Identifying the black sheep
22/05/2004 NST-PROP By Salleh
Assurance needed that developers with bad track records do not repeat their
According to recent reports, housing developers with 'bad
track records' have been denied new licences in order to protect buyers.
That piece of news came from none other than the Housing and Local Government
Minister Datuk Seri Ong Ka Ting.
Ong was quoted as saying that these developers would have
to "sort out their previous problems" that they are given new developer
licences by the ministry.
This move was aimed at "tightening control over developers"
so that future buyers will not suffer the prospect of being left high and
dry as a result of project abandonment. The objective of this new ruling
is to prevent these black sheep of the industry from "coming back into the
market," he added.
Although I welcome the Ministry's tough stand, it is regrettable
that when pressed by reporters, Ong refused to identify the errant developers
or indicate how many applications for licences have been rejected so far.
Ong, however, did say that among those denied new licences
were developer who refused to pay liquidated ascertained damages to their
purchasers for late delivery and those who refused to comply with the awards
made by the Tribunal for Homebuyer Claims.
What should be remembered here is that this prohibition (against
applying for, and being issued, new licences) is not a permanent thing.
Developers who redeem themselves in good time can still apply. As Ong put
it: "They can apply once they have sorted out the problems."
In other words, the prohibition by the ministry is only temporary.
If that is the case, who is to guarantee that they will not repeat, their
former misdeeds? Will the ministry do that?
Ong explained that all relevant information on "problematic
developers" is continuously updated in the ministry's computer database
to enable officials to keep tabs on them whenever they apply for new licences.
This 'stringent monitoring' was implemented in line with the recent overhaul
of the law, which came into force in December 2002.
Apart from "red-flagging' problematic developers, the ministry
also keeps watch on all licensed housing developers through the returns
(Form 7F) which they have to submit to the ministry periodically - a statutory
mechanism intended to inform the authorities of the progress of their projects.
In theory, if these returns submitted to the ministry tell
the truth, the whole truth and nothing but the truth, the officials should
know if and when a particular housing project is facing trouble - with the
risk of abandonment in the not too distant future. Ong is, however, confident
that these new measures will work and there will be no more abandoned projects
in the future.
"What I can guarantee is that we will take all necessary
steps to minimise problems for buyers," he told reporters.
In the meantime, while all this is happening at ministry
level, actual events on the ground do not seem to reflect obedience or respect
for the law.
Developers who participated at an expo held in Shah Alam,
Selangor, recently (which the State Government referred to as its Program
Pendaftaran dan Penawaran Rumah Kos Rendah) blatantly asked the prospective
purchasers to pay a "booking fee" of between RM100 to RM500 if they are
interested in purchasing a low-cost unit.
Many purchasers did so, while some refused. We were subsequently
told that out of the 18,000 low-cost houses offered, 600 were sold during
the first two days. Probably mre were sold following the event.
Obviously distressed by this illegal and unethical practices,
Selangor Menteri Besar Datuk Seri Dr Mohamad Khir Toyo proposed that the
Housing Ministry not renew the licences of these developers in the future.
Dr Khir said: "Develpers know too well that they can only collect 10 per
cent of the purchase price after the standard Sale and Purchase Agreement
(SPA) has been signed, not before that. "
Expressing his displeasure, Dr Khir said the State Government
would send the list, of miscreant developers to the Housing Ministry, with
the hope that appropriate action would be taken against them.
Two lessons can be learnt from what happened at the Shah
Alam expo. One, the local housing industry still has its quota of black
sheep. They may be lie low for a while, but when opportunity arises, they
will be back to their old tricks. And if you honestly ask yourself, how
did this happen, the answer is definitely inadequate enforcement of the
Two, we need a measure of flexibility in the law, especially
its ability to adapt itself to the needs of the poor such as those
who cannot even afford the 10 per cent deposit. For those unfortunate purchasers,
the law as well as the standard SPA should be modified to enable them to
sign the agreement by merely paying (RM1 (as good and valuable consideration
to make the SPA an enforceable contract) with the rest of the purchase price
being taken care of by the end-financiers.
The fiasco at Shah Alam would not have happened if Housing
Ministry officials were close at hand. State Governments intending to hold
such expos in the future should take the initiative of inviting or requesting
the Housing Ministry to send their officers to be present for the entire
duration of the event.