Authored By: Prisheela Thavanthran
National University of Malaysia (UKM)
ABSTRACT
This article examines the developer’s liability for latent defects in Malaysia, particularly in the sub-sale property market, where the protection under the Defect Liability Period (DLP) is limited to the first purchaser. It explores whether subsequent purchasers can hold developers accountable for latent defects after the DLP has expired. Through analysis of statutory provisions under the Housing Development (Control and Licensing) Act 1966, relevant case law, and comparative insights from Australian jurisprudence, the study highlights that liability may extend through the tort of negligence, even without contractual privity. It also discusses the limitations imposed by the six-year statutory period and the applicability of caveat emptor. This legal article concludes with a call for legal reform to extend protection to subsequent purchasers, ensuring a fairer allocation of responsibility among developers, first buyers, and sub sale purchasers in Malaysia’s evolving housing market.
INTRODUCTION
A defect liability period (DLP) is a crucial timeframe during which the developer of a housing project is responsible for rectifying any defects in workmanship or materials at their own cost. In Malaysia, this period is regulated under the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) and typically commences from the date of vacant possession, commonly understood as the date the homeowner receives the keys. The DLP serves an important function in holding developers accountable for construction quality while protecting purchasers from financial burdens arising from faulty workmanship. Once the DLP expires, the developer’s contractual obligation to repair defects ceases. However, developers may still bear liability for latent defects that are not apparent at the time of delivery but emerge later. This raises a pertinent legal question: can a subsequent purchaser, who is not a party to the original sale and purchase agreement, hold the developer liable for such latent defects? While the DLP under HDA 1966 limits a developer’s contractual duty to remedy defects to a defined timeframe, liability for latent defects may persist beyond this period. Nonetheless, whether a subsequent purchaser can hold the developer accountable for these defects depends on the recognition of the developer’s continuing duty in tort and the extent to which statutory provisions and legal principles extend protection beyond the original contractual relationship to safeguard future homeowners.
RESEARCH METHODOLOGY
This research adopts an analytical approach by using information gathered from case law and statutes. It involves a comparative analysis to evaluate how legal principles governing defect liability and latent defects are applied in different jurisdictions. The study focuses on interpreting and analysing existing legal rules and judicial reasoning to assess the adequacy of current laws and the balance between developer accountability and purchaser protection in the sub-sale housing market.
III. LEGAL FRAMEWORK GOVERNING DEFECT LIABILITY IN MALAYSIA
Statutory Basis: Housing Development (Control and Licensing) Act 1966
To begin with, Clause for 27(1) of Housing Development (Control and Licensing) Regulations 1989 (“HDR 1989”) outlined the defect liability period as follows:-
“Any defect, shrinkage or other faults in the said Building which becomes apparent within twenty-four (24) months after the date the Purchaser takes vacant possession of the said Property and which are due to defective workmanship or materials or; the said Building not having been constructed in accordance with the plans and descriptions as specified in the Second and Fourth Schedules as approved or amended by the Appropriate Authority, shall be repaired and made good by the Developer at its own cost and expense within thirty (30) days of the Developer having written notice thereof from the Purchaser.”
With that being said, if the said defects are not repaired by the developer within thirty (30) days, the Purchaser is entitled to carry out the works in order to fix the repairs and the purchaser can deduct such costs made from the repair from any sum that they have paid to the developer’s solicitors.1 These both regulations that were outlined is clearly evident that the purchaser is entitled for any defects within the liability period. However, upon the expiry of the DLP, the purchaser is no longer entitled for any claim against the defects by virtue of the statute except the purchaser can make a claim for latent defects by virtue of tort of negligence which will be discussed below.
Limitation of Developer’s Contractual Liability in Sale and Purchase Agreement
It is evident that the primary objective of this legislation is to safeguard the interest of purchasers.2In fact, in the Court of Appeal of Malaysia, His Lordship Azmel Maamor JCA firmly rejected the defendant’s reliability on DLP and held that DLP serves as an additional safeguard for the purchasers rather than limiting their rights, particularly by strictly complying to the clause in sale and purchase agreement.3 He furthered quoted that the Act and the Rules does not remove any litigation claim for contractual remedy expressly or impliedly as they were designed to supplement common law remedies. The Federal Court Justice Peh Swee Chin shared the same view that expiry of DLP should not deprive the right to sue for the defects.4
The Principle of Caveat Emptor
Since it is established that a purchaser retains the right to sue the developer for defects even after the expiry of the DLP, the question arises whether this right extends to subsequent purchasers in the sub-sale market for latent defects. In such cases, the principle of caveat emptor may not favour developers as a means to evade liability.
The phrase caveat emptor derives from Latin which means “Let the purchaser beware”. In similar vein, the Federal Court in Bayangan Sepadu v. Jabatan Pengairan dan Saliran Negeri Selangor & Ors [2022] 2 CLJ 1 explained this doctrine as follows:-
- The purchaser must check and ask about the property’s condition before the sale when it is sold on “as is where is” basis;
- There is no guarantee about the property’s condition; and It does not protect anyone who has no legal or beneficiary interest in the property
It is important to note that all these conditions must be satisfied for the doctrine of caveat emptor to apply. This principle, however, is limited to patent defects those that can be discovered through reasonable inspection where the seller has no duty to disclose such defects. In contrast, latent defects, being hidden flaws that a subsequent purchaser cannot detect through ordinary inspection, fall outside the scope of this doctrine. In the case of Huang Chin Hwee v. Heng Kay Pah, the court affirmed this distinction, holding that a vendor is under a duty to disclose any latent defects to the purchaser.5
This raises an important question: who is the vendor that should be liable for latent defects in a sub-sale transaction when the property title remains registered under the developer? The doctrine of caveat emptor is silent on the status of the vendor, as it primarily emphasizes the buyer’s duty to exercise caution rather than defining who qualifies as the liable vendor, whether a registered proprietor or a beneficial owner. Nevertheless, latent defects are inherently traceable to the developer, since such defects typically arise from deficiencies in the design or construction stages. Therefore, despite the complexities of ownership in sub-sale situations, liability for latent defects is more appropriately connected to the developer’s role in the original construction. This connection aligns with the principle of duty of care, which further supports holding the developer accountable – a concept that will be examined in the following section.
JUDICIAL INTERPRETATION: DUTY OF CARE AND LIABILITY FOR LATENT DEFECTS
Malaysian Jurisprudence on Developer’s Duty of Care to Subsequent Purchasers
In a recent 2025 case of Badan Pengurusan Bersama Subang Parkhomes v. Zen Estates Sdn Bhd, the High Court of Malaysia held that a developer’s duty of care to another party depends on two key questions: first, whether there is sufficient legal proximity and reasonable foreseeability of harm arising from developer’s conduct; and second, whether any policy considerations negate this prima facie duty.6 The Court further emphasized that the absence of a contractual relationship does not preclude liability in negligence, as such a duty arises independently of contract.
Australian Jurisprudence on Builder’s Duty of Care to Subsequent Purchasers
In the case of Bryan v. Maloney, the High Court of Australia recognised duty of care from the builder to the subsequent buyer for the economic loss suffered which was caused by defective construction.7 Mason CJ resonate that if the same defect had caused physical injury or property damage, the builder would be responsible and as such it is sensible to hold the builder liable for financial loss suffered by the subsequent buyer.
The Supreme Court of Queensland in Raymond v. Lewis reaffirmed the principle established in the case of Bryan but clarified that a builder’s duty of care to a subsequent purchaser depends on the purchaser’s vulnerability. 8 Such vulnerability arises when the purchaser cannot reasonably protect themselves from latent defects at the time of purchase. The court noted that the nature and discoverability of the defects are key factors in determining this vulnerability. This establishes that liability to subsequent purchasers is not automatic and applies only in limited circumstances where the purchaser is incapable of safeguarding against hidden defects.
Comparative Analysis of Developer’s Duty of Care: Malaysia vs Australia
Malaysia and Australia share the view that a developer’s responsibility may extend beyond the original contract, imposing a duty of care toward subsequent purchasers. In both jurisdictions, this liability arises from negligence relating to latent defects. However, there is a subtle but important difference between the two approaches. In Malaysia, the courts focus on proximity and foreseeability, meaning that liability can arise as long as these conditions are satisfied, regardless of the existence of a contract. In contrast, Australia adopts a more restrictive approach based on vulnerability, considering whether the subsequent purchaser could reasonably protect themselves from latent defects at the time of purchase. Consequently, Malaysian law takes a broader view in imposing a duty of care, prioritizing the protection of subsequent purchasers, whereas Australian law is more cautious and conditional in its application.
CRITICAL ANALYSIS
Subsequent Purchaser’s Claim During the Validity Period of DLP It is possible for the original purchaser of a property to sell it to a subsequent buyer soon after the acquisition, even while the property is still under the developer’s Defect Liability Period (“DLP”). Although such a sale may involve financial implications and contractual requirements such as obtaining the developer’s written consent and paying a consent fee ranging from a few hundred to several thousand Ringgit as well as Real Property Gains Tax (RPGT), this article will explore the position of the subsequent purchaser in such a scenario, assuming the property has indeed been sold during the DLP.
It is clear that the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) primarily governs the sale and purchase of new properties from developers in Peninsular Malaysia. Its application does not extend to the sub-sale market, except in cases involving assignments where the developer’s consent and administrative fees are required. However, an important question arises: if a subsequent purchaser buys a property in a secondary market that is still within the DLP, can they claim for defects on the basis that the first purchaser has assigned their rights to them?
This issue has become increasingly topical in Malaysia, as many buyers remain unaware that the balance period of the DLP can, in fact, be transferred to the subsequent purchaser, allowing them to lodge defect claims during the remaining validity of the period. According to The Star Property article titled “Understanding Defect Liability Claims,” it has been a recurring issue in property transactions, and lawyers handling such sales are urged to ensure that the second buyer’s right to claim for defects under the unexpired DLP is properly recognized and preserved.9
Although the HDA does not expressly regulate sub-sale transactions, it can be argued that the DLP protection may still extend to subsequent purchasers, based on the wording of Clause 27(1) of the Housing Development (Control and Licensing) Regulations 1989. The clause uses the term “Purchaser” when referring to the DLP. Referring to Section 3 of the HDA, “Purchaser” is defined broadly as “any person who purchases housing accommodation.” This wording is ambiguous, raising the question of whether a second buyer could also fall within this definition.
If the answer is yes, another question then follows – does the phrase “twenty-four (24) months after the Purchaser takes vacant possession” mean that the DLP resets when the subsequent purchaser takes possession, or does it continue from the original purchaser’s date of vacant possession? This ambiguity underscores the legal uncertainty surrounding the applicability of the DLP in sub-sale transactions and highlights the need for clearer legislative guidance to protect subsequent purchasers.
Subsequent Purchaser’s Claim After the Expiry of Validity Period of DLP
This section makes it clear that a subsequent purchaser may still bring a claim against the developer under the tort of negligence, even after the expiry of the DLP, as discussed earlier. However, such a claim must be filed within the statutory limitation period prescribed under Section 6(1)(a) of the Limitation Act 1953. In Badan Pengurusan Bersama Subang Parkhomes, the court emphasized that accepting the expiry of the DLP as a valid defence would render the six-year limitation period redundant, since the cause of action in such cases arises from negligence, not contract. Moreover, it is often impractical for subsequent purchasers to detect latent defects through reasonable inspection, as these defects typically stem from the developer’s workmanship and construction quality, making the developer the appropriate party to bear responsibility.
CONCLUSION AND RECOMMENDATION
In summary, the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) does not extend a developer’s liability to subsequent purchasers and offers only limited contractual protection to first purchasers. While first purchasers retain the right to pursue claims against developers for latent defects even after the expiry of the DLP, the position of subsequent purchasers under Malaysian law remains uncertain. At this point, tort law plays a crucial role in bridging the gap, extending protection to sub-sale purchasers in the absence of a contractual relationship provided the defects are latent in nature.
Although the principle of caveat emptor “let the buyer beware” remains the general rule, it may be set aside where the defects are hidden and undiscoverable, thereby preventing developers from escaping liability. Nevertheless, subsequent purchasers must ensure that any claim is brought within the statutory limitation period, which restricts delayed actions and highlights the need for a more balanced legal framework.
Given these gaps, the Malaysian legislature should take proactive steps to amend the HDA to expressly address latent defects affecting sub-sale purchasers, as such defects originate from the developer’s construction, not from prior owners. A modern and equitable housing market requires reformed legal mechanisms that fairly allocate risk and responsibility among developers, first purchasers, and subsequent buyers.
REFERENCE(S):
Statutes
Housing Development (Control and Licensing) Act 1966
Housing Development (Control and Licensing) Regulations 1989
Limitation Act 1953
Cases
Badan Pengurusan Bersama Subang Parkhomes v. Zen Estates Sdn Bhd [2025] 7 MLJ 780 (HC)
Bayangan Sepadu v. Jabatan Pengairan dan Saliran Negeri Selangor & Ors [2022] 2 CLJ 1 (FC)
Bryan v. Maloney [1995] 128 ALR 163 (HC)
City Investment Sdn Bhd v. Koperasi Serbaguna Cuepacs Tanggungan Bhd [1988] 1 MLJ 69 (PC)
Huang Chin Hwee v. Heng Kay Pah [1991] 2 MLJ 15 (HC)
PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor And Other Appeals [2021] 2 CLJ 441 (FC)
Raja Lob Sharuddin bin Raja Ahmad Terzali & Ors v. Sri Seltra Sendirian Bhd [2008] 2 MLJ 87 (CA)
Raymond v. Lewis [2024] QCA 43 (SC)
Teh Khem On & Anor v. Yeoh & Wu Development Sdn Bhd & Ors [1995] 2 MLJ 663 (FC)
Newspaper Article
Chris Tan, ‘Understanding Defect Liability Claims’ Star Property (Malaysia, 10 February 2018)
1 Housing Development (Control and Licensing) Act 1966, clause 27(2).
2 PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor And Other Appeals [2021] 2 CLJ 441 (FC).
3 Raja Lob Sharuddin bin Raja Ahmad Terzali & Ors v. Sri Seltra Sendirian Bhd [2008] 2 MLJ 87 (CA); City Investment Sdn Bhd v. Koperasi Serbaguna Cuepacs Tanggungan Bhd [1988] 1 MLJ 69 (PC).
4 Teh Khem On & Anor v. Yeoh & Wu Development Sdn Bhd & Ors [1995] 2 MLJ 663 (FC).
5[1991] 2 MLJ 15 (HC).
6[2025] 7 MLJ 780 (HC).
7[1995] 128 ALR 163.
8[2024] QCA 43.
9 Chris Tan, ‘Understanding Defect Liability Claims’ Star Property (Malaysia, 10 February 2018).
