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WHAT MALAYSIAN HOMEBUYERS NEED TO KNOW ABOUT MISLEADING DEVELOPER ADS

By:


Bryan Lui (Co-Managing Partner) [bryanlui@luibhullar.com]

Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]


unfinished facilities and amenities in their new condominium, despite being promised in project brochures


After a long wait, homebuyers were disappointed to find missing and unfinished facilities and amenities in their new condominium, despite being promised in project brochures.


Despite what the brochure showed, the developer informed the homebuyers that they were not obligated to supply all the features as they were not specifically outlined in the sale and purchase agreement (SPA). The homebuyers were instructed to wait for the establishment of the Joint Management Body (JMB) to propose any additional amenities or enhancements for the facilities that were absent. Unfortunately, this guidance proved to be deceptive.


  • Legal Requirements for Advertisements By Developers

Developers are required to ensure that the information provided in their advertisements, such as marketing brochures, is accurate under the Housing Development (Control and Licensing) Regulations 1989 (HDCLR). The marketing brochure is considered an advertisement for a housing development. Specific details must be included in the advertisement, and it needs to be approved by the Controller.


Any misleading statement or false representation in the advertisement constitutes an offense under Regulation 5 (3) HDCLR. Upon conviction, the developer can be fined up to RM50,000, face imprisonment for up to five years, or both.


  • Promises in Marketing Materials

Developers are accountable for the commitments stated in their marketing materials, which are commonly viewed as contractual obligations. She emphasizes that these commitments should be honored by developers, regardless of whether they are explicitly outlined in the Sales and Purchase Agreement (SPA).


If a developer fails to comply, it constitutes misrepresentation. However, proving misrepresentation in a civil suit requires evidence and context. The buyer must show that the misrepresentation in the marketing materials led them to enter into the SPA.


  • Incomplete Facilities

The developer is accountable if facilities specified in the SPA, like a gym or library, are not fully equipped or are absent. It is the developer's duty to make sure that shared facilities are prepared for use upon unit handover. A vacant room lacking equipment fails to serve its intended purpose and violates both the SPA and the Deed of Mutual Covenant (DMC).


Developers need to provide essential amenities to ensure their proper functioning. In case these facilities are not adequately equipped, buyers have the right to collect evidence and demand that the developer fulfill their responsibilities. If the issue remains unresolved, the Homebuyers can initiate legal proceedings.


  • Home Buyers' Recourse For Misleading Advertisement

In Malaysia, property developers must obtain a Developer's Licence and the Sales & Advertising Permit (APDL) before launching a project. This ensures that the government knows the project's details and can prevent consumers from being misled.


Misleading statements or false representations made by the developer when applying for the license can result in the housing controller refusing to grant the APDL. Without proper justification, developers are prohibited from making certain claims in their advertisements, such as promises of free legal fees or projected rental income.


Interestingly, property buyers are not protected under the Consumer Protection Act 1999 (CPA) for housing accommodations, as this falls under the Housing Development (Control and Licensing) Act 1966 (HDA). However, buyers can seek claims and relief under the HDA.


  • Importance of Home Buyer Awareness

Despite the existence of laws to safeguard buyers, a significant number of purchasers remain uninformed about their rights. Although public awareness has increased and developers have become more vigilant, there are still instances of baseless assertions being made. Before signing the Sales and Purchase Agreement (SPA), buyers must conduct thorough research on developers' past performance and financial stability.


  • Role of Authorities

To prevent misleading advertisements, the regulator Jabatan Perumahan Negara (JPN) must ensure that developer advertisements are backed by sufficient documents and are consistent with approved plans. Random checks should be conducted regularly to ensure compliance and unapproved advertisements should be stopped.


Restricting or removing disclaimer clauses in ads to lessen public confusion. Vital details like the developer's license and land ownership should not be hidden in small print. Furthermore, local authorities should mandate written approval from buyers before making any changes to authorized plans.


Conclusion

Misleading advertisements can cause significant issues for property buyers. Developers must provide accurate information and fulfill promises made in marketing materials. Buyers should be aware of their rights and conduct thorough research before purchasing a property. Authorities play a crucial role in ensuring compliance and protecting consumers from misleading claims.


For guidance on developer misrepresentation issues, consulting a housing development lawyer can help homebuyers understand and protect their rights under the Housing Development Act.


Contact us for a free consultation via WhatsApp at +60143000960 or email at admin2@luibhullar.com for any questions

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