When it comes to investing in a property, various considerations are to be taken into account. There are also legal aspects that you should be familiar with to ensure a smooth transaction of possession. For instance, you will come across legal terms such as Vacant Possession and Certificate of Completion and Compliance (CCC) beyond Sales and Purchase Agreement (SPA).
In such situations, you should be aware of the meaning and underlying consequences if these terms are not fulfilled according to the agreement.
In General, a Vacant Possession (VP) refers to a property that is in a competent state to be occupied and handed over to the owner. Conversely, the Certificate of Completion and Compliance (CCC) is a document required to prove that the unit is safe and habitable.
And that is why folks, it is important to retrieve your CCC from your developer before you officially move into your property.
What Is a Vacant Possession (VP)?
Vacant Possession is a legal term used to represent a property that is in a competent state to be occupied. It is also the official process of handover of keys from the property developer to the home buyer.
As buyers, receiving a Notice of VP from your developer might just be one of the greatest news. You are finally getting the keys to your home after endless house-hunting, applications for loans, and a never-ending wait for your property to be completed!
However, there are a few criteria the development needs to comply with before your VP can be delivered to you by the developer. With that said, the property should be ensured that:
- Its CCC is appropriately signed and issued by the local authorities;
- Its utility supplies are ready for use;
- Whatever payment balance is paid for by the buyers in accordance with the agreed schedule.
Typically, the handover date of your VP will be listed in your Sales and Purchase Agreement (SPA).
For new developments, residential properties with individual titles are estimated to be delivered within 24 months while residential properties with strata titles are estimated to be delivered within 36 months from the date of signing the SPA.
In the secondary property market, buyers are expected to receive their VP earlier, in just a 3 months time period. It also depends on the payment of the balance purchase price for the property and the Agreed Apportionments – a list detailing the bills that have been paid by the previous owner.
As exciting as it sounds, there might be times when the development is not delivered on time or in accordance with the HDA schedule.
In these instances, buyers of new developments have the right to claim for liquidated ascertained damages (LAD) under the Sales and Purchase Agreement (SPA) should there be any delay in the completion of VP.
Liquidated Ascertained Damages (LAD)
All standard Sales and Purchase Agreement (SPA) for new residential development contains a clause known as the LAD clause. This is mandated under the Housing Development Act (HDA) to safeguard the interest of homebuyers against unscrupulous developers.
In simple words, the Liquidated Ascertained Damages (LAD) clause protects your interest as the buyer when a developer fails to deliver the property within the agreed timeline stated in the Sales and Purchase Agreement (SPA).
LAD is a contractually agreed ascertained or pre-determined amount of damages whereby it is claimable by either contracting party who has suffered a loss in the event the contract is breached.
Under Clause 24(1) of Schedule G and Clause 26(1) of Schedule H of the Housing Development Act 1966 which provides for the statutory form of the standard Sales and Purchase Agreement (SPA), it is the right of a buyer to claim for LAD for any delay in the delivery of Vacant Possession (VP).
In other words, the developer will be liable to pay the damages to the buyer starting from the date of expiration of the VP schedule to the date on which the buyer eventually receives the VP from the developer.
In cases where the developer continues to delay or fails to deliver the property at all. You can take action against the developer through the Homebuyers Tribunal or the Civil Courts. You also have the option to terminate the SPA and file a claim for a full refund of all monies paid to the developer up till the date of termination.
When exactly do I claim for Liquidated Ascertained Damages (LAD)
In all standard Sales and Purchase Agreement (SPA) for the purchase of new residential development, there will be a clause that states the Vacant Possession is to deliver within 36 months. In some cases, the developer would have gotten approval from the local authorities to extend the delivery timeline to 48 months.
So when do the 36 months start counting from?
This is an open debate and there are 2 trains of thought.
In general, the Vacant Possession needs to be delivered within 36 months from the agreement date after it is signed by both buyer and developer. If the Vacant Possession is delivered later than 36 months, the buyer has the right to claim for Liquidated Ascertained Damages (LAD).
Having said that, the landmark case PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and Other Appeals (Appeal No.: 01(f)-29-10/2019(W)). set precedence that the date for calculating LAD should begin from the date the booking fee is paid.
Personally, I would recommend seeking advice from legal counsel before making any claims in court.
What Is Defect Liability Period (DLP)?
Another thing to note is that when a notice of VP is served, it also indicates the start of the defect liability period. Nonetheless, not all developments come with a DLP since the Malaysian Housing Development Act (HDA) only protects developments and properties under a residential title.
Under the HDA, a Defect Liability Period is essentially a “warranty period” that lasts for 12 to 24 months starting from the date the homeowner receives the keys to their property. This warranty period begins from the date of Vacant Possession when keys are handed over to home buyers.
During this period, the homeowner is to check for any defects, damages, faulty workmanship, and report the issues to the developer. The report filed will then be attended to by the developer at no cost.
Generally, within the DLP, it is advisable for you to inspect whether the workmanship is satisfactory, whether all the fixtures and appliances are in good working condition as well as whether the property delivered is as promised by the developer.
Here are some of the tips on what to inspect during the DLP.
- Inspect all pipe fittings for any leakages;
- Observe for any chips, dents, and/or scratches on the surfaces;
- Inspect all fittings and finishings, ensure that it is all functioning properly;
- Check for any hollow floor and wall tiles by knocking lightly on it with a stick;
- Inspect all keys, locks, and doors to make sure that the keys given matches with the locks.
- Inspect for wonky surfaces by using a spirit measure to check whether the surface are leveled.
- Furniture provided by the developer is in good working condition.
What happens after I claim for damages with the developer?
Once a claim is submitted, the developer has 30 days from the received date to make good on the damages. Upon completion, an inspection is done with the developer and if other major defects are found, the developer is obliged to carry out repair works if it is within the Defect Liability Period (DLP).
If you are having issues with difficult developers refusing to make good of the damages, there are ways around the situation despite the hassle.
If 30 days have passed and the developer still refuses to carry out repair works, you will need to submit your own quote for the repair to the developer. If another 30 days have passed and the developer fails to respond, you can engage their own contractor to complete the repair works.
Once the repair work is completed, the invoice is submitted to the developer to seek reimbursement for the repair costs.
If the developer refuses to reimburse the repair cost after 30 days have passed from the date of invoice received, you are allowed to submit a claim to the Tribunal for Homebuyer Claims (Housing Tribunal) for action to be taken against the developer.
The claims that can be submitted to the Tribunal for Homebuyer Claims is limited to RM 50,000 only.
Can I do renovation during the Defect Liability Period?
My personal recommendation is to sort out the defect and seek completion of repair works before engaging the service of renovators.
This is a common issue encountered during the Defect Liability Period (DLP) where renovations are concurrently done to the property.
If renovation works are done to your home and a defect was found, the developer would argue that you contributed to the defects and refuses to fix them. Hence, it is best to complete any claim on defective works or until repair works are done before engaging the service of renovators.
What Is Certificate of Completion and Compliance (CCC)
The Certificate of Completion and Compliance (CCC) is a certificate for verifying that a building is safe and fit for occupation. It is only issued after ensuring that the design and construction comply with the provisions of the law such as Uniform Building By-Laws (UBBL) 1984, approved building plan, and also the conditions set by the local authorities in the approval of the building plan.
Certificate of Completion and Compliance (CCC) is a self-regulated and self-certified process that deals with the technical elements of building construction to ensure that none of the safety aspects are compromised. It is an assessment undertaken by industry professionals in which each section of the assessment addresses different components of the building in order to achieve a comprehensive review.
Essentially, there are 21 building components under the CCC issuing system. With this, the 21 Stage Certification Forms – Form G1 to G21, were introduced under the 2nd Schedule of the UBBL 2007. The construction components that are reviewed are as follows:
- Foundation work
- Earthworks
- Plumbing
- Drainage
- Landscaping
- Street lighting
- Fire-fighting system
Besides the Stage Certification forms, the implementation of the CCC system also requires Form A, B, C, D, E, F, and F1. The whole process is usually handled by an industry professional with an overview of the construction, also known as the Principal Submitting Person (PSP). Other than the CCC being countersigned/assessed by the PSP, it is also signed by individual contractors that are responsible for each of the components of the construction work.
And, that is why the CCC is a mandatory document to allow the final sign-off for the construction of a building.
If you find the above really technical, it is technical indeed.
In other words, your property needs the Certification of Completion and Compliance (CCC) before Vacant Possession can be done with the individual homeowners. With the CCC, you can rest assured your property is safe for the family!
Can CCC Be Issued For Ongoing Construction Projects?
Well, as you would guess from the name ‘Certificate of Completion and Compliance’, the answer to that would be a NO. Nevertheless, a Partial CCC can be issued under Form F1.
In general, a Partial CCC allows part of a development project to be opened up for occupation although the rest of the development may still be under construction. Given that the completed section of the development complies with and satisfies all necessary requirements.
If you are concerned about developers issuing partial CCC, then you should know the partial CCC does not apply to all properties except for mixed developments that are built in phases such as commercial projects that consist of offices, residentials, and retail towers.
Furthermore, after taking into consideration the protection of buyers, the HDA also stated that Partial CCC is not acceptable for the issuance of VP.
Just imagine if you have moved into one of the residential units of an ongoing project just to have the developer abandon the development halfway through. It would be a nightmare!
Therefore, it is important for buyers to not confuse Partial CCC with CCC, and to always check through the SPA before signing the dotted line.
Principal Submitting Person (PSP)
As mentioned, PSP plays an important role in the issuance of CCC.
A Principal Submitting Person (PSP) is typically a professional architect, engineer, or building draftsman that is registered under the relevant law relating to their field such as the Architects Act 1967 and/or Registration of Engineers Act 1967.
Based on Part 2 of the UBBL 1984, the responsibilities duties of the PSP outlined are as follow:
- Submit building plans for approval by the local authority.
- Supervise the erection and completion of the building in conformity with aproved plans and requirements of the related Acts and/or By-laws.
- Ensure all technical conditions imposed by the local authority are duly complied.
- Ensure the building is safe and fit for occupation.
- Submit CCC to the developer, local authority and relevant professional boards once he is satisfied that all criteria are met.
- Report any issues or breach that may have occured to the local authority, and ensure rectification work for the breach (if any) is carried out.
What Happens If There is A Withdraw or Change of PSP?
Typically, the PSP will be responsible for the proper execution of the construction works and shall continue to do so until the works are complete unless it is with the agreement of the local authority for another PSP to be appointed to take over.
In situations where the PSP, in the midst of construction, has died or become bankrupt or has been deregistered from the register, or for any other reason ceased to practice, then the owner/developer shall as soon as possible appoint another PSP and submit adequate evidence to the local authority of the circumstances.
However, if such situations happened after the issuance of CCC, any faults regarding the components that arise shall then be the responsibility of the relevant parties.
The Certification of Completion and Compliance (CCC) implements a Stage Certification process where every building component is inspected and placed under the responsibility of the individual contractor that is in charge of that particular component.
For instance, a licensed electrician is responsible for the internal wiring, and BOMBA is responsible for the fire fighting systems, etc. Hence, despite the PSP being responsible for the overall construction of the building, the individual contractors are held responsible for their respective areas of work and will be held liable should there be any issues and/or negligence.
On a side note, should any parties produce any false declaration, certificate, application, or representation of any form in the CCC process shall be fined a sum not exceeding RM250,000 or a jail sentence not exceeding 10 years, or both.
Final Words
Certification of Completion and Compliance (CCC) is an assurance of the quality of the building construction as there is a trail of responsibilities and legal consequences should there be any issues. Therefore, it is important to never accept a Vacant Possession (VP) if the building has not been issued its CCC.
Also, do not be fooled by your developer into thinking that a Partial CCC is enough.
Remember, HDA has stated that Partial CCC is NOT ACCEPTABLE for the issuance of VP. That said, buildings without CCC may have underlying issues in which you will have to be prepared to bear the consequences should you still want to proceed.
Buying a property is a huge milestone in life whereby it is full of risks and pitfalls. Thus, it comes in handy if you are familiar with the legal terms and relevant acts.
