5 THINGS YOU SHOULD KNOW ABOUT HOUSING ADVERTISEMENTS

p16Knowing these will clarify your rights and help you deal better with the developer.

There are a number of issues regarding housing advertisements that many house buyers in Malaysia are not aware of. Here are some of them:

1. Disclaimer clauses in ads not binding

Many a time we find Disclaimer Clauses like “This is an artist impression only”, “Subject to change by Developer”, “The architect can vary the plans”. These are not valid despite the clause being inserted into the advertisement/brochure/ leaflet by the developer.

Firstly, such disclaimer clauses are never approved by the Controller of Housing and secondly, according to the recent amendment to the Consumer Protection Act 1999, they are unlawful.

Taking cognisance of the growing concern pertaining to unfair contract terms, Parliament felt it necessary to intervene in protecting purchasers from such terms. Instead of enacting a wholly new statute, Parliament amended the existing one as a result of which a new part has been inserted into the existing Act 599, namely Part IIIA Unfair Contract Terms. Pursuant to the Consumer Protection (Amendment) Act 2010, provisions on unfair contract terms in a consumer’s standard form contract were introduced, which will apply to any contract entered into after the enforcement of the Act. The amendment was gazetted on Feb 1, 2011.

The intention of having these amendments was:

a) to give better protection to consumers in situations where unequal bargaining powers between consumers and suppliers exist, which leaves consumers with no option except to abide by the unfair terms; and

b) to prevent suppliers from imposing unfair terms in any standard form contract which are detrimental to the consumers.

2. Representation made in Brochures are binding

Judges are 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.

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.”

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

Sometimes you will find a beautiful girl sitting under a canopy on a deck chair next to the pool. Well, the developer does not have to provide the beauty but certainly has to provide the deck chair and the canopy.

Case studies

1). 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… ”

2). 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.”

3.) 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.

3. Completion date stated in Brochures overrides date stated in SPA

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 the brochure differs from that in the written agreement. The question is which one prevails, the SPA or the brochure? The answer: The expected date in the brochure prevails over the date in the SPA.

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 completion date as stated in the brochure prevails over the date in the SPA.

Statements made in brochures and other promotional materials are therefore not trivial promotions. They can be said to be solemn efforts undertaken by developers with the help of professional advertising agencies to convey a distinct mental image to the prospective purchaser so as to persuade them to make not only a mere booking, but a commitment to purchase by paying the first 10% of the purchase price, which is non-refundable.

So, the next time you look at a brochure by a developer, make sure you keep a copy. It may well come in handy should there be a dispute between yourself and the developer; similarly, in representations made by the sales person who persuaded you to buy one of life’s most important purchases.

4. Developer cannot advertise the following information any more

Any advertisement made by any licensed housing developer shall not contain:

(a) offer of free legal fees;

(b) projected monetary return gains and rental income;

(c) claim of panoramic view;

(d) traveling time from housing projects to popular destinations; or

(e) any particulars to which a housing developer cannot genuinely lay proper claim.

5. Controlling the content

The above are some of the ways to protect house purchasers in Malaysia i.e. by controlling the contents of housing advertisements.

The word “advertisement” here refers to 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.

Intimation, on the other hand may refer to hints or indirect suggestions, or informing subtly or indirectly, that there is a proposed or pending housing development project.

Whatever the form of intimation or notification, the developer is required to have a permit (AP) issued by the Controller of Housing (who is the Chief Secretary of the Ministry of Housing & Local Government) before any form of advertisement is made.

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).

The Housing Development (Control and Licensing) Regulations 1989 not only controls the types of advertisements but the contents of such advertisements. It is mandatory that the following particulars are 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, and 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 project;

(e-i) 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 amendment in 2007 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.)

(f ) the name of the housing development, if any;

(g) the expected date of completion;

(h) the selling price;

(h-i) 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.(This is to give a chance to purchasers to obtain a copy from the local authority if the need arises)

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 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, incorrect description of particulars or information required is an offence.

Pretam Singh Darshan

Dato’ Pretam Singh Darshan Singh practises at Pretam Singh, Nor & Co in Kuala Lumpur.

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