Today, this article will go through the basic terms related to construction adjudication and explain them.

What is adjudication?

Adjudication refers to a statutory dispute resolution method under CIPAA which was enacted to deal with payment claims related to construction work or consultancy services and provide options for payment recovery.

It is different from arbitration and litigation in which the two are commonly the last resort where all parties are ready to terminate the contract. In comparison, adjudication provides a swift neutral decision on dispute where neither party will be unfairly favored.

Here are commonly-used terms in the adjudication process.

Payment Claim: Served by the unpaid party (Claimant) to the non-paying party

Payment Response: Served by the non-paying party (Respondent) to the unpaid party within 10 working days

NOTE: When one party admits to the claim, they are required to state the whole amount as listed. The party disputing the claim will need to state the amount disputed and their reason for doing so.

Notice of Adjudication: Served together with the supporting documents by the claimant

Appointment of Adjudicator: Appointed by agreement between all parties within 10 working days from the Notice of Adjudication or within 5 working days from a receipt requesting for an adjudicator appointment by the director of the Asian International Arbitration Centre (AIAC).

Terms of Appointment: Negotiated and agreed with the adjudicator by all parties within 10 working days

Adjudication Claim: Served together with the supporting documents by the claimant to the respondent and the adjudicator within 10 working days

Adjudication Response: Served together with the supporting documents by the respondent to the claimant and the adjudicator within 10 working days

Adjudication Reply: Served together with the supporting documents by the claimant to the respondent and the adjudicator within 5 working days

Representation: All involved parties may be self-represented or be represented by an outside party, such as solicitors, appointed by them

Adjudication Proceedings: Conducted according to the adjudicator’s directions. Oral evidence may or may not be involved depending on the adjudicator.

Decision: Must be issued according to one of the following:

• Delivered within 45 working days from the service of adjudication response or reply
• 45 working days from the expiration date of the prescribed period for the adjudication response if no adjudication response was received
• A further time as agreed by all involved parties

The adjudication proceeding is binding unless one of the following takes place:

• The proceeding is set aside by the High Court
• The matter has been settled by all involved parties in writing
• The dispute was decided by arbitration or the court
• There is a stay of adjudication decision

The case can be reopened if either or both parties do not agree with the adjudication decision. In such an event, the case is solved through either arbitration or litigation or the termination of the construction contract.

In conclusion, contractors and companies can gain a deeper knowledge regarding CIPAA 2012 by understanding the various terms and processes within the construction adjudication process, ensuring that they receive a speedy dispute resolution solution that is both time saving and cost effective.

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But what is a CCC? Who is a PSP and what is their role in this process? What is the difference between a CCC and a CFO? And most importantly, why is the CCC process critical for a building’s construction?

This article will answer all the above.

The CCC is a certificate proving that a building is well-constructed and safe for occupation. It is mandatory for all buildings, both residential and commercial, to obtain a CCC before they can legally operate.

A Principal Submitting Person (PSP) completes the CCC and is a registered industry professional who is in charge of overseeing the overall construction of the building. The PSP is typically an engineer, architect, or a profession related to the construction industry.

The PSP’s duties include submitting building plans to local governments (also known as pihak berkuasa tempatan or PBT), keeping the PBT updated on when construction begins, as well as acting as a supervisor for all construction work. They are also responsible for reporting any breaches of plans or regulations, providing consultation on why said breaches occurred and ensuring the breaches are rectified before the building’s completion. 

Prior to the CCC’s introduction, the Certificate of Fitness for Occupation (CFO) was the certificate necessary for a building’s completion. But there is a key difference between the CCC and the CFO. 

While the CCC requires a PSP to sign it off, the CFO was under the complete responsibility of local governments (PBT). 

Because the CFO required local government authorities to visit the site in person to provide approval however, the lack of manpower meant that Malaysia’s property development industry had to experience backlogs and delays due to the limited availability of local authorities in signing off buildings. 

As such, the CCC was then introduced in 2007 to speed up the approval processes and prevent homebuyers from experiencing delays when moving into their newly-built properties. 

Nevertheless, the PBT is still included in the property development process as they are responsible for receiving, processing and approving CCC applications. This also means that PBT has the right to conduct site inspections to confirm construction details and are also authorized to impose penalties if there are breaches within the construction project.

So why do you need a CCC?

A CCC is important to ensure a building’s structure and overall build has been done up to standard. 

The CCC process requires a sign off at every step of the building development process, ensuring that each step has been safely constructed, from the foundations of the building to the final touches of landscaping. Individual contractors are also required to sign off their respective work in the CCC as a form of responsibility over their work in the event that there are any defects that need to be addressed. 

The CCC is submitted alongside documents from relevant registered bodies such as utility companies to ensure that everyday essentials like sewage connections or electricity supplies are functioning properly. 

Once the CCC is issued, it is accompanied with a Vacant Possession (VP) notice and is the final step before you are able to move into your new home.

In conclusion, it’s important to not overlook the CCC process during a building’s construction period. With the presence of the CCC, you can rest assured that your building will be constructed according to standard and should there be any defects or negligence, you will be able to seek legal consequences easily. 

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Before we start detailing the significance of strata titles, it is pertinent to understand all things related to strata titles in order for homebuyers to protect their legal rights.

Strata titles are commonly implemented to subdivided buildings or complexes including residential buildings, such as serviced apartments and commercial buildings. This form of title is necessary for subdivided buildings because unlike landed properties, the title gives control for the individual unit in the building that the homebuyer occupied —namely the parcel— instead of the land itself. The land and the common facilities surrounding the property are managed by the management committee of the Management Corporation (MC), which is elected amongst the strata title owners of the property.

Among the two types of land titles available in Malaysia —namely individual title and strata title— there are several differences as listed below:

• Ownership: For individual titles, the land and property ownership is with the purchaser. However, for the strata title, the ownership is shared between the owners of the properties.
• Registration of titles: Individual titles are registered faster than strata titles.
• Issuance of titles: Individual titles are issued to landed properties, whereas strata titles are issued to high rise properties.
• House type: Houses that have their own land such as terrace houses, semi-detached houses and bungalows will have an individual title. On the other hand, strata titles are available to high rise buildings that are subdivided such as condominiums and apartments.
• Responsibility: The responsibility for properties with individual titles falls solely on the individual who owns the property, whereas shared maintenance is expected for the building amongst strata title owners.
• Ease of finance: Acquiring financial support is easy for individual title owners. However, strata title owners may face some difficulties while attempting to acquire financial support.

There are many cases whereby despite homebuyers having bought their apartment units over 20 years ago they have yet to receive strata titles from their developers. Such stories are unfortunately common and rampant in Malaysia.

Although there are many voices expressing their opinion to involve banks in Malaysia to correlate with home buyers in issuance of the strata titles, there are no concrete actions taken thus far. Hence, with all things said, why bother with strata titles when its absence can go unnoticed for years, even decades?

Firstly, strata titles serve as proof of ownership of the high rise building’s parcel. This is because before the issuance of strata titles to the home buyers, the land and the building still legally belongs to the developer (or the registered proprietor) and the homeowner has only beneficial ownership of said parcel. The absence of strata titles will certainly be felt when the property developer becomes insolvent or goes into liquidation, as homeowners will need to prove ownership of their parcel to the liquidators without having a strata title.

The situation will be even more so complicated when homebuyers are seeking to sell their property. Aside from being an ultimate proof of ownership, a strata title is a necessary instrument when it comes to a smooth transaction during the sales process, as the developer is still the registered owner of the property.

Secondly, banks are often reluctant to grant loans where strata titles are either not perfected or downright not issued to the homebuyer, making it difficult for the sub-sales buyer to obtain a housing loan for the purchase. Hence, nowadays many sub-sale buyers require the presence of strata title as a prerequisite for the property purchase deal. Having the strata title ready during the sales process serves as an attractive prospect, allowing homebuyers to offer a higher price too.

What about the homebuyers who intend to stay in the property? Do they require a perfect strata title?

Thirdly, the issuance of strata titles to a minimum of 25% of the parcel owners is required to kickstart the formation of the MC. The members of MC are voted by all the other parcel owners who attended the Annual General Meeting, as strata developments are intended to operate as a democratic community. There are many responsibilities that are handled by the MC including enforcing rules and regulations, maintaining and managing common properties, obtaining insurance, paying quit rent and complying with relevant policies and law. The MC is a representation of all the parcel owners, in which it can only be enacted upon the issuance of strata titles.

Last but not least, the property developer can impose additional storage charges ranging between RM100 to RM150 monthly in the event of failure or delay to effect the perfection of transfer. This is because by not perfecting the transfer of the strata title within the specific period as announced by the developer, the developer continues to bear the burden of being the registered owner of the property. In this case, it is a lose-lose situation that should be rectified as soon as possible.

In conclusion, we strongly urge homebuyers to not delay the perfection of their respective strata titles the moment the developers have issued the strata titles for the property. Having a strata title registered in your name not only proves your indefeasible ownership of the property, but it allows you to fully exercise your rights as a parcel owner in a strata development.

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Cash flow refers to the movement of income (or revenue) into and expenditure out of a business.

In the construction industry, it’s a vital concept as contractors need money to pay subcontractors, material suppliers, as well as daily operation expenses during a project’s timeline.

However, negative cash flow (when there are more outgoing costs than incoming profit) also exists within the industry and can cause various drawbacks in a project’s completion. Let’s examine the critical issues that cause negative cash flow in businesses.

The first and most prevalent cause among the others is the pervasive attitude by various parties.

It has become an unfortunately common practice for paymasters to be late in issuing payment certificates as well as late in honoring them.

This culture has inevitably affected contractors’ cash flow and profit, creating a domino effect that goes as follows:

The second point is that contractors also often overlook the importance of payment provision in construction projects, despite the fact that it is a major concern for most if not all contractors.

The contractual provision governs the rights and entitlements of contractors to be paid, which relates back to the need for cash flow among contractors.There are two criteria needed to be met for the payment clause:

• Certification Period
• Period of Honouring Certificate

A majority of contracts tend to ignore or exclude the certification period as it relieves the contract administrator from being tied with a constraint period to make valuation and issue a payment certificate.

Even so, that is why the commonly used standard form of contracts such as JKR Contract (PWD) and PAM Contract have these two criteria to provide clarity in terms of payment for work done for the contractors.

To summarize, contractors must develop awareness from time to time regarding this matter to ensure that they will be able to receive the monetary rewards that they were promised.

Contractors should be aware of their rights contractually and legally and avoid being subjected to negative cash flow or worst still, become insolvent. It’s also beneficial as it narrows the room for exploitation of any party under a contract.

The third point is the availability and effectiveness of dispute resolution mechanisms.

Apart from the conventional litigation, there are various alternative ways often regarded as Alternative Dispute Resolution (ADR) to resolve disputes which include mediation, adjudication, and arbitration.

Mediation, for example, provides an alternative way to settle the dispute without the need to go to court. Involved parties could consider options and suggestions made by the mediator to ensure a win-win solution, as well as maintaining a personal and business relationship between involved parties.

The statutory adjudication under CIPAA 2012 was enacted and came into force on 15 April 2014 to cure this very payment problem in the construction industry. Through CIPAA 2012, a speedy and cheaper dispute resolution which considers all aspects of the situation can also be provided. Thus, the issue of late payments, pervasive negative cultures and behaviours can be overcame to avoid negative cash flow problems in the future.

The third method is arbitration which is an effective way of obtaining a final decision or award in a dispute, or a series of dispute, without needing reference from a court. It requires construction contracts to have an arbitration clause and is more informal compared to a typical court proceeding. It is, however, a private and consensual process whereby the involved parties are at liberty to decide on the arbitration terms such as the number of arbitrators, language used as well as the venue of the proceeding.

In conclusion, it is clear that there needs to be a greater understanding among contractors regarding the critical issues affecting their cash flow in business.

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But many new homebuyers may be unaware that several things need to be taken care of before they can start planning their house-warming party.

The most important thing is that the house-buying process doesn’t end the moment they get the keys to their property.

This might come as a surprise to some new homeowners. Developers may understand, however, as there’s still much to be done to ensure the property is safe and habitable before the purchase can be officially closed. This is also commonly known as the Vacant Possession (VP) process.

But before the VP process begins, there are three requirements that need to be addressed:

1. Local authorities need to issue a Certificate of Completion and Compliance (CCC), which verifies that said property is completed, safe and habitable.
2. The water supply and electricity to the property are ready to be connected.
3. The buyer has paid off any balance in accordance with the pre-agreed payment schedule.

Once the conditions have been met, the homebuyer will then have to sign several forms acknowledging the handover of keys, CCC as well as a list of fittings and fixtures included in their new property.

Along with those signed forms includes the Notice of Vacant Possession from the property developer. Remember to take a close look at the Notice, as buyers are given 14 days from the Notice’s date to take possession of a finished property. After the 14-day period, the buyer is deemed to have taken VP over the property.

An important note: The beginning of the Defect Liability Period (DLP) starts from the date homebuyers receive their keys, according to the Housing Development Act (HDA) Malaysia. Homebuyers are given an interval of time between 12 to 24 months of DLP depending on the type of property, to check for any problems and report it to the developer to kickstart any repair work.

Once the homebuyer reports a defect, developers are obligated to respond and begin fixing said defect within 30 days. Even if the problem cannot be fixed within a month, developers will need to show that they recognize the homebuyer’s defect report and that they have begun the process of remedying it.  If the developer does not respond to the original report within 30 days, it is legally acceptable for homeowners to begin the process of fixing those defects at the developer’s expense, as the cost of rectification can be claimed from the developer’s lawyer.

Property defects can be costly when they occur. Furthermore, the monetary costs of repairing those defects as well as the intangible costs of a ruined relationship with a homebuyer, loss of reputation among peers as well as brand damage among future potential clients, can all cost developers tremendous time, effort and money.

This whole ordeal can be quite time-consuming and expensive, especially when working with inexperienced home buyers. Luckily, there’s now a solution for developers.

Launched by CIC-QS Services Sdn Bhd (CIC), VP Manager is a new cost-saving solution for developers that is guaranteed to enhance your brand while also avoiding any potential disputes with clients.

VP Manager offers various services for contractors including but not limited to:

• Educational 3-month workshops for homeowners
• Contractor T&C support
• Homebuyer report evaluation
• On-site duty

VP Manager is also accompanied by our phone app ProFix, allowing for smoother and quicker communication between contractors and homebuyers.

So how does this process work? It’s simple.

VP Manager will conduct an educational workshop for homebuyers on the topic of building defect so that homebuyers understand what constitute to defect and the defect management procedure. The workshop is conducted by trainers who are experts in the field.

Any defects found will be liaised between VP Manager and homebuyer clients, ensuring a smooth and efficient communication bridged between the developers and the homebuyers.

With the innovative technology of VP Manager, developers can rest in ease as they focus on what they do best, delivering sturdy and quality properties to the homebuyers.

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