WARRANTIES given to housing developers by manufacturers, contractors and suppliers should also be extended to buyers of residential properties to protect them against defects, an NGO says.
National House Buyers Association honorary secretary- general Datuk Chang Kim Loong said it was time to consider adding a new clause to the sale and purchase agreement (SPA) so purchasers could inherit such warranties.
“Often, house buyers are left in the lurch after the defect liability period (DLP) is over,” he said.
“I propose that lawmakers impose collateral warranty which is a contract that supplements the primary contract to a third party, that was not included in the initial contract.”
Chang was commenting on StarMetro’s frontpage report, “In a fix over leaks” on Feb 17, which highlighted serious defects faced by buyers, especially water seepage in strata properties, and the possible remedies available to them.
He said property development involves multiple stakeholders from a developer to main contractor and various subcontractors.
He said property development involves multiple stakeholders from a developer to main contractor and various subcontractors.
A property first bought from a developer may be resold to others in the secondary market.
“In a typical scenario, a developer engages a main contractor through a contract to construct the building as a whole.
“The main contractor will then award different types of work to various subcontractors by way of letters of award or appointment.
“Meanwhile, the developer enters into SPAs with purchasers.
“Such contractual relationships in a property development are mutually exclusive,” said Chang.
He said specialist contractors were subcontractors engaged for their expertise in select areas of construction.
“Among others, specialists are appointed for waterproofing works, proprietary roof truss system, paint work, aluminium works such as doors, windows and louvre, mechanical and electrical works such as fire-fighting system, automatic gate, air condition, lifts and escalators, and termite treatment.
“These specialists’ works usually come with extended warranties, some up to 10 years.
“However, unless otherwise provided for, the extended warranties are only given to the party who engages them, which are the housing developer or main contractor,” he elaborated.
Chang said housing development laws require developers to provide purchasers with a two-year DLP from the delivery of vacant possession.
Once the DLP lapses, the purchasers are left without protection should further defects appear, despite the fact that subcontractors’ warranties may continue to run beyond the two-year DLP period.
“Purchasers are regarded as a third party to these contracts (warranties), hence they generally cannot enforce the warranties given under these contracts,” he said.
Chang said a properly drafted collateral warranty would extend contractual rights to the purchaser to claim on the work within the given warranty period, even if it was longer than two years.
“The notion of collateral warranty is especially pertinent in specialists’ works because repair or remedial work require expertise and are generally more costly, and come with extended warranties in the first place.
“Exposure of specialist contractors may even be covered by professional indemnity insurance.
“Otherwise, beyond the DLP, purchasers are at best only able to request the developer, on a goodwill basis, to claim on the warranty from the specialist contractors, provided that the existence of extended warranty is disclosed to purchasers.
“Since the developer is not legally bound to make good the defects after DLP, the purchaser may end up losing out on the benefit of the extended warranties,” he added.
Chang said collateral warranty was one of the solutions if the Local Government Development Ministry was serious about addressing problems concerning house defects.
Notwithstanding the proposed assignment of warranties to purchasers, he also said that housing developers must remain entirely responsible for the performance of their obligations to the purchasers during the DLP.
