Know Your Rights - What you can do about defects in new property

WHAT options do you have if the new property you have bought is full of defects?

The sale and purchase agreement for property which falls under the Housing Development (Licensing and Control) Act 1966 has a specific time-frame where the developer is required to make good the defects at its own cost and expense for the buyer. This article attempts to explore whether there is any specific provision under the Housing Development (Licensing & Control) Act 1966 and the Housing Development (Licensing & Control) Regulations 1989.

The format of the sale and purchase agreement only provides for minor defects which are to be rectified under the defects liability period as required and directed by the architect of the developer. To ensure that the developer carries out its statutory obligation, there are retention sums carved out from part of the purchase price which is held by a stakeholder so that the developer performs its obligation under the terms of the sale and purchase agreement and if the developer fails to make good the defects within a time-frame to the satisfaction of the architect, the sum retained can be used to remedy or make good the defects. There are, however, no provisions which address the possible scenario of major defects of the property constructed being unfit for human habitation due to deviation from approved plans and statutory licences and approvals from the local authority and non-compliance with relevant laws on electricity supply installations, etc.

In view of the apparent lacuna or "shortcoming" in the statutory format of the sale and purchase agreement, there is a need to rely on the general law of contract to explore a possible remedy from the courts when a buyer encounters such a problem on the basis of "total failure of consideration" and would have to apply to the court to nullify the sale and purchase agreement and to seek refund of the full purchase price paid plus expenses incurred in the purchase of the property and other expenses like legal fees and stamp duty expenses for the execution of the sale and purchase agreement and the security documentation expenses incurred for the bank financing facility.

It has been suggested that there is a need to provide in the statutory sale and purchase agreement how such cases may be dealt with. Until such time the statutory format of the sale and purchase agreement is amended, parties will have to seek the remedies required by filing an action in court which is time consuming and costly.

Although such cases may exist, it may not be detected unless the buyer engages a professional architect and consultant engineer to review the constructed building before formal acceptance of delivery of vacant possession of the completed property. Many may not want to incur such costs but just accept delivery of vacant possession of the completed building as constructed.

Buyers are in the habit of undertaking extensive renovations to the property upon delivery of vacant possession of the completed property by the developer. In such an event, the developer is no longer liable for the defects of the property purchased and delivered. Effectively, the defects liability period as stated in the sale and purchase agreement is of little use due to the perception and conduct of the buyer which may be due to ill advice or adventurous conduct of the buyer.

If the property is tenanted, it must be very clear and specific on what type of renovations may be carried out at the property in the tenancy agreement to avoid a situation whereby the conduct of the party undertaking the renovation may discharge in total of the obligation of the developer to remedy any defects in the construction of the property. The terms of the tenancy agreement need to be drafted carefully to specifically suit the case.

So the next time you buy a new property and want to undertake renovations, you need to be very careful so that the renovations will not void the defects liability period given by the developer under the terms of the sale and purchase agreement.

When a complaint is filed with the developer relating to defects, you need to serve the notices of defects correctly to the registered office of the developer and the architect of the developer. Many people are under the impression that they can just deal with the people at the site office which may be the sub-contractor of the developer. There is a retention sum equivalent to 5% of the sale and purchase price parked with a law firm as stakeholders where the sum is held as stakeholders to ensure that the developer carries out the defects liability work. In the event that the developer fails to carry out the repairs to the defects or certified as remedied and attended to by the developer, the buyer is entitled to carry out the repair of defects and claim for the retention sum from the stakeholder. Any breach by the stakeholders in the release of the stakeholder sum to any party is a serious criminal offence.

The writer, formerly a banker, is a lawyer. Comments: letters@thesundaily.com