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Blacklisting rogue developers
21/01/08 Property New Straits Times Salleh Buang

From the email I receive every month, one sent by Dick (not his real name) just as we turned the corner into 2008, grabbed my attention.

He asked: Has the Housing and Local Government Ministry’s blacklisting of rogue developers had any lasting, beneficial impact?

With so many urgent things to do at the begining of this year, I forgot Dick’s question. However, prime time television news a fewSalleh Buang nights ago about yet more abandoned housing projects brought his email to mind.

With a guilty conscience at having overlooked it, I dug into the law again and scanned cyberspace for some answers – bearing in mind, of course, that not every problem has a solution.

In a website maintained by what I think is a credible NGO, I came across a report stating that as of March 2007, the Housing Ministry blacklisted 453 errant developers "for various offences".

Out of this number, 163 firms (and their 461 directors) had failed to comply with awards handed down by the Tribunal for Homebuyers’ Claims, while the remaining 290 developers had "failed to settle compound notices" issued for not submitting their progress reports.

Let us take a look at the law relating to the first issue: Failure to comply with the tribunal’s award.

With the amendments made to the Housing Development (Control and Licensing) Act which came into force on April 12 last year, any failure on the part of a developer to comply with the award given by the tribunal can result a fine of not less than RM5,000 and not more than RM10,000, or a prison term not exceeding two years or to both (Section 16AD).

In the event of a "continuing offence" – meaning that the developer continues in his default or refuses to comply with the award – a fine of not more than RM1,000 a day is imposed for as long as the offence continues.

But have you heard of any company director being packed off to jail for failing to comply? Before you answer that question, how many times have you heard of company directors being prosecuted for failing to comply with the tribunal awards?

As any secondary school student can tell us, there must first be a prosecution before there can be a conviction; there must first be a conviction before a penalty can be imposed.

Let us now take a look at the law relating to the second issue: Failure to produce progress reports.

Under last April’s amendment, a housing developer must furnish to the Controller of Housing "correct and complete" information, twice a year (in January and July), of the progress of his housing project.

That duty, according to Section 7(f) of the Act, continues until the Certificate of Completion and Compliance is issued in respect of "all the housing accommodation in that housing development".

What is the penalty for not furnishing the report? The answer is found in Section 19, which was also amended last year. Upon conviction, the housing developer can be fined not less than RM50,000 and not more than RM250,000.

The question we should therefore ask is, what is the point of revamping the law and increasing penalties if the people tasked with implementing the law are only interested in compounding the offences?

Let me sum up the report I found in the NGO’s website. We have 290 developers who deliberately failed to comply with the law. Section 7 clearly outlines their duties, while the penalty is set out in Section 19. These legal provisions were put in place for one purpose: To protect house purchasers from harm.

However, the defaulting developers were not prosecuted; they were allowed to compound their offences. This is why compound notices were issued against them in the first place. Despite the leniency showed, the developers still made their restitution. So what happened to them? Were they hauled to court? No, kid gloves were still in use. The sledgehammer I spoke of in my earlier articles is still locked up somewhere, not being used. The developers were merely blacklisted.

I may be wrong, but as far as I am aware, blacklisting is not one of the penalties spelt out in the Act.

The NGO’s report quoted a very senior official of the Housing Ministry as saying that “We will run a check to see if they have been previously blacklisted.

The names of the directors involved will remain on our list and they will not be allowed to operate under new development firms or undertake new projects until they have complied with the tribunal’s order or settled the compounds."

He added, "We are taking a more aggressive approach, which includes raiding developers’ premises to ensure they obey the laws.

"While it is our role to protect the interests of house buyers, we are also aware that developers contribute much to the growth of the economy. Therefore, we want to ensure that the housing sector maintains a healthy growth."

I applaud the officer’s sentiment in wanting to protect the interests of house buyers. This very important principle in the law (protecting purchasers’ interests) is now spelt out clearly in the long title of the Act, again done during last year’s amendment. Having said that, however, a couple of things still bother me.

First, are we correct to assume that when the rogue developers were blacklisted in 2006, the ministry had not yet run a check then to see "if they have been previously blacklisted"?

Second, if the ministry is prepared to be more aggressive in its enforcement, including raiding developers’ premises, why not carry that through with prosecutions and leave the compound procedure only as an exception to the rule, rather than the general rule?

We are made to understand that from 2003 until December 2006, RM1.6 million was collected from 1,051 developers who were issued with compound notices. The Housing Ministry should be more of a protector and a sheriff, not a mere fine collector.

Third, if the ministry is really committed to ensuring a “healthy growth” of the housing sector, how does it justify its reluctance in prosecuting rogue developers, even as the affected house buyers are crying out for justice?

In 2004, 227 housing projects were abandoned, involving at least 75,356 houses worth RM7 billion. Compare that with the RM1.6 million collected by the Housing Ministry in the form of compounds, apart from some 400-odd developers being blacklisted.

There are at least a quarter of a million people across the nation affected by projects abandoned by rogue developers. These people thought they were buying their dream homes; what they got were unending nightmares.

I hope you get the picture.


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