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Fancy A New-Build House? Beware Of The Defects

REENA KAUR BHATT prods at the elephant in the room – In an age where we have an app for almost everything, why are Malaysian home buyers still dealing with building defects?

By Reena Kaur on Mar 31, 2017

How is it that Malaysians spend a hefty sum on a home that supposedly meets the necessary building requirements, only to find out that these assets are riddled with physical flaws, at this day and age? Cracked walls, leaking roofs and sinking floors – these are just a few of the gripes by purchasers.

What makes it worse is that most of the homes involved are not low-cost units, rather a bulk of them are projects/ townships by leading developers. The handful of complaints reported in the media is just the tip of the iceberg; most defect cases ‘disappear within the cracks’ due to a combination of factors:

  1. There is insufficient ‘evidence’ that the defects were caused by builders and not due to natural causes;
  2. Homebuyers file their complaints with the wrong authority/party;
  3. Many purchasers adopt the victim mindset and do not try to fight for their rights as they assume that process involved is a tedious one with levels of red tape.

Build Quality – Then & Now

A fellow Gen-Y, Robert (renamed for privacy) mentioned that the 40-year old terrace house inherited from his parents in Taman Tun Dr Ismail (TTDI) is in much better shape than the medium-cost residential property he purchased in 2013 and built by a public-listed developer. In the first year itself, in his new home, he was faced with the usual suspects – cracks in walls, leakages and a gradually sinking numerous defects including cracked walls, water leakages and sagging floors.

I find it mind-boggling how there are more defects in recent times; especially when considering the advancement of technology and building material innovation.

 

KOH KEAN KANG, a LEGAL ADVISOR FOR THE NATIONAL HOUSE BUYERS ASSOCIATION (HBA), lends his reasoning on the issue. According to him, from the time of Malaysia’s independence in 1957 to the early 1980s, the local construction industry boasted skilled construction workers; the supervisors and management staff especially benefited from the construction system standards set by the British during the colonisation era.

When recession hit in the 1980s, the construction industry was one of the sectors which took the full brunt. The recession was so bad that it took roughly a decade for the economy to recover, and by then, many skilled construction personnel either:-

  1. left to work somewhere else; particularly Singapore or Brunei for the better remuneration packages. These individuals continue to remain overseas thereafter as by then, the foreign currencies had appreciated substantially against the Ringgit; on top of other incentives;
  2. left the trade for greener pastures and not to mention, quite a few retired.

Unfortunately, post-recession, there were very few, if any initiative by the relevant government bodies in keeping construction skills relevant through retraining/training programmes.

Hence, when the economy turned around in the 1990s, in a knee-jerk reaction to the sudden surge in demand for construction workers; the government began to hire many foreign workers. They were from Indonesia, Bangladesh and Myanmar to fill up the large void left behind by their Malaysian counterparts.

Most of these foreign workers were new to the trade and did not go through proper building construction training in their country. Meanwhile, in Malaysia there were no training academies or research centres working on introducing and implementing the latest building technology, except for Construction Industry Development Board (CIDB), the local body tasked with regulating building standards.

On top of that, there were sub-par workers led by their equally inexperienced or untrained supervisors and management personnel. The level of worker competence and skills standards were left to the device of the private contractors.

Further adding salt to the wound, many builders post recession were noticeably less passionate about building quality; they were either relatively new to the industry and/or motivated by maximising profits. Hence, there was no emphasis on quality; rather developers tend to outsource building jobs to contractors with the lowest bid. Thus, assurance of the quality of completed work is therefore reliant on self-certification by the contractor. Also, the contractor’s project managers usually come from a quantity surveying background, whose expertise is only on construction costs and contracts.  

On Who Does The Onus Fall?

How well are Malaysian homebuyers protected when it comes to defects in newly completed homes?

HBA points out that purchasers have to be proactive and make the effort to safeguard their own interest when it comes to home defects. Legal safeguard for home buyers comes in the form of a provision under the Defect Liability Period (DLP) Clause stated in the Sale & Purchase Agreement (SPA).

Developers are legally required to provide a retention sum equivalent to 5% of the SPA price, which will be parked with a law firm, that serves as one of the stakeholders of the sum held. If the developer fails to make good the defects within a time-frame, the sum retained can be used to remedy or make good the defects.

Alternatively, aggrieved parties could also file a claim with the Tribunal for Homebuyer Claims in the relevant zone. The Tribunal enables purchasers to recover rectification costs in a cost-effective and efficient manner. Parties are not allowed to be represented by lawyers in the Tribunal unless, under limited circumstances, this ensures that pursuing a claim is kept affordable.

However, the Tribunal’s jurisdiction is limited to giving an award of not more than RM50,000 and in many cases, this amount is insufficient given the rising costs of material and labour.

When necessary, the Tribunal will send its own team of technical personnel to visit the subject property and assess the defects including the rectification costs.

Do Not Be A Damsel in Distress - Homebuyers Must Be On Top Of Their Game

In Robert’s case, as the defects experienced were still within the Defects Liability Period (DLP); upon his complaint, the developer did send over their contractors/repairmen to patch up the defects temporarily. However, these problems manifest after a few months, and the whole cycle repeats again (until the 24 months is up).

This begs the question - What should a homebuyer’s course of action be in this instance; how does one compel the developer to make permanent repairs that will last quite a long time?

HBA advises, if defects recur due to unsatisfactory rectification by the developer, the aggrieved buyer can file a claim/action at the Tribunal/Court as well as claim for the costs incurred in engaging his/her own contractor to rectify defects. It is important that purchasers should exercise their rights promptly. This is because it may be more difficult to prove that the defects are attributable to the workmanship/quality of material as time progresses and issues of maintenance and wear and tear come in.

Dealing With Unscrupulous Developers

Robert shared that unscrupulous contractors go to extra lengths to stave off big defects till after the DLP – for e.g: these contractors install a layer wooden panel just below the house to delay the ‘sinking’ process (as they can't be bothered with the extra cost of treating the land properly and waiting for the land to sit after filling it). As the wood slowly rots away, the homebuyer will be faced with a sinking home after a few years and the developer gets to escape scot free as this happens after the DLP.

Robert and his fellow neighbours have lodged a complaint with the local council over this issue, but the ‘experts’ hired to analyse the homes’ condition dismissed the defects as natural occurrences. Ironically, the defect analysis was tasked to the developers, i.e: the experts were hired by them, thus the independence of the matter is highly questionable.

What can Robert do in this instance?

According to HBA, the Malaysian Courts have held the DLP clause does not remove the rights of purchasers to claim for compensation resulted from defects discovered after the expiry of DLP.

In other words, purchasers are still able to claim for compensation to make good of defects discovered after the expiry of DLP provided that it can be proven that the defects were attributable to the developer. In that event, contract law as applicable in other normal contract cases applies.

Nevertheless, homebuyers must take note that if the claim is filed in court, the action ought to be filed not later than 6 years from the date of vacant possession or if it is filed in the Tribunal, the claim ought to be filed not later than 12 months from the expiry of DLP period.

Thus, Robert can recover compensation from the developer by filing an action in court or a claim in the Tribunal depending on the timing of filing a claim and the amount of claim.

How Do We Fix The Core Problem?

All said and done, though the words of advise above do lend a hand in assisting homebuyers when something goes wrong, we are still faced with the issue of less than satisfactory build quality. Requesting for compensation or bringing developers to court when they have messed up does not quite cut it, it is akin to bailing out water out of a ship riddled with leaks.

*Watch out for the second part of the article as we look at how technology can go a long way in minimising defects and improving overall build quality.