Now that the Minister of Housing and Local Government has finally ruled that Certificate of Fitness for Occupation (CFs) for housing will be replaced by Certificates of Completion and Compliance (CCC), we can only hope buyers will have one less worry on their minds in their run-up to home ownership.

If you have been following the opinions we have expressed in the pages of Property Times, you will know we have vehemently objected to the replacement of CFs issued by the local authorities by CCCs to be signed off by architects and engineers.

Our stand, on behalf of buyers, is clear: By leaving this important process to to "development professional" who are essentially agents of housing developers, the industry is deprived of a check-and-balance mechanism to ensure quality housing standards.

Although the new process might mean buyers will be able to move into their houses faster, we think that it will open a new can of worms, and had highlighted our fears in the past by citing cases of errant certification by some professionals.

Despite our arguments, the Government has made its ruling and we are now at a stage where housebuyers throughout the country have to depend on the professionalism and integrity of architects and engineers to ensure their houses and surrounding infrastructure will be properly built to specifications.

On a parallel but brighter note, we are fully supportive of the Government's call that developers embrace the Build-Then-Sell (BTS) method of housing delivery, as opposed the current practice of selling and then building.

It is because of the latter that so many buyers are facing financial and social problems due to non-delivery and non-compliance on the part of the developers. Yet, although the industry openly acknowledges BTS as being the perfect answer, its coming is still a long way away, with developers saying they are not ready to implement it.

Creating a win-win environment

In examining the two issues facing the industry (the introduction of CCC and the BTS preference), we feel a compromise can be reached that will allow both initiatives to happily sit side-by-side. It is a variation of the BTS, which we call the 10:90 concept.

In this proposal, a developer will be allowed to sell its products by executing a revamped version of the standard Sale and Purchase Agreement (SPA) with its buyers even before construction commences, so long as all necessary approvals have been obtained.

Buyers will pay a downpayment of say, 10 per cent upon signing of their SPAs. However, instead of the money being remitted to the developer's Housing Development Account as is current practice, it will be placed in an interest-bearing escrow account held by a nominated stakeholder (such as a lawyer or banker).

Once the developer secures the requisite number of buyers, it can proceed to build its project - if it can be completed before the prescribed 24 months (for landed properties) or 36 months (for stratified properties), the speed will be to the developer's benefit.

However, while the developer can take out bridging finance to cover construction cost, it will not be able to take any money from the buyers until the houses have been completed and the envisaged CCC issued.

Only once this happens can the developer collect the 10 per cent downpayment, together with the accrued interest.

For the remaining 90 per cent, buyers will have to make payment either via housing mortgages or from their savings after they have physically inspected their houses and are satisfied with the quality of the work. Once the buyers give the nod and okay the release of the balance, the SPA will be fully performed.

For buyers/speculators who renege on their commitments and refuse to complete their transactions, the developer can seek remedy through the penalties as spelt out in the revamped SPA.

Advantages of the 10:90

We see the 10:90 concept as being a viable compromise between the present system and the much talked about BTS as it possesses several advantages.

The first is that buyers' downsides will be limited in the event of the project abandonment.

Nobody can guarantee that there will be no more half-completed schemes in the future, but the 10:90 will ensure that buyers won't be dragged deep into any more financial and legal quagmire as they would only paid out the 10 per cent downpayment.

Furthermore, without the buyers, an abandoned project can be more easily revived as only the bank providing the bridging loan and the developer need be involved. Without the participation of the buyers, discussion can be on a corporate basis without the emotional baggage carried by the buyers.

A bank providing the bridging loan to a developer would also not be put in the precarious situation of seeing its collateral diminish in strength. Such a scenario currently arises because should buyers take out end-financing from a bank that is not providing the bridging loan, the late has to issue a whole or partial "disclaimer undertaking" of the assets it holds as necessary.

With the 10:90, the bridging financier would retain full control of all collateral until the project is completed and full payment made by the buyers. Only then will the formal transfer of ownership be presented for adjudication and the end-financing banks assume the lien-holder position.

The long list of other problems now faced by buyers is also likely to be shortened with the 10:90.

For instance, sensible developers will attempt to build quality houses instead of questionable units because at the end of the day, when the time comes for the buyers to make full payment, developers would not want to risk getting into disputes due to shoddy or unacceptable workmanship.

Disagreements over penalties for delays in handover of vacant possession would also be a thing of the past, because any postponement would only be to the detriment of the developers. As such, the 10:90 would give them the incentive to complete their ventures in good time instead of the giving all kinds of excuses and challenging buyers to take them to court for late delivery penalty claims.

All said, we strongly believe that with the advent of self-certification by way of the CCC system, the time has come for the industry to depart from the present method of progressive payment. It would provide some comfort and assurance to buyers who have had to play on a lopsided field for so many decades.

To implement the CCC while maintaining the current sell-then-build method would be akin to taking one big step backwards as it would put buyers in an even hazardous situation.

We at HBA feel that the CCC, working with the 10:90, will bring about positive results. Certainly, it would achieve Prime Minister Datuk Seri Abdullah Ahmad Badawi's two aspirations of "enhancing the public delivery system" as well as breathe life to the "build-then-sell concept". A win-win proposal if we ever saw one.

The National House Buyers Association (HBA) is a non-profit, non-government and non-political organisation manned by volunteers. Its website is www.hba.org.my. E-mail: info@hba.org.my