Thursday, September 17, 2009

HBA Calls for Stricter Vetting

HBA Calls for Stricter Vetting
By: Ivy Chang

The Ministry of Housing and Local Government has started vetting developers’ marketing brochures and advertisements strictly. From July this year, they have been prohibited from advertising free legal fees and other freebies.

Meanwhile, National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong revealed that more restrictions on property ads are in the pipeline.

According to him, HBA has proposed additional regulations to govern such ads under Regulation 8 but that was not included in the amendments to the Housing Development (Control and Licensing) Regulations 1989 which came into effect from Dec 1, 2007.

Although not codified in law, the ministry’s licensing department is already using some of HBA’s recommendations administratively when approving developers’ ads and marketing brochures, such as that on free legal fees and other freebies.

Among the prohibitions that may be enforced in the future: Projected monetary returns that cannot be guaranteed or are doubtful in nature (such as projected rental returns); claims of panaromic views unless substantiated; claims that a project is situated at or close to popular or upmarket locations unless proved (also, distance of housing schemes to popular places must be in travelling distance and not map distance); and misleading price tags.

Additionally, Chang disclosed developers are not allowed to use the phrase “10:90 or “5:95 concept” unless the ad clearly states that it is a loan scheme.

“Otherwise, it may give the wrong impression that the development is a 10:90 Build-Then-Sell project,” he explained.

Source: New Straits Times, September 11, 2009
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Regulate Ads To Protect Buyer

Regulate Ads To Protect Buyer
By Ivy Chang

Flip through newspaper or magazine and you’ll be bombarded by advertisements – picture perfect, too-good-to-be-true products. The advertiser aims to entice, and to do so, advertisements have to attract as many readers’ attention as possible.

Developers employ a number of gimmicks. As a property’s location is valuable when it come to buying, they almost always cash in on this. For example, one advertisement stated that the condominium is located at the high-end Duta area when it’s actually at not-so-up-market Segambut.

Another trick use by both the relatively unknown and the big boys is the claim that the up-and-coming development is “just five minutes from town or city centre”. Sure, if there’s no traffic congestion and you’re Michael Schumacher zooming down the highway.

Yet another gimmick is to state that the property is being developed by some well known developer when in fact it’s one of its subsidiaries. House buyers only discover this isn’t the case when they sign the Sale and Purchase Agreement (SPA).

Recently some investors sued the developer of the Trump Tower Waikiki condo project in Hawaii, the United States, claiming that they were misled into thinking that property mogul Donald Trump was a co-developer when he was merely a licensor who could withdraw the use of his name in the event he terminates his association with the development. The investors are claiming they were misrepresented and are asking for a full refund.

In another case, the Supreme Court of New South Wales, Australia, held that buyers of an off-the-plan property were entitled to rescind their contract and have their deposit refunded because the developer’s realtor had engaged in misleading and deceptive conduct. The inexperienced buyers had relied on baseless representations in advertisements that the value of the said properties would double in five years.

However, in a case from Canberra where the advertisement detailed anticipated supply and demand for Canberra’s Australian Capital Territory hotel/motel accommodation, financial projections, guaranteed leasing and management arrangements, cash flows, expected pre-tax profits, investment returns and likely capital gains, the Supreme Court held that the statement was a “mere puff” and therefore, didn’t constitute misleading or deceptive conduct. This case involved the former Canberra International Hotel.

Here are some real-life gimmick provided by the National House Buyers Association (HBA): Guaranteed five-year return on investment (provided you furnish the unit with not less than RM30,000 on furniture and fittings); only RM98,888 upwards for a three-room condo (this minimum price shown was that of the studio unit as the three-room unit was pegged around RM22X,XXX); and condo living in the city (this refers to three blocks apartments consisting of 600 units with a swimming pool half the size of an Olympics-size pool and two squash courts).

According to HBA honorary-secretary general Chang Kim Loong, such gimmicks usually come with several fine prints at the bottom which, sadly, the house buyers do not read.

“The gimmicks highlighted in the promotion advertisements are attractive and catch the eye of potential buyers. The result is booming sales for the developers at the expense of the homebuyers.”

Chang advised that under the Housing Development (Control and Licensing) Regulations 1989, developers are required to give accurate information and true particulars in the advertisement of their housing schemes. He warned that those in violation of the terms and conditions of their approved permit can be prosecuted for their false advertising and misrepresentation.

“On conviction, the offending developer is liable to be fined not exceeding RM20,000 or jailed not exceeding five years or both,” Chang said.

C.K. Ling, a former legal manager with a developer, said buyers can take legal action against developers for such misleading or false advertisement but winning may not be on the cards.’

“Usually, most buyers make a lot of noise which ultimate comes to nought. Suing costs money and most people can’t afford to take on wealthy developers who can drag the case on for years.”

According to her, the buyer has to show that the advertisement was an offer as opposed to a mere puff or invitation to treat and that a binding obligation was created when the developer made an offer which the buyer accepted unconditionally.

What’s more important is the SPA between the developer and buyer. If these misrepresentations are stated in the agreement, then that’s a different matter.

“The representations must be material. You can’t go to court claiming for damages if the brochure depicts a property painted in pink and you get a blue house instead.

“In the majority of cases involved Sell-Then-Build properties, what you see in the brochures, advertisements or scale models won’t be what you get once you obtain the keys of the property. Buyers should expect that the properties will not look exactly the same as portrayed in glossy pictures,” Ling said.

Another example: One owner complained that when he bought his house, the advertisement showed a lake and that he bought it because of the water feature. A few years down the road, the developer filled it up. He and a few other disgruntled owners have been advised that they are unlikely to win in the event they drag the developer to court.

HBA feels the only way to protect housebuyers is for the authorities to regulate advertisement contents and to prosecute offenders when they breach them.

Source: Property, New Straits Times, September 11, 2009
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Tuesday, September 15, 2009

Selling of Property

Selling of Property
By: Bhag Singh

When a landed property carries the joint namesof husband and wife, there is no unilateral right on the husband's part to sell it without his wife's concent.


It is often the case that a property is purchased in the joint names of the husband and wife. The reasons for this are varied. In some cases, the husband and wife contribute equally to the purchase.

However, there are instances where there is no direct monetary contribution by the wife. Yet for different reasons, the name of the wife is included as co-owner of the property. This is not do deny contribution by the wife in a broad sense.

In many such cases, there is a tendency by the husband to think that he is the de facto owner of the property. And with this mindset, he may enter into an agreement to sell the property with both parties assuming that the wife’s signing of the agreement, if any, will be but a mere formality.

However, when the time comes for the document to be signed, the wife may refuse to do so. The refusal is on the basis that being co-owner of the property, she does not agree to the sale.

Should this happen, the question that arises is whether the wife can be compelled to sell her share. And if as a result of her refusal, the transaction cannot be completed, what are the remedies available to the buyer?

Wife’s rights

With regard to the rights of the wife to refuse to sign any document to part with her share, little need to be said. If she is the registered owner of the property, it is she who must agree and not anyone else.

It would be different if she had authorized her husband, in which case he would have been acting as her agent. However, in the absence of cogent evidence, it cannot be assumed that the husband is authorized to sell her part of the property just because he is her husband.

The fact that the wife did not contribute even a sen to the purchase of the property is irrelevant. Even if she did not contribute in looking after the home and family directly, it also would not matter. The property is hers in law.

The position could be different if the wife were not the beneficial owner. This can come about by reason of her holding the property in trust. In such case, it would belong to the beneficiary of the trust who would be the owner. Different considerations would apply.

The buyer

Where does this leave the buyer? He may have paid the deposit and be looking forward to ownership of the property. The transaction is stalled and there is refusal on the part of the wife, leading to the transaction becoming abortive.

Of course, the buyer could file an action for specific performance of the contract. However, the likelihood of the court allowing specific performance of the entire contract where the wife is half owner would appear at the best of times to be unlikely.

It may be asked whether it would be an option for the husband to offer at least to go ahead and transfer his half share of the property to the buyer. This would no doubt show an element of bona fide in the matter where it is inability rather than unwillingness on his part.

Such an approach would have its limitations.

It could work where the subject matter is a big piece of land of which parts could be separately used and at the appropriate time capable of being partitioned.

However, it would be impracticable if it were a family residence. The buyer may have wanted to have the property as a whole and dividing the property into two parts may not necessarily mean that the market value of each part is the same.

In the absence of such willingness, the buyer would be left without the property he has agreed to buy. His remedy will be in monetary compensation. The question that rises is: to what extent is the buyer entitled to damages for the property he is unable to acquire?

Measure of damages

He would no doubt be entitled to a refund of any deposit paid.

However, the damages may not stop there. An example is the Court of Appeal case of Malhotra v Choudhury. The plaintiff and defendant, partners in a medical practice, agreed that the defendant buy the property on which the medical practice was carried on.

It was also agreed that if for any reason the partnership was terminated, the plaintiff would have the option to buy back the property at a certain price that was capable of being fixed in the absence of the agreement.

In the course of the conveyance, however, the transfer was to the defendant and his wife.

At the point of time, no significance was seen. However, when differences led to termination of the partnership, the exercise of the option was challenged.

The court held that the defendant was in breach of his contractual undertaking, and not only was he liable to refund the deposit but also to pay damages on the basis of loss of income from the practice which could have been carried on.

A question that arose was whether the defendant ought to be made liable, when in fact he had sincerely wanted to allow the option to be exercised but for his wife’s refusal.

This could be in mitigation of damages though not relevant to the question of liability.

However, in this case, the court referred to the evidence available which showed that it was not the inability but the unwillingness on the part of the defendant to hanour his obligation.

Source: Articles of Law, StarTwo, September 8, 2009