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Can the housing developer impose the requirement of prior consent and/or charge a high administration fee for assignment?

It is common practice for housing developers (“Developer”) to impose the requirement of prior consent and/or charge an administrative fee for the request of consent to any resale, transfer, or assignment of rights for property purchase pending the issuance of separate titles.

However, the issue is whether the law imposes a restriction on the developer in regard to the conditions of consent and/or the amount of administration fee that can be charged.  The answer would depend on whether the property is residential or commercial.

“Housing Accommodation” includes building, tenant or messuage which is constructed, adapted or intended for human habitation or partly for human habitation and partly for business premises. 

In Low Cheng Seong & Anor v Ceria Development Sdn Bhd [2021] CLJU 877, the court held that “service apartment” or “small office home office” were residential accommodation. The term “residential accommodation” means an intention to reside permanently or at least for a substantial period, i.e. “to call the place home”.

Thus, if a property is for residential purposes, it would be entitled to protection under the HDA 1966. Whereas for commercial property, HDA 1966 would not be applicable. However, this does not mean that the housing developer can charge arbitrarily.

Following Section 22D (1) HDA 1966, the requirement to obtain the housing developer’s consent for assignment of residential properties has been dispensed with. In fact, by imposing such a requirement, the housing developer is committing an offence under Section 22D (6) HDA 1966 and shall be liable to a fine between RM50,000 to RM100,000 or imprisonment for a term not exceeding three years or both on conviction.

The assignor is only required to provide a copy of the deed of assignment and other documents to the developer at or after the completion of the Sales and Purchase Agreement (“SPA”) between the assignor and the new purchaser to update the records (Section 22D (4) HDA 1966). 

However, the Act only applies to “housing accommodations” under Section 3 of HDA 1966 and buildings not covered by the Act, for example, office lots and industrial lots may still require the housing developer’s consent for assignment. 

In Lee Ming Chong Sdn Bhd v Prudential Properties Sdn Bhd [2011] CLJU 1322, it was stated that the protection of the HDA 1966 only applies to housing residential development that fall under the HDA 1966. Thus, the requirement of consent to sub-sale office lots, industry and shop houses very much depends on whether the developer has inserted such a requirement in the SPA with the assignor. For commercial property, the developer is free to impose the consent requirement on the assignment of property under contract law.

Following Section 22D (4) HDA 1966, the housing developer shall only charge “a payment of a fee not exceeding fifty ringgit or such amount as may be prescribed from time to time” for meeting the request for confirmation of the particulars of the property. 

In Lim Seang Mee v Keepahead Holdings [1992] 3 CLJ 1445, it was held that “a fair reasonable amount for endorsing the deed of assignment and giving an undertaking to deliver the title and memorandum of transfer should be a sum of RM500”.  

However, developers usually impose an administrative fee of 1% on the purchase price or the value of the loan as one of the conditions for assignment, especially for commercial property.

In KAB Corporation Sdn Bhd & Anor v Master Platform Sdn Bhd [2019] CLJU 975, the Court of Appeal held that the administrative fee of RM65,000.00 (i.e. 1% of the loan facility) was plainly arbitrary, unreasonable, unfair and oppressive. The developer has failed to take into consideration that the work of updating the records for each and every unit was the same regardless of the value of the property or loan facility. Also, the developer’s obligation to undertake the administrative work was attributable to their failure and/or neglect to obtain the strata titles despite the lapse of time after the completion of the property. The assignor having paid the full purchase price for the office unit has no continuing obligation under the SPA.

Although for commercial property, the developer has a right to charge an administrative fee for the assignment at a rate to be decided at their absolute discretion under the SPA, the rate must not be arbitrary and unreasonable. It was stated by the Court of Appeal that the developer must exercise its “contractual discretion” honestly and in a good faith manner. As such, a nominal administrative fee of RM 500.00 is fair and reasonable.

1. For residential property, the housing developer is not allowed to impose the requirement of prior consent for assignment. Nevertheless, they are allowed to charge RM50 or any reasonable amount for the administrative work as prescribed under the HDA 1966. Failure to comply with the law may result in the housing developer committing an offence under Section 22D HDA 1966.

2. For commercial property, the housing developer can always insert the requirement of prior consent for the assignment of the property in the SPA under the contract law. However, in doing so, they should ensure that they are exercising their “contractual discretion” honestly and in a good faith manner. Although they are not bound by the HDA 1966, the administrative fee of 1% of the transaction is arbitrary and unfair. An administrative fee that is fair and reasonable will likely be valid.

By George Miranda, Joy Sam Jia Qian, Kong Chai Yin

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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