House Buyers Association (HBA) applauds the quick
reaction and timely initiatives of Yang Berhormat Dato Seri Ong Ka Ting,
the Minister of Housing and Local Government, on the exigencies of the
matter to re-regulate the Housing Developers (Control & Licensing)
Regulations 1989, Schedules G & H and the Housing Developers
(Housing Development Account) Regulations, 1991 in line with the Housing
Development (Control and Licensing) Act 1966.
Amendments to the Regulations are considered
necessary and vital to give it more consistency and effectiveness to
curb undesirable practices prevalent among housing developers in the
building industry. There should not be any form of accusation by the
public that we have ‘new Acts and old Regulations’ resulting in a
mismatch of expectations. The gazetting of the new Act should coincide
with the proposed amendments to the regulations to give it more refined
and terms with no-uncertainty and to bring them in line with each other.
HBA’s consultative committee have
made a study of the Regulations and noted that they were many loopholes
that have to be plugged as well as certain construction of words
rendering it a ‘grey-area’ that errant developers deliberately
flouted the laws by taking advantage over ill-protected house buyers. It
is on these perceived weaknesses that the HBA would like to contribute
by making some suggestions to amend the Regulations. For whatsoever they
are worth, they represent our views, which, we believe is representative
of the thousands of house buyers, who have always been on the loosing
end in their dealings with the housing developers and in the matter of
public interest. We back this statement by the fact that we have
frequent dealings with many house buyers who have received the short end
of the stick with their purchases. It is hoped that our views will lead
to a more protective Regulations for safeguarding the interest of house
buyers.
Housing Developers (Control and
Licensing) Regulations 1989
In the mid-eighties, the Malaysian
economy went into a recession. That was when the existing inadequacies
and deficiencies of the original Act manifested itself in the form of
abandoned housing projects and projects that never took off despite
purchasers having paid a lot of money towards the purchase of housing
units. In some instances, up to 80% of the purchase price had been paid
while the project in terms of construction costs were less than 35% of
completion. Those were the times of recklessness and unruliness in the
housing industry. The problems caused by non-standard and inherently
unfair payment schedules coupled with unbridled terms of the contracts
of sale were then reviewed and addressed by the then Minister. Under the
powers vested in him, the Minister made the Housing Developers (Control
& Licensing) Regulations 1989. There is now a need to further amend
several sections in the regulations, in tandem with the amendments in
the parent Act.
While HBA recognizes the need for improvement in
defining the roles and responsibilities of housing developers and
purchasers and other involved parties, there are particular areas of the
Regulations that are especially in need of further work. In the sections
below, we present the house buyers’ view of the most pressing issues,
and the provisions that are most directly problematic. This is followed
by a review of clauses of the Regulations, which we raise chiefly
because of their impracticality, unenforcability, or other pragmatic
problems.
B. Recommendations
for Improvements
I)
Housing Developers (Control and Licensing) Regulations 1989
Regulation 3 - Application
for Developer’s licence
3(1) (a) – “submit
his application in the form prescribed in Schedule A together with such
documents as are specified in section 5 (3) of the Act; and”. HBA
urges the Minister to make it mandatory to include:-
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a copy of an approval for the conversion of the
lands for building purposes and for the subdivision and
proof of
full payment of the premiums and charges imposed by the relevant
land office.
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Recommend IDT individual titles necessity.
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A copy of a sworn statutory declaration
set out in Section 6(1) of main Act.
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A
certified copy of the Building Plans and
Development Order and proof of payment thereof imposed.
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A copy of the sworn statutory declaration by
each of the directors that there has not been any two (2) complaints
lodged against him or her and/or the company reflecting their
credibility in the industry in tandem with the amendments of Section 6 of
the main Act.
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Payment of deposit with the Controller of
Housing, not less than two hundred thousand Ringgit (RM200,000)
in cash or such other form as the Minister may determine.
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A copy of the latest audited balance sheet and projection
of cash flow certified by
Auditors.
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A copy of the feasibility study for the
intended project.
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Irrevocable letter of offer from banks or
financial institutions.
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Copy of Form 49 (list of directors and
secretaries) and certification by the Secretary, in respect of
directors, shareholders and their shareholdings.
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Copy of sworn statutory declaration that they
are proxies (where applicable).
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Copy of geologist study (where
applicable).
Regulation 3 (4) – HBA
recommends that the application fees for a housing developer’s licence
be increased to a more reasonable amount.
Regulation 4 – Renewal of a
housing developer’s licence
4(1) – renewal of the licence should be made
within a reasonable period prior to its expiry. There should not
be a situation where the licence would lapsed while application for
renewal is still pending processing by the Ministry’s licensing
department resulting in a period of
‘twilight zone’.
4(2) – the requirements as recommended by us
in Regulation 3 aforesaid should be application for renewals.
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that the Developer has submitted the biannual report on the
stipulated dates to the satisfaction of the Controller
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written confirmation from the participating Banks or financial
institutions that the Housing Development Account under 7(A) has been
complied with and that it has been diligently maintained.
Regulations 5 – Advertisement and Sale
Permit.
Regulations 6 –
Particulars to be included in advertisement.
5(2) refers to Schedule D
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under the column in the brochure, the tenure of the land should
include its expiry date and whether the land is subjected to
‘restrictions in title’. A typical endorsement of the
restriction is as quoted: “Tanah ini tidak boleh di jual, di pindahkan,
di gadai atau di cagar melainkan dengan kebenaran daripada Pihak
Berkuasa Negeri”.
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To include whether separate title deeds are available or still
under the Master title.
5(3) – Any misleading, inaccurate or false
representation or description or economically unachievable
representation or exaggerated information which in the discretion of the
Controller is a gimmick, shall be an offence under the Regulations.
Regulation 8 – Restriction of
description of Advertisement.
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Projected monetary returns that cannot be guaranteed or are
doubtful in nature (Such as projected rental returns) should not be
permitted.
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Deceiving claims of panoramic views should not be permitted
unless substantiated.
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Distances of housing projects to popular destinations should be
realistic in terms of travelling distance and not map distance. Likewise
on travelling time.
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Claims that a particular project is situated at or close
to any popular and up-market location should be verified and proved.
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Misleading price tag on a nominal number of lowest costing
units to entice potential buyers should not be allowed.
Regulation 9 – Renewal of advertisement and
sale permit
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the requirements as recommended by us in Regulation 5 aforesaid
should be application for renewals.
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That the Developer has submitted the biannual report
within the stipulated dates to the satisfaction of the Controller.
Regulation 11 – Contract of Sale
11(2) – “No housing
developer shall collect any payment by whatever name called except as
prescribed by the contract of sale”
Additional Concern (1): Deed of Covenants
Ancillary to the contract of sale is the Deed of
Covenants, which HBA urges the Minister to regulate. The Deed of
Covenant has to have uniformity to reflect the standardized conditions
upon which the parties covenant to adhere their pertinent rules for
subdivided building. Developers have been using Deed of Covenants or
whatsoever name called it, drafted according to their whims and fancies
and very often lopsided in their favour, to compel home purchasers to
sign the Deed not mutually beneficial. House buyers too have been
ignorant and would generally sign whatever “their lawyers’ tell them
to do so. In most cases they are overwhelmed and blinded by the vision
of owning their own dream homes. It is a perfect recipe for developers
to circumvent the statutory Contract of Sales. It is high time that the
Ministry provides in the Regulations for a uniformed “deed of
covenants” for all developers to adopt to ensure better protection for
buyers and to ensure that there is no uncertainty of rules and bylaws.
Surely, the Deed of Covenant can be standardized since Contract of Sales
(Schedule G & H) are standardized.
Additional Concern (2): ‘Consent Fees’ or
Administration Fees
One of the pertinent point that has to be addressed
is the arbitrary imposition of administrative fees or by whatever name
called by the developer for giving developers consent to Vendors in
relation to sub-sale of property. Quite often Developers ‘arm-twist’ house buyers to
succumb to the payment of levies between 1% to 2% based on the
transaction value. They do this by withholding endorsement of their
consent. Similarly, Developers withhold the giving of their consent to
the financial institutions, in cases of financing or re-financing and
also in situations where buyers institute legal proceedings against them
for any antecedent breaches under the contract of sale. These practices
must be stopped. HBA recommends that the ‘consent fees’ or by
whatsoever name called, to be disallowed. It will then be incumbent upon
the Developer to expedite application of separate individual title or
strata titles as the case may be and transfer the same to the owners.
In the event after the study by the Ministry, the
so-called fees cannot be waived, HBA is of the view that a nominal fee
be charged in the following rates:
-
RM250.00 or 1% of the transacted price whichever is the lower for
property that is RM250,000 or less;
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RM500.00 or 1% of the transacted price, whichever is the lower
for property that is RM250,001 or more.
Additional Concern (3): Sale of Standard Contract of
Sale Documents
The regulation should stipulate that in cases where
the buyers have opted to appoint their own solicitors and not the
developers’ panel lawyers, then the buyers’ appointed lawyers should
be entitled to a free copy of the SPA from the developers’ lawyers,
including all the schedules attached. The Bar Council has issued a
directive to this effect but this requirement is frequently violated as
there is no law to bind lawyers to conform to this. Hence we suggest
that there be a sub-regulation making this tenet mandatory. This will
make it easier and encourage buyers to appoint their own lawyers and not
to leave it all to the developers’ lawyers. In this way, their
interests will not be compromised.
Regulation 13 – Penalties
HBA would like to recommend that the penalty for
contravening any part of the Regulations including the statutory
contracts of sale (Schedule G & H) and the proposed standardized
Deed of Covenants, be increased to ‘not less than RM50,000 and/or to a
term of imprisonment not exceeding three (3) years subject to not less
than one(1) month. This is to reflect the gravity of these regulations
and to show the Ministry’s seriousness in wanting Developers to
strictly adhere to the laws of the Housing Industry.
II) Contract of sale - Schedule G (Land and
Building) & Schedule H (Subdivided Building)
Clause 5 – Loans
Clause 6 – Loans from Federal or State Government or Statutory
Authority.
As the Ministry may be well aware of, the process of
loan documentation is not as simple as it seems. It entails exchange of
undertakings (either from the Developer or Bridging Financier) and it
would be time consuming. These could also be experienced by government
servants who obtain loans from Bahagian Pinjaman Perumahan (BPP)who have
to go through the red tape before loan could be released. Very often
these government servants has to plead to the Developer for waiver of
late payment interest. HBA has received a number of complaints from
government servants that even BPP letters seeking waivers of interest
imposed were refused by arrogant developers.
HBA urges that a reasonable time frame, say, three
(3) months interest free period from the date of initial purchase be
granted across the board to buyers who buys off the plans irrespective
of the stage of constructions.
Clause 5 (4) of Schedules G & H should be
deleted and substituted with a clause that give rights to the Purchaser,
who have failed to procure loan, due to whatsoever reason, to be able to
rescind his Agreement and seek refund of monies paid thus far. Very
often, purchasers are ignorant of the criteria required in obtaining
loans. In their zest to possess a home shelter for their families, they
contract to buy a property without having the relevant documents,
bankers seek to provide a loan. Thus, they later find themselves
stranded. It is no doubt their fault but HBA urges the Ministry to
consider a way out of their dilemma.
Clause 8 – Interest on late payments
A reasonable period of say thirty (30) days from date
of the progressive billings would be fair prior to the Developer’s
imposition of interest at 10% per annum provided always that the
Developer should diligently sent out their billings within 48 hours from
the date of notice.
Clause 9 – Default by Purchaser and
determination of Agreement
This clause gives the perception that only the Vendor
can determine the SPA. It should be a fair bargain agreement giving
options to both parties. It should be seen more of ‘a two-way
traffic’ and not giving the Developer the upper hand.
Similar to clause 9 there should be corresponding
clause of “Default by Vendor and determination of Agreement by
Purchaser” whereby the fundamental rights of a Purchaser are
preserved.
Clause 10 of Sch. G – Separate document of
titles/transfer of titles
Clause 10 of Sch. H – Separate strata title and transfer of
title.
Sch. G 10 (1) “ Upon the execution of this
Agreement the Vendor shall, as its own cost and expense and as
expeditiously as possible, obtain the issue of a separate document
of title to the said Lot.”
The problem here is that “as expeditiously as
possible” is unacceptably vague. As it is the responsibility of the
seller to provide the said documents, a time frame should be imposed in
this clause. Accordingly,
the Vendor will have to bear liability for the delays in obtaining the
said documents, and the purchaser should be reasonably compensated for
the delay.
Sch. H 10 (1) “The Vendor shall, at its own
cost and expense, apply for subdivision of the said Building so as to
obtain the issue of a separate strata title to the said Parcel under the
Strata Titles Act 1985.”
Under the Strata Titles Act, 1985, a time frame of
six (6) months is set for obtaining the said documents. As such,
reasonable compensation should be provided to buyers when there is a
delay.
This clause would be superfluous should the Ministry
accept ‘the concept of having separate titles prior to the sale off
the plans’. We have earlier recommended that it should be made
mandatory to have available separate titles even before the developer
applies for a housing licence.
Clause 11 – Position and area of lot
With advanced technology, there should be no room for
errors in the system of measurements. This clause is encrypted in the
Contract of Sale in case of eventualities and HBA accepts it. However,
HBA recommends that “the Purchaser should be entitled to compensation
if the final area is reduced by more than 3% and the Developer is not
allowed to charge more if the final area exceeds the sold lot. 3% is
accepted to be a fair and reasonable degree of accuracy in construction
industry.
In the case of Schedule H, it must be rationalized
that the Developer did not use any more land upon which the parcel lot
is built. They would have signed a Building Contract with their
contractors at an agreed cost. They should not be making benefits out of
nothing.
Clause 12 – Materials and workmanship to confirm
to description
Most buyers are layman and do not know much about the
building industry, save and except, to complain. They would not know the
quality of the materials whether they are inferior or not. More so, when
the plastering work are done, one would not know the quality of the
bricks behind the plastered walls. This is where the Architects come in.
But when you have the situation where the Architects are ‘employed’
by the Developer, corners are cut and works are compromised. May we
suggest that a mechanism in the form of a quality assurance program
mechanism be activated as a check and balance?
Clause 15 of Sch. G – Payment of outgoings
Clause 18 of Sch. H
Payment of outgoings including quit rent …… should
be from the date of delivery of vacant possession with water and
electricity connection and not otherwise as stated.
Clause 16 of Sch. G – Maintenance of services
Clause 16 of Sch. H – Payment of service charges
There should have been a pre-determined amount
a buyer has to pay for maintenance of services prior to the local
authorities taking over. Very often, the statement ‘fair and
justifiable proportion’ has been abused by developers who insist that
buyers pay one (1) year in advance at a certain high charges. The
Developer would withhold the release of the keys if the buyers fail to
pay up. We are certain that the maintenance charges can be
pre-determined by the Architects.
Clause 20 of Sch. G – Time for handing over of
vacant possession & Clause 21- Manner of delivery of vacant
possession AND corresponding clauses 22 & 23 of Sch. H.
HBA admires the boldness of Yang Berhormat Dato Seri
Ong Ka Ting to revolutionize the concept of vacant possession with
Certificate of Fitness (CFO) and ensuring the public that future vacant
possession should come with supply of electricity and water (running
through the wires or pipes) as reported in “The Sun” newspaper on
January 22nd, 2002, a copy of the excerpt is enclosed for
easy reading.
SYABAS, for such a bold step forward.
Additional Concern (4): Liquidated Ascertained
Damages
* Schedule G - Clause 20. Time for handing over
vacant possession.
“(2) If the Vendor fails to hand over vacant
possession of the said Building to which water and electricity supply
are ready for connection to the said Building, in time, the Vendor shall
pay immediately to the Purchaser liquidated damages to be calculated
from day to day at the rate of ten per centum (10%) per annum of the
purchase price.”
* Schedule H - Clause 22. Time for handing over
vacant possession.
“(2) If the Vendor fails to hand over vacant
possession of the said Parcel to which water and electricity supply are
ready for connection to the said Parcel, in time, the Vendor shall pay
immediately to the Purchaser liquidated damages to be calculated from
day to day at the rate of ten per centum (10%) per annum of the purchase
price.”
* Schedule H - Clause 24. Completion of common
facilities.
(2) If the Vendor fails to complete the common
facilities in time the Vendor shall pay immediately to the Purchaser
liquidated damages to be calculated from day to day at the rate of ten
per centum (10%) per annum of the last twenty per centum (20%) of the
purchase price.
In a contract of sale, the basic obligation of the
selling party is delivering subject matter, strictly abiding by both the
requirement of quality and delivering time described by the contract.
The market practice, whereby housing developers offer a discounted rate
on the LAD or challenges the plaintiff in court over the damages citing
other laws is a breach of this basic obligation. In favour of public
interest, this clause should be made clear and definite and house buyers
should be able to seek a cost-effective claim without the need of
lengthy litigation.
In relation to the issue of liquidated ascertained
damages (LAD), HBA urges the Minister to re-construct the wordings with
clarity by inserting the words:-
“Notwithstanding anything contained in any written
law or rule of law, …….. in Clause 20(2) of Sch. G and the corresponding Clause
22(2) and Clause 24(2) of Sch. H.
HBA’s rationale are as contained in the article
titled Liquidated Ascertained Damages annexed hereto and marked ‘Annexure II’.
III) The Third Schedule to the Contract of Sale (Sch.
G & H)
The Schedule of Payment of purchase price is quite a good
arrangement, save and except, that there should be more emphasis and
elaboration on the works that each billing stages entails. The
Lembaga Arkitek Malaysia (LAM) has a detailed guideline which each
architect has to strictly adhere to. Annexed hereto and marked ‘Annexure
III’ is a copy of the LAM’s General Circular No. 1/2001. To
ensure transparency on the part of the architect, the guidelines by LAM
could be adopted or at least elaborated.
May we recommend to the Ministry that the
stakeholders retains a certain percentage (say, 2.5%) of the balance
payment payable under the Contract of Sale, on the developer’s
undertaking to expeditiously extract out separate individual titles or
strata titles, as the case may be. This withholding of monies is to
ensure that Developers complete their part of the bargain in the
Contract of Sale.
IV) Housing Developers (Housing Development
Account) Regulations, 1991
8. Conditions for withdrawal of monies from
Housing Development Account.
“(1) No monies from the Housing Development Account
of a housing development shall be withdrawn by a licensed housing
developer except where the withdrawal of such money is supported by a
certificate from the architect or engineer in charge of the housing
development stating that payment is due to be made for that purpose
or where such request is supported by documents duly certified by the
director, proprietor, partner or office-bearer, as the case may be, of
the licensed housing developer's company requesting the payment.”
HBA recommends that a system of monitoring be set-up
whereby an independent party can verify that the withdrawals are
authentic. The appropriate independent party would be PAM or the Board
of Engineers. These would reflect more transparency in accounting of the
Housing Developers (Housing Development Account) Reg. 1991.
V) Homebuyers Tribunal
May we suggest that Clause 7 & 9 be re-worded for
the purpose to include settlement of the Awards made by the Homebuyers
Tribunal referred to in the main Act and for satisfaction of any
Judgement made by the Courts of Laws of Malaysia.
C. Conclusion
Our comments aforesaid are supplementary to our stand
that no amount of law will be able to eliminate or solve the problems
unless they are strictly enforced.
In closing, we would like to thank the Ministry of
Housing and Local Government for taking the time to review our
Memorandum. It is clear to us that many points need to be revised, while
others require improved clarity or expansion. We look forward to meeting
with Ministry officials to discuss our views, and in particular, we
would like a similar opportunity be made available to HBA to provide
comment on draft and amendments to the Regulations.
Thank you,
Yours sincerely,
Datuk Hj. Zainuddin Bin Hj. Bachik
President, House Buyers Association
