Brochure overrides sales contract

SOLEMN EFFORTS: The courts have ruled that promotional materials including brochures advertising housing developments prevail over the Sale and Purchase agreement itself

One of the many ways to protect house purchasers in Malaysia is to control the advertisements that are placed by housing developers. Towards this end, the Housing Development (Control and Licensing) Act 1966, considered a piece of social legislation, functions to protect house buyers from unscrupulous developers.

‘Advertisement’ here would mean any notification or intimation of housing development. The act of notification merely means any act of informing the public at large about a proposed housing development. Words like “proposed housing development” is a clear notification of a pending housing project.

Intimation, on the other hand may refer to hints or indirect suggestions, or informing subtly and indirectly that there is a proposed or pending housing development project. Whatever the form of intimation or notification, they are all required to have a permit issued by the Controller of Housing (who is the Ketua Setiausaha of Kementerian Perumahan dan Kerajaan Tempatan) before any form of advertisement can take place.

The form of advertisement may include:
a) publication in any newspaper, journal or magazine,or in the form of a brochure; or
b) in any other form; or displayed on any hoarding,boarding, roof, wall, piling, fence, frame, signboard,plate, cloth, bar pillar, post, wire-casting or other erection, structure or contrivance; or
c) conveyed by means of films or communications; or d) conveyed by other means oral or written and whether of the same kind or not as set out in paragraphs (a) to (c)

Housing Development (Control and Licensing ) Regulations 1989 not only controls the types of advertisements but also the contents of such advertisements. It is mandatory that the following particulars be inserted no matter how big or small the advertisement:
(a) the housing developer’s license number and validity date;
(b) the advertisement and sale permit number and validity date;
(c) the name and address of the licensed housing developer and his authorised agent, power of attorney holder of project management company, if any, as approved by the Controller;
(d) the tenure of the land, if the land is leasehold, its expiry date, restriction in interest and encumbrances,if any, to which the land is subject;
(e) the description of the proposed housing accommodation;
(ea) any parking lot which is an accessory parcel to the housing accommodation and which does not form part of the common property of the accommodation; (This recent amendment was inserted to ensure that the number of parking lots attached as accessory parcels [included in the purchase price] is clearly indicated in the advertisement in order to avoid their being sold to unwitting purchasers.)
(f) the name of the housing development, if any;
(g) the expected date of completion of the proposed housing development;
(h) the selling price of the housing accommodation;
(ha) where applicable, the minimum and maximum selling price of each type of housing accommodation;
(i) the number of units of each type available; and
(j) the name of the Appropriate Authority approving the building plans and the reference number.

Under Regulation 5 of the Housing Development (Control and Licensing) Regulations 1989, any advertisement and sale material that is used to make the sale must first be submitted in its final content and form -including all disclaimers- for approval by the Controller. Should there be any changes or deviations from the first proposed materials, these should be approved by the Controller as well, or they would be deemed invalid. Under the Regulations, any misleading statement, false representation, or description of the particulars or information required is an offence.

Pro-buyer judgments: Judges have been aware of the need to protect purchasers from these promotional materials and have held that statements made in brochures by housing developers are not “mere puffs” but can be said to be undertakings which the developer is bound to honour.

Since an advertising and sales permit is required by the Act, and has specific particulars that need to be disclosed, the nature of the brochure is legally binding. If the drawings and details of the brochure mislead the homebuyer, the homebuyer would have a valid case against the developer.

In Cheong Bee Yong v MBF Finance Bhd & Anor [2001] 1 CLJ 668, the Court held that:

“From the way the brochure was worded, it must be regarded as an undertaking by the developer to pay whatever expenses that arose before the issuance of the CF. The Plaintiffs purchased the condominium unit on the strength of such an undertaking…. ”

In Ammer Ali Mohamad Yussof & Anor v Sunrise Bhd [2008] 1 LNS, “The brochure and folder of promotional materials used…and produced before the court, are luxuriously produced material, and not in the nature of the usual sales flyers. The promotional materials are not trivial promotional materials, but are a solemn effort to convey a distinct mental image to the prospective buyer to persuade him to make not any mere booking
but a commitment to purchase by payment of a non-refundable deposit.”


In Dato’ Soo Lai Sing v Kumpulan Sierramas (M) Sdn Bhd & Anor [2004] 3 MLJ 546, the Court was of the view that the developer did represent to the purchaser that it would provide special security features at the housing estate and for this reason, the plaintiff was completely persuaded to purchase a housing lot to later reside there.

Such security features must exist and must be in operation at the time when any purchaser had come to stay in the house he purchased in the housing project. Since the developer had failed to provide the special security features as represented, such omission is tantamount to an act of misrepresentation.

There are also incidents where the completion date in the advertisement may differ from the date in the Sale and Purchase agreement or some information in brochure differs from that in the written agreement. The question is which one prevails, the SPA or the brochure?

In Faber Union Sdn Bhd v Tribunal Tuntutan Pembeli Rumah [2011] 7 CLJ 37, the High Court upheld my decision made before the Tribunal that the date in the brochure prevails over the date in the SPA.

Statements made in the brochures and other promotional materials are therefore not trivial promotions but can be said to be solemn efforts undertaken by developers with the help of professional advertisement agencies to convey a distinct mental image to the prospective purchaser to persuade them to make not only a mere booking but a commitment to purchase by paying the first 10 per cent of the purchase price.

So, the next time you look at a brochure by a developer, make sure you keep a copy. It may well come in very useful should there be a dispute between you and the developer.

Pretam Singh Darshan Singh can be contacted at pretam@arahimadvocates.com.

 

Pretam... High Court upheld my decision.

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