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Know Your Rights: Vacant Possession in Malaysia

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Buying a property is probably one of the most prominent purchasing decisions you will ever make in your entire life. You have to spend countless nights researching and qualifying houses, preparing loan documents, and planning your finances before you can even set foot into your new home.

However, one of the lesser talked about aspects of purchasing a property would be the legal aspects of it. Seeing that 72.5% of Malaysians own their very own property, it is extremely vital for us to know our rights as property owners, in order to circumvent any legal issues that may come our way.

Today, we will explore this exact topic, or more specifically, your rights once you have received the keys to your newly developed home.

1. Liquidated Agreed Damages (LAD)

When purchasing a property, the Sales and Purchase Agreement will specify a particular date or a period of time in which the property will be completed and will be handed over. But if there is an issue of delay in the delivery of Vacant Possession (VP), buyers are able to claim for liquidated agreed damages (LAD).

Even though the bank owns the rights to your unit due to the borrowing of loans, homebuyers have a locus standi to sue for the LAD without having to bring the bank as a party from a legal point of view.

Do note that the calculation of LAD starts from the signing date of the Sales and Purchase Agreement (SPA), and not from the date of the booking form was signed. But where does the calculation ends?

In the case of Everest Point Sdn Bhd & Anor v Lim Peck Sim & Ors in 2017, the Federal court has decided that the calculation date ends after the issuance of the Certificate of Fitness (CFO)
Simply speaking, you, the homebuyer, are entitled to damages up to the date the CFO is issued. Speaking of CFO, what exactly are the legal documents we can expect once the unit is ready for VP?

2. Certificate of Completion and Compliance & Strata Title

On the same day you collect the property, you will also receive a copy of the certificate of completion and compliance (CCC), or formerly known as CFO. You will also be issued the strata title to your particular unit as well.

The CCC is a document released by the local authority council that ensures that your property is completed and is safe to move in. Under the new Strata Management Act 2013, the strata title for your unit must be issued upon vacant possession as well. Without the strata title, your unit is still technically owned by the developer in the eyes of the law.

If you have yet to receive any of these legal documents, it is important to safeguard a copy of your SPA and consult your lawyer for further action. However, if things run smoothly, you will sign several documents to mark your acceptance of the keys to your unit, and that is when the defect liability period begins.

3. Defect Liability Period (DLP)

The defect liability period (DLP) is simply the “warranty period” for your unit. Homebuyers are given roughly two to three years to identify and report any defects, usually along with a representative from the developer.

Do note that it is possible to check and identify defects on your own accord, provided that the defects are not aligned with the specifications listed in your SPA. Be sure to mark and document any defects properly, and as clearly as possible. (Taking multiple photos, using tape to mark visible defects, and be wary of non-visible defects.)

If the developer refuses to fix the defects, or remain unresponsive, you also have the option to hire your own contractor to proceed with the repairs and recover the cost from the developer’s lawyer. It is also wise to mark and rectify the defects before proceeding with the renovation of the property.

Regardless of the context, in the situation where you feel that either party has wronged you, it is essential that you remain calm and take the steps necessary to remedy the situation with the tools and resources available to you as a buyer.

Taking the precautionary steps necessary (marking the defects properly, actively contacting the developer etc.) will help you gain substantial leverage in the worst-case scenario when the matter is being brought up to court or tribunal.

Always remain vigilant, and consult your lawyer if the matter gets out of hand.

Kickstart your home buying journey, and let us guide you through the complicated process of owning your own home by checking out our reliable Buyer Agent Services. Owning a home shouldn’t be a difficult process, so let us do the heavy lifting for you!


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