WORKING OUT A SYARIAH-COMPLIANT S.P.A.
BN’s housing initiatives will see the birth of a new national single entity to oversee the provision of affordable housing
THE 220-page Barisan Nasional manifesto launched by Prime Minister Datuk Seri Najib Razak recently contained over 360 initiatives for all Malaysians. In law, it represents a solemn promise, a commitment, a covenant or an undertaking by BN that if it wins the forthcoming general election (dubbed as “the mother of all elections”), it will diligently and faithfully carry out and implement these promises.
I will focus only on the housing aspects of the manifesto, which if fully implemented, will certainly change the national housing landscape.
The following is a summary of the housing aspects in the manifesto:
can secure loans by combining their incomes with those of their siblings or parents;
will be granted on housing rental income;
will be established to facilitate loans for affordable and low-cost housing priced RM300,000 and below;
will be granted for development funds to encourage banks and housing developers to offer rent-to-own (RTO) housing schemes;
will be established to monitor, synchronise and manage public housing issues;
for property valued at RM1 million and above is scrapped; and
between housing developers and purchasers.
These initiatives are intended to benefit buyers and developers as well as promote both the rental market and home ownership. It will also see the birth of a new national single entity to oversee the provision of affordable housing, which at the moment, is within the jurisdiction of the states.
The initiatives will also look into developing underutilised government quarters, buildings and use land for affordable housing and mixed development projects. There will also be greater opportunities for government retirees and their children to buy houses priced between RM150,000 and RM300,000.
Apart from reviving some 20 abandoned housing projects nation-wide with an initial allocation of RM123 milion, the government will also help buyers of some 50,000 units who have purchased their houses from unlicensed developers.
The announcement of a syariah compliant SPA intrigued many of my colleagues in the legal profession. At the moment, our housing law in Peninsular Malaysia is contained in primary as well as subsidiary legislation. The former is the Housing Development (Control and Licensing) Act 1966 (usually referred to as Act 118) whilst the latter is the Housing Development (Control and Licensing) Regulations 1989.
Both have been amended several times in the past, in keeping with the legislative intent of Act 118, which is to “protect the interest of purchasers” — per Suffian LP in SEA Housing Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31.
The SPA is a standard and mandatory document for all sale transactions entered into by developers and their purchasers. No departure or change in its content is permitted.
There are now four different formats of the SPA, in accordance with Schedules G, H, I and J of the 1989 Regulations. The Schedule G format is used for houses built on terra firma whilst Schedule H is used for strata housing. Schedules I and J were introduced much later in time (December 1, 2007) when the government implemented the 10:90 formula for developers, after the Build Then Sell (BTS) system was scrapped.
The concept of syariah compliance first appeared in the local banking and finance industry and has since spread to the capital market, the aviation, hospitality and tourism industry. Although its entry into the local housing industry seems to have surprised many quarters, the idea of a syariah compliant SPA had been mooted by some of our local scholars some time ago.
In broad terms, an agreement or contract will be struck down as void under Islamic law if its terms are unfair or unjust, obscure or unclear, or if they are in conflict with Islamic principles or are clearly forbidden (haram) — for example, if there are elements of riba (interest) or they produce hardship to one party whilst the other party stands to benefit unfairly.
The current SPA does not fully protect purchasers if the housing project is abandoned by the developer. It does not guarantee that the house will be completed. The purchaser is the one who bears the risk of the project being abandoned, the house left uncompleted. Although latest amendments in Act 118 have criminalised such misconduct by the developers, the unfortunate victims cannot get the full compensation for their loss.
If the house is completed late, purchasers’ rights are limited to claiming 10 per cent of the purchase value of the houses from the developers. Their rights under general principles of contract law as contained in section 74 of the Contracts Act 1950 (the right to claim for loss “naturally arising”) have been denied. The courts have consistently held that the 1950 Act is a law of general application whilst Act 118 is a special law applicable to housing development, and on the principle that the special law prevails over the general law, the purchaser’s rights to recover loss from the developer is limited to such rights contained in the SPA only.
These are only some of the issues regarding the current SPA which the Urban, Wellbeing, Housing and Local Government Ministry will have to revisit if they are serious in their plan to make it syariah compliant.
If and when that happens, we can expect a new format in the 1989 Regulations.
The current SPA does not fully protect purchasers if the housing project is abandoned by the developer. It does not guarantee that the house will be completed. The purchaser is the one who bears the risk of the project being abandoned, the house left uncompleted.
The writer formerly served the Attorney-General’s Chambers before he left for practice, the corporate sector and, then, the academia.