10/08/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

The House Buyers Association highlights some cases of developments turned into nightmares

Learning from others’ experiences is one of the best ways to become smarter. And you need to be smart in the home ownership game as the field is littered with cases of developers failing to deliver what was promised.

This week, we highlight three such cases that have left buyers in a state of limbo as they cannot call themselves homeowners, neither can they recover their lost hopes and the resources they’ve put into their purchase.

Case1: The abandoned buyers

In this heart-rending story, buyers signed Sale and Purchase Agreements (SPA) and put down 10 per cent payment for medium-cost apartments in Sentul, Kuala Lumpur on and around July 28, 1997. The project, planned to contain 374 units spread out in three blocks, appealed to the middle-class buyers because of their affordable pricing of around RM99,000. It was to have been developed in a joint-venture with several landowners and completed in July 2000.

Unfortunately for the poor buyers, however, there has been no sign of construction on the site since they signed their SPAs.

In response to a plea from the buyers, HBA helped them form an action group, which they called the Sentul Indah House Buyers Pro Tem Committee (SIPTC). The committee submitted a memorandum through HBA to the Ministry of Housing and Local Government (MOH) on Sept 18, 2001. Subsequently, a dialogue was convened by the MOH with HBA representatives and the office bearers of the SIPTC on Jan 22, 2002. During the dialogue, it was acknowledged by the MOH that this project had been classified as “abandoned”.

Our representatives made the following recommendations:

• That the developer be placed on a blacklist;

• That the developer be prosecuted for breaching the SPA;

• That the Syarikat Perumahan Negara be requested to intervene to study
the viability of reviving the project;

• That instructions be given to the Land Office to lodge a caveat on the master title to prohibit the developer from disposing of it;

• That investigations be conducted to find out if there was any wrongdoing on the part of the developer.

Together with the buyers, we are still anxiously awaiting the outcome of the MOH’s investigation and a possible solution to the dilemma since the dialogue six months ago. The SIPTC recently informed us that the same developer has been issued a fresh developer’s license expiring April 2006. So where’s the protection here?

Case 2: Hiding behind the law

In another case, also related to a Sentul project, some 1,000 buyers signed SPAs for medium-cost apartments pegged from RM98,800 in January 1994. Their units were planned for the project’s second phase, and were supposed to have been delivered in January 1997 by the developer, which is the subsidiary of a public listed company. However, there was a delay in completion, and construction work stopped in 1998, after 65 per cent of the purchase price on the units had been paid based on the Architect’s Certification. The developer had sought protection under the Corporate Debts Restructuring Committee (CDRC).

It’s been eight years since they signed the SPAs and buyers have been left in a state of limbo, unable to take possession of the houses they purchased and yet wondering whether they have to continue servicing their bank loans. Their problems are compounded by the fact that if they want to sue the developer for late delivery charges, they’ll have to do so by January 2003 before the claims are statute barred under the Limitations Act, 1956.

Under these circumstances, the buyers’ questions are:

• How are they to sue in view of the fact that the developer has sought protection under the CDRC?

• What is there to sue for when the developer is going through a process of debt restructuring that gives priority to secured creditors such as financial institutions?

• Litigation is time-consuming and expensive and the buyers are reluctant to throw in any more money to try and recover some form of compensation.

HBA has another question to add to this list: How are the house buyers here to be protected under the existing Act or under the newly revamped Act?

Case 3: The orphaned project

Towards the end of 1986, more than 500 hopeful buyers signed SPAs for affordable walk-up apartments pegged at RM42,500 in a project in Medan Duta in KL’s Sri Hartamas area. They paid up between 10 and 20 per cent of the purchase price, eagerly anticipating delivery of their new houses within three years.

Alas, it was not meant to be. The project was delayed and in 1990, the developer Sri Hartamas Development Sdn Bhd went into liquidation. The project was subsequently taken over by TPPT Sdn Bhd (Tabung Pemulihan Projek Terbengkalai), which in turn appointed financial consultants, Ernst & Young, to look into the viability of the project.

In 1994, Mawar Tiara Sdn Bhd was appointed to revive the project. However, luck (and good management) did not appear to be on the buyers’ side and the company was subsequently put under a Special Administrator by national asset management company Pengurusan Danaharta Nasional Berhad in October 2000. Once again, the hapless buyers have been left in the lurch.

In a land that boasts the highest twin towers in the world and one of the most sophisticated airports, such neglect of house buyers’ rights should not be happening. Even the “white knights” appointed by the authorities appear to have tarnished armour.

Again, we ask, where is the protection?