National Housing Conference II: The Road Ahead in National Building, Sustainable Development & Environmental Considerations, Economics Viability and Technological Innovations; 6th November 2001 - Sunway Pyramid Convention Centre

SPEECH TEXT

HOUSE BUYERS OVERVIEW ON THE HOUSING INDUSTRY AND PERSPECTIVE ON THE AMENDMENTS TO THE HOUSING DEVELOPERS ACT 1966

BY MR CHANG KIM LOONG, SECRETARY-GENERAL
HOUSE BUYERS ASSOCIATION

A)      INTRODUCTION:

1. It is an honour to be invited to deliver a speech in this seminar.

2. I am the Secretary - General of the House Buyers Association ("HBA"). HBA was set-up in 1999 and was officially registered in the middle of 2000 by a group of aggrieved house buyers who have also volunteered their services for the association. The main purpose then, as today, is to create awareness of legal rights and to voice house buyers' interest in legislature procedures and in the housing arena.

3. Like all the works of consumer bodies, its work is directed towards providing information, advice and support so that house buyers are in a position to act as equal "partners in the market". The aim is to balance out the inferior position of house buyers in the housing-supplier-dominated market.

4. This is why HBA issues reactions to draft laws, amendment bills, maintains close contacts with law makers and people involved in this industry. Press and public relations work is also part of our representation of house buyers' interests.
   

B)     HOUSE BUYERS OVERVIEW OF THE HOUSING INDUSTRY

1. I would like to take this opportunity to highlight certain degenerating aspects of the housing industry in the country. HBA while pursuing with the authorities on the immediate need of a new legislation and policies to control the housing industry, would also simultaneously urge developers to be more responsive to the call for honesty and transparency in their dealings with house buying consumers.

2. They should as a matter of urgency adopt more innovative designs and technological advancement in their building plans of houses that could minimize cost without compromising quality.

3. The housing industry as a whole has shown some signs of degeneration over the years that have aroused a lot of suspicion and criticisms from dissatisfied house buyers. The quality of houses built was much below expectation and does not reflect the prices paid for. This phenomenon has caused a growing concern to the people that the industry might relapse into a worse situation unless immediate efforts are made to arrest its damaging effects.

4. The frivolous and conniving attitude of some of the developers must change if they want the industry to prosper. Those developers, who have absconded with the house buyers' money without realizing the projects, must be made to pay the price of severe penalties as they are likened to committing daylight robberies on unsuspecting and poor house buyers.

5. I read in the papers recently of a case of a man who stole RM4.70 from a telephone box and was convicted and sentenced to six (6) months imprisonment. Those errant developers who have absconded with millions of ringgits of house buyers' money seem to go scot-free. There is no logical explanation here.

HOUSING INDUSTRY RELATED PROFESSIONALS

Apart from the developers there are other players as well who are related to the housing industry, such as the architects, lawyers, planners, engineers, Surveyors and contractors who are equally bound to strictly adhere to their professional ethics by a display of the utmost professionalism in their work.

HOUSING FOR ALL

6. Under the public sector economic development plan, concerted emphasis has been focused on the development of infrastructure, public amenities, public housing, etc.

7. Housing developers have apparently shown more inclination to catering only for the middle and higher-end priced houses, which give hefty profits unlike the low cost houses with low profit margin. Such a shortsighted vision and lack of cooperation from housing developers to build low cost houses might have been construed for being unsupportive of the National Development Plans that have been diligently formulated for the promotion of sustainable economic growth and nation building. It is to be viewed with grave concern the existence of squatter communities alleging that they have been deprived of social justice and marginalized from the mainstream economic development.

OVERCROWDING

8. We have also discovered that certain developers would take the advantage of maximizing the use of their plot of land by overcrowding it with houses at the expense of open spaces for healthy lifestyle and a conducive environment. We urge the local approving authorities to keep this trend in check as the people are entitled to fresh natural air and decongested surroundings.

GOOD MOVE

10. HBA hailed the action contemplated by the State Govt. of Selangor to confiscate lands that were alienated to the developers for low cost houses but have failed to lift up the projects. The Association urges the other State Government to follow suit.

11. Public housing for the low income earners should be built by the State Governments who are in better positions to reduce the costs of houses of this category within the range of RM35,000 each, as the states need not necessarily charge a high premium on alienated lands to the low cost house buyers. Selection of the eligible house buyers must be confined exclusively to the targeted groups.
    

C) HOUSE BUYERS PERSPECTIVE ON THE AMENDMENTS TO THE HOUSING DEVELOPERS ACT 1966 (AMENDMENT BILL NO. 36/2001)

1. HBA applauds the positive response from Yang Berhormat, Dato Seri Ong Ka Ting, the Minister of Housing & Local Government, in addressing the cumulative problems related to the housing industry. HBA compliments the Minister in renaming the Act to "Housing Development (Control & Licensing) Act 1966" as the perception of the public on the previous title was that the law was drafted by and for the developers.

2. HBA congratulates the Minister for the timely initiative on the exigencies of the matter to propose amendments to the Act. Some of the Sections (new and old) have been sufficiently improved, inter alia, Section 6(e)(f)(g) & 6(1A) (Licensing Housing Developer); Section 7 (h)(i)(j) & (k) (Duties of Licensed Housing Developer); New Section 7B (inclusion of any housing developer whose license has expired); New Section 10A - 10J (Investigation & Enforcement) and the positive formation of the Tribunal for Homebuyers Claims to reflect the seriousness of the Ministry in addressing the problems of the house buying public in seeking solutions and remedies and giving more power to enforce the letters of the law.

3. While the amendments are considered expedient and vital as a stop gap measure to curb undesirable trends presently practiced by errant housing developers in the building industry, it is the Association's considered opinion that for the long term, a complete review should be carried out on the existing Act or to replace it totally with one that suits the present day conditions in order for it to take us through the new millennium. This contention is prompted largely on the basis that the existing Act which was passed in 1966 might be construed as having surpassed its effectiveness over such a long period of time and in the chase taken by developers to build houses to cater for the market.

BUILD FIRST THEN SELL

4. HBA in its pursuit to forestall the problems of house buyers, in an effort to regain the eroded confidence would strongly recommend the implementation of a policy that houses are built first by the Developer before they are put out for sale in the market, to be precise, the concept of selling readily built homes. The present economy may not permit but perhaps, the state aligned projects, where land costs is minimal, should be the forerunner.

5. Nevertheless, our committee have made a study on the proposed amendments and noted that they were intended to streamline the existing Act as well as to serve as deterrents to developers who had deliberately flouted the laws by taking advantage over ill-protected house buyers. For whatever they are worth, they represent our views, which, we believe is representative of thousands of house buyers who have always been on the losing end in their dealings with the housing developers. We back this statement by the fact that we have frequent dealings with many house buyers who have got into trouble with their purchases. It is hoped that our views will lead to a more protective Act for the better protection of house buyers.

INCREASED PAID UP CAPITAL - AMENDMENTS TO SECTION 6

6. HBA cannot comprehend why the cash deposit should be 'not less than' RM200,000 when it equates to a drop of water in a tea-cup to the developers, in addition to the mainstay paid up capital of RM250,000.

7. Housing developers are not petty traders and a cash deposit of RM200, 000 is only a small sum. Even a single storey home in Puchong costs more than that. We do not understand the rationale for such a minimal imposition when the cost of houses has increased many folds since the inception of the Housing Developers Act 1966, that was 35 years ago.

8. HBA's stand is that to enable developers to be serious in their commitment in building houses and development of housing schemes, the developer must have a paid up capital of at least 30% of the land and project cost of that particular project. For instance, if the project and the land cost is RM100 million (which is merely a medium-sized housing scheme) the paid up capital should be RM30 million. This would make the housing industry open to those developers who are serious and experience enough to take up a project. The developer cannot simply rely on the purchaser's deposits and progressive payments to roll and to fund the project. The developer should have their own funds to be converted to investment capital while the balance of project funds would normally come from the Bridging Financier who would in the current trend grant a margin of 70%. Even the Minister of Domestic Trade and Consumer Affairs, Tan Sri Muhyiddin Yassin has said 2 weeks ago that the paid up capital on multi-level marketing licenses for direct selling companies be increased to RM2.5 million from the current RM250,000.

PROPOSED NEW SECTION 8A (STATUTORY TERMINATION OF    SALE & PURCHASE AGREEMENT)

9. This Section allows the Developer to apply to the Ministry to terminate the Sale & Purchase Agreement earlier if:-

(a) Six (6) months after the execution of the SPA the Developer has not commenced works; and
(b) 75% of the Purchasers have agreed in writing to terminate the SPA.

This Section appears to give developers the notion that the business of housing development is a 'no risk venture'. It gives the housing developer the opportunity to collect vast amount of money from house buyers solely for their own gains. They can then declare that they are unable to proceed with the project and then apply to the minister to invoke Section 8A for the nullifying of the SPAs. The funds that were collected and utilized would then be returned to the house buyers free of interests.

The following issues should be addressed:-

1. In the event that the Minister invokes the statutory termination of the Sale & Purchase Agreement, shouldn't the cash deposit of RM200,000 referred to in New Section 6A be utilized to compensate the aggrieved purchasers as to their expenses (legal fees and stamp duties on SPA, legal fees and disbursements on the loan documentation, processing fees etc)?

2. What about the interest paid to service the bank account should the purchaser take a 100% loan margin?

3. Shouldn't the developer bear the legal cost and expenses for the removal of the banks charge / assignment?

4. Shouldn't the Banks' consent be first had and obtained prior to termination of the SPA?
5. Shouldn't there be a time frame, say, seven (7) days to refund the deposit?
   

IRONIC SITUATION

10. The proposed New Section 8A (11), should be amended to read as "Any licensed developer" instead of "Any person". If it is not amended, it would mean that any person who fails to comply with any of this Section shall be guilty of an offence and shall on conviction, be liable to a fine not exceeding RM50,000 and a further fine not exceeding RM5,000 each day during which the offence continues after conviction. The poor house buyer who do not have a house that he had purchased, ironically might land himself in jail if he disagrees on the statutory termination of the SPA by the Ministry!

PROPOSED NEW SECTION 10H - PROTECTION OF INFORMERS

11. Perhaps, there could be a suggestion to give "incentive of awards to informers"

PROPOSED NEW SECTION 16A - TRIBUNAL FOR HOME BUYERS CLAIMS

The spirit of the inception of Tribunal for Home Buyers Claims is good as it is intended to allow those aggrieved house buyers to seek redress at the tribunal as an alternative to civil courts where cases are often bogged down. We see the capping of the claims to RM25,000 as targeting the marginalized sector of society. We have our reservations. However, time will tell on the effectiveness of the proposed tribunal.

POWERS OF THE HOUSING MINISTER

12. Generally the new sections 8A, 10A-10J, 11, 16AI & 24, have given the Minister vast powers and HBA is certain that the Minister would exercise the power entrusted to him cautiously with fair and balance treatment to house buyers. HBA urges the Minister to exercise his powers to amend the Housing Developers Regulations, Schedule H & G and to provide for a standardized Deed of Mutual Covenants for all developers to adopt to ensure better protection for purchasers and to ensure that there is no uncertainty of house rules.

HBA earnestly wishes and urges the Minister to consider re-regulating Clause 23 of Schedule H & G (i.e Manner of delivery of vacant possession) to adopt the concept of 'Vacant Possession only upon issuance of Certificate of Fitness for Occupation.' ("CFO") HBA takes this stand based on the following grounds:-

1. the taking over of vacant possession without the CFO is meaningless and detrimental to the house buyers because they are still unable to move into their houses;

2. from the date of 'deemed' taking over of vacant possession, the house buyers take over responsibilities of the security of the houses. How can they do so, when they are not allowed to move in? The houses would be subjected to vandalism, theft, and other hazards, all on the house buyers' expense.

3. the defect liability period starts running and gets shorter and shorter. How are the house buyers able to identify any defects when they are not allowed to stay in the houses while waiting for the CFO? In the extreme case, if the issuance of CFO is delayed by eighteen (18) months or more, then the defects liability period would have ran out before the house buyers could even move in!!!

The present Ministry of Housing has done a relatively good job in reviving the element of consumerism in the new Act. This long awaited amendment after 35 years is seen as a major breakthrough for house buyers. Our input in the current law was accepted to a good certain degree. However, we feel that the Act will have optimum impact if part of the enforcement is 'Retrospective' in nature. This may provide some comfort and relief to those already disadvantaged by the existing situation. It will also ease the Ministry's frustration on the claim that they "currently do not have the teeth to bite". Nonetheless, this is the prerogative of the Housing Minister.

CONCLUSION

14. Our comments here are not exhaustive. You are encouraged to visit our web-site at www.hba.org.my for more details on the Memorandum we have submitted to the Members of Parliament who have invited us to do so.

We reiterate our stand that no amount of law will be able to eliminate or solve the problems faced by house buyers unless they are strictly enforced or self-regulated. As the saying goes, 'the law is only as good as its enforcement'.

In ending, I would like to take this opportunity to wish the Seminar organisers and all participants and industry players present, every success in the coming year. I am sure that the Seminar will serve to stimulate the meaningful and insightful discussion on the future of housing.

Thank you.