The goal of Act 118 is to protect the interest of housebuyers but a growing body of cases shows that Act 118 does not really achieve its purpose. FILE PIC

The law does not protect housebuyers ACT 118 (of housing law in Peninsular Malaysia) was originally known as Housing Developers (Control & Licensing) Act 1966. It led some people to assume that it was intended only to regulate housing developers.

Not so. In SEA Housing Corporation Sdn Bhd vs Lee Poh Choo [1982] 2 MLJ 212, the Federal Court explained that the objective of Act 118 is “to protect the interest of the purchasers”.

Two decades later (in 2002) Parliament enacted Act A1142, changing it to Housing Development (Control & Licensing) Act 1966.

Five years later, under Act A1289, Parliament finally took the cue from the judiciary and inserted the important words “the protection of the interest of purchasers” into the long title of Act 118.

Over the years, a growing body of case law continuously reminds us that Act 118 does not really fully protect housebuyers. The act still smiles on the “sell-then-build” (STB) system that favours developers and places the risk of non-completion and abandonment on purchasers.

Abandonment has since been criminalised, and sanctions imposed on developers, but the victims are still without a real civil remedy.

There is a provision in the law that has since its inception been perceived as favouring developers and victimising purchasers. That provision is Regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989, which states as follows:

“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive such provisions.”

A proviso then states that no waiver or modification “shall be approved” if the application for extension is made by the developer after the expiry of the date of handing over of vacant possession to the purchaser.

What is the flaw in this provision? The answer was given by the Federal Court on Nov 26 in its 42-page judgment in a landmark case known as Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar & Pengawal Perumahan.

In the case, under a sale and purchase agreement (SPA) dated May 3, 2012, between the developer and purchasers, the developer must deliver vacant possession within 36 months, failing which he must pay the purchasers liquidated damages.

However, on Oct 20, 2014, the developer applied for an extension of time (EOT) to the Controller of Housing under regulation 11(3). The application was rejected by the Controller, and the developer then appealed to the minister under regulation 12.

By a letter dated Nov 17, 2015, the minister granted a 12-month extension, thus allowing the developer 48 months to deliver vacant possession.

As a result of this, the purchasers were no longer able to claim their liquidated damages from the developer. Aggrieved by the minister’s decision, the purchasers filed for judicial review.

They succeeded. Allowing the application, the High Court ruled that Act 118 is a social legislation intended to protect the purchasers and that regulation 11(3) is ultra vires the act and therefore null and void. Unhappy with the decision, the developer appealed to the Court of Appeal.

The Court of Appeal held that regulation 11(3) is not ultra vires Act 118. However, it held that the letter of approval of extension was not signed by the Controller, thus “made without jurisdiction and was ultra vires the act, and that the order in the said letter was a nullity and of no effect”.

Another fundamental principle enunciated by the Court of Appeal is that the purchasers affected by the application must be given an opportunity to have their say before any EOT is granted to the developer. In the instant case, the Court of Appeal noted that “no such right” was afforded to the purchasers and therefore the minister’s decision was null and void. Amazingly, the developer obtained leave to appeal to the Federal Court.

In paragraph 60 of its well-researched judgment, Chief Justice Datuk Tengku Maimunah Tuan Mat held “the Controller has no power to waive or modify” the SPA because section 24 of Act 118 (the power to make regulations) does not confer on the minister to make regulations for delegating the power to waive or modify the SPA to the Controller. Consequently, the court held that regulation 11(3) is ultra vires the act.

The decision has underscored, once again, that Act 118 is intended to protect the interest of housebuyers.

It may be time for the government to revisit the law and overhaul it with a view to fulfilling that important system. It can start by implementing the build-then-sell system.

The writer, a former federal counsel at the Attorney-General’s Chambers, is deputy chairman of Kuala Lumpur Foundation to Criminalise War