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Is it a crime?

13/04/2002 NST-PROP By Salleh Buang

Under the Housing Developers (Control & Licensing) Act 1966, as it stood before its most recent amendment, housing developers can be sent to prison by the courts (apart from having to pay substantial fines) if they commit any of the following offences:

(a) contravening section 5(1) and (2) of the Act (to carry out housing development without a valid license as well as failing to comply with any of the conditions imposed on the licence);

(b) contravening any of the provisions of section 7 of the Act (which sets out the full range of statutory duties of a housing developer);

(c) contravening or failing to comply with section 7A of the Act (to open and maintain a housing development account);

(d) entering into any arrangement or agreement in contravention of section 8 of the Act (which requires the developer to make notification to, and obtain the consent of the Controller of Housing);

(e) contravening section 10(3) of the Act (which requires the developer to furnish information or explanation to the Controller of Housing);

(f) contravening section 11(1) of the Act (which requires the developer to comply with various specific directions of the Minister);

(g) contravening section 11(3) of the Act (which requires the developer, upon receiving directions from the Minister, to submit the control of his business to another party);

(h) contravening section 12 of the Act (which requires the developer to comply with general directions of the Minister).

In addition to the above, there is a general penalty provision in section 21 which states that any housing developer found guilty of an offence under the Act “for which no penalty is expressly provided” is liable to a prison term not exceeding three years.

A prison term of not exceeding three years can also be imposed also on any individual (director, manager or secretary) who continues to be involved or concerned in the management of the housing developer in contravention of section 15(1) and (2) of the Act. This section prohibits a person who has been adjudicated a bankrupt or been convicted of a crime involving dishonesty or fraud from holding office as a director, manager or secretary of a licensed housing developer.

It also prohibits any person who previously had been working as a director or been directly concerned in the management of a housing developer which has been wound up by a court from acting as a director or an officer of another housing developer, without the Minister’s prior approval in writing.

Finally, under section 22 of the Act, a director, manager or secretary of a housing developer can be made vicariously liable for an offence committed by a housing developer unless he can prove to the court that the offence was committed without his consent or connivance, and that he has exercised all such diligence to prevent the commission of the offence. The penalty for this offence can be a prison term not exceeding three years.

Apart from a prison term for contravening specific provisions of the Act, a housing developer can also be imposed a prison term of not exceeding three years for contravening certain provisions of the Housing Developers (Control and Licensing) Regulations 1989, such as -

(a) for making any misrepresentation when providing information under Regulation 4(2), which concerns the renewal of a housing developer’ license;

(b) for making any misrepresentation when providing information under Regulation 5(2), which concerns the application for an advertisement and sale permit;

(c) for breaching any condition in a license or in any advertisement and sale permit.

Under the recent amendments to the Act, which saw it being renamed the Housing Development (Control & Licensing) Act 1966, the Tribunal for Homebuyer Claims was established. Claims by house purchasers against developers can now be filed with the Tribunal, provided these claims do not exceed RM25,000 in value. Claims exceeding that amount can still be filed with the Tribunal provided both parties agree in writing to do so.

Under a new section 16T of the Act, the Tribunal is expected to encourage the parties to work out a settlement amicably, if they can. Where the Tribunal has heard the case (which must be open to the public) and has made its decision, it should deliver its “award without delay” and, where practicable, within 60 days of the first day of hearing. The decision of the Tribunal is final and all parties are obliged to comply with it.

A new section 16AD states that “Any person who fails to comply with an award made by the Tribunal” within the prescribed time commits an offence and shall upon conviction be liable to a fine of not more than RM5,000 or to imprisonment for a term not exceeding two years or both”.

It is in regard to this custodial penalty for failing to comply with the decision of the Tribunal (viewed by many as being obviously targeted at the defaulting developers) that I have recently been asked by certain quarters whether the latest amendments have gone overboard in trying to protect house purchasers’ interest?

These parties told me that essentially the disputes laid at the door of the Tribunal are “civil” in nature and to impose “criminal sanctions” as a remedy for a civil default is carrying things a bit too far.

Do you agree? Do you feel that the criminal sanctions provided for under the pre-amendment law are more than adequate to punish the black sheep in the housing industry, without any need to empower the Tribunal to impose custodial sentence on the developers for their default in paying out monies to the purchasers?

In any case, many believe that the custodial sentence only works as a threat. But if the developer actually chooses to accept the jail sentence, the house purchasers might as well kiss their monetary claims (and the award) goodbye.


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