Assurance in enforcement

13/04/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

The House Buyers Associations stresses the need for adequate subsidiary rules and regulations to the Housing Development (Control & Licensing) Act

In certain advanced countries, property developers proudly compete for the covetous task of building quality housing for the state. However, here in Malaysia there appears to be no signs of growing pride in building high-calibre houses for the masses.

On the contrary, the industry appears to be showing visible signs of rapid deterioration that can only be halted if stiff laws are applied consistently and efficiently to keep a check on irresponsible developers and other key players. It the House Buyers Association's firm opinion that no effort should be spared to instill some orderliness in the industry as spelt out under the newly amended law governing housing development.

So precisely what assurances are there for the protection of house buyers' rights, following the amendments to the Housing Developers (Control & Licensing) Act 1966 that have also seen it renamed the Housing Development (Control & Licensing) Act 1966?

There are mixed feelings from the public. Many want an assurance that the bad experiences encountered in the past with respect to home purchasing will not recur under the new Act.

They are waiting to see if the Ministry will take the bold step of enforcing the changes to the law.

A good example of a positive step as evidenced by the new Act is the setting up of a Tribunal to hear cases of disputes between house buyers and developers for monetary claims up to RM25,000. The Tribunal will ensure that the bureaucratic process of litigation is simplified and both time and expenses may be reduced compared with taking grievances to court.

Other plus points are the stiff measures and the toughening of rules, such as requiring developers to deposit increased cash capital and to submit bi-annual reports. These are aimed at minimising the chance of housing projects not being launched within the stipulated time frame or worse still, being abandoned.

Another feature in the amendments is the one that allows the Ministry to terminate the sale and purchase agreements of any particular housing project with the agreement of the developer and 75% of the house buyers. This measure is aimed at tightening control so that only bona fide  developers are licensed to undertake public housing projects.

The amendments to the Act also extend to co-operative societies and statutory bodies undertaking housing developments. Prior to the amendments, these organisations did not come under the purview of the Act.

The amendments also empower enforcement agencies to enter the premises of errant developers to check on their affairs. Thus if there are adverse reports lodged on discrepancies, irregularities or other deceitful modus operandi in developers' operations, enforcement agencies can now enter the premises to check on transactions documents and build up circumstantial evidence against the developer. In terms of deterrents, the amendments have also led the penalties imposed on errant developers to be increased to five-fold which is bound to have a stronger effect than the amount imposed before.

In the past, words of persuasion and stern warnings directed at errant developers to urge them to refrain from shoddy workmanship and from taking advantage of unsuspecting house buyers largely fell on deaf ears. But with the new amendments, this category of developer will no longer be able to avoid the long arm of the law. It is to be hoped that the additional stringent conditions for the issuance of developer's licences and the imposition of more meaningful duties and obligations required of a licensed housing developer will give added protection to all house buyers.

Enforcement of the revamped Act, however, can only be executed after the date it comes into force. Furthermore, subsidiary regulations arising from this amendment need to be put in place by the Ministry. The old regulations forming part of the original Act are inadequate to cover the wider scope of functions created under the new provisions of the revamped Act. As an example, the Tribunal that the Act has provided for would be incomplete and improper without its own Regulations that set out its operational procedures, how claims are to be made, the composition of members of its court and so on.

Ambiguities in the Regulations in the past have invariably led to developers making loose or wrongly interpretations, resulting in house buyers being at the losing end. To put a stop to such practices, new regulations with clearer definitions that are consistent with the new amendments are essential.

Stringent rules should be imposed before licences are issued to genuine housing developers with adequate financial back up and good track records. In the same process, bogus developers with questionable intentions should be weeded out before they get the chance to default on unsuspecting house buyers and cause irreparable damage.