Fresh stab at an old wound

30/08/2003 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

Has supervision and enforcement by the authorities plunged to such depths that a developer, having had a history of abandoning a housing scheme, be allowed to renew its licence so it can sell again? What guarantee is there that the outcome will be different this time? - Chang Kim Loong, secretary-general of the National House Buyers’ Association

Six years ago, a group of buyers signed the statutory Sale and Purchase Agreements (SPAs) for apartments in a project in Sentul, Kuala Lumpur.

The buyers were diligent, and checked that the developer had the necessary licence and Advertising and Sales permit to undertake the venture. Everything appeared to be in order, so they made their downpayments and signed on the dotted line.

Today, construction of the project has yet to commence.

Two years ago, the understandably angry and frustrated buyers approached us at the HBA, narrated their dilemma and sought our assistance. We submitted a memo on their plight to the Ministry of Housing and Local Government on Sept 18, 2001. On Jan 22 the following year, the Ministry called for a dialogue between all parties, with officers from the Legal Section; the head of the Supervision and Enforcement Division and the Licensing Department present.

We at the HBA were there; so too was the buyers’ ad hoc committee . The developer, however, was nowhere in sight.

From the dialogue, the project was classified “abandoned” which, according to the Ministry, is broadly defined as:
1) A project where all work at site has ceased for at least six months, or where work has yet to be completed after the scheduled date of completion as stated in the SPA;
2) The developer admits its inability to complete the project; and
3) The Ministry feels that the developer cannot fulfill its obligations as a developer.

As a result, we offered some recommendations that included:
1) Blacklisting the developer;
2) Prosecuting the developer for breaching the terms of the SPA (its failure to deliver completed units within the stipulated 36 months);
3) Requesting Syarikat Perumahan Negara (SPN) to intervene to study the viability of reviving the abandoned project;
4) Asking the Minister to direct the related Land Office to lodge a Registrar’s caveat on the project’s master titles to prohibit the developer and/ or the proprietor(s) from disposing and/or dealing with the titles;
5) Investigating the developer for any wrong doings especially with regard to the Housing Development Account; and
6) Invoking the power of the Housing Minister under the Housing Development (Control & Licensing) Act to:

a) direct the developer to take necessary steps to rectify the situation;
b) present a petition to High Court to wind up the developer’s business; or
c) with the concurrence of the Minister of Finance, direct another company to take control of the developer’s business.

We expected the outcome of the meeting to provide some hope for the disappointed buyers and teach errant developers a lesson. But it was not to be.

Recently, we came to discover that the same developer has been reissued a Developer’s Licence as well as other permits to continue with its project, expiring April 2006.

As soon as the buyers were informed, they were shell-shocked. How can it be allowed to happen, they asked?

Our inquiries with the Ministry of Housing and Local Government revealed that the developer was reissued a license because “it has now conformed with the minimum requirement standard”.

Another explanation given: “The developer had to be given a license so it can collect money from the sale of its unsold units to enable the earlier ones (those purchased earlier) to be paid off”.

These are ridiculous and incomprehensible reasons.

What is there to prevent the developer from leaving the present batch of buyers in a lurch? Where is the blacklist the Ministry has often referred to? Shouldn’t the developer and its directors be prosecuted? What happened to the foolproof Housing Development Account?

The developer had the audacity to inform its previous batch of buyers that those who opted out of their purchase would be repaid in instalments from the proceeds received from the current batch of buyers.

Those choosing to continue with their purchase had to sign fresh SPAs whereupon their entitlement to compensation for late delivery, after the expiry of the covenanted 36-month period, would become null and void as the fresh terms of the SPA would prevail.

We leave readers to decide whether the buyers have been given a fair deal, and who to pin the blame on. It surely cannot be fate that caused the problem - only the greed of man and the lack of enforcement.