House
buyers get better protection with changes to Act
29/10/2001
theedgedaily.com
There is a price to everything. While amendments to the Housing Developers
(Control and Licensing) Act 1966 will put developers under the microscope
to better protect house buyers, the improvements are likely to translate
into more costly homes.
The word from developers is that a price rise is inevitable and they
attribute it to stiffer regulations laid out under the amendments to
the act to be renamed the Housing Development Act.
“However, this inevitable rise in price will be compensated by better
quality houses as well as assurance in delivery,” says Real Estate and
Housing Developers Association Malaysia (Rehda) president Datuk Eddy
Chen.
However, one developer begs to differ. Choosing to remain anonymous,
he concludes that homes that cost more to build need not necessarily
be of better quality.
He also asks how the requirement of a RM200,000 deposit for every developer’s
licence issued can improve the quality of homes. “It is just a waste
of money… dead money… that is added to the holding cost,” he exclaims,
adding that he foresees house prices rising between RM1,000 and RM2,000.
Developers, naturally, are dead set against the RM200,000 deposit requirement.
Rehda, in fact, has taken the matter up with Housing and Local Government
Minister Datuk Ong Ka Ting and “would like to see that changed”, Chen
tells City & Country.
“Developers do not want to tie up liquidity further… they may have to
borrow (to meet the requirement) and this will increase their cost which
will then be passed on to the consumer. We do not want to see that and
we are not in favour of this amendment,” Chen explains.
Currently, housing developers with a paid-up capital of RM250,000 are
not required to place a deposit with the ministry, but a RM100,000 deposit
is required from individual developers.
The deposit can be in the form of cash or a bank guarantee. It can also
be banked into the Housing Development Account with the bank statement
as proof. The deposit can only be withdrawn with the approval of housing
officers when the project is completed and after the expiry of the defects
liability period.
While the new requirement helps ensure that developers are of sound
financial standing, the impact of the move is significant as, at any
one time, some 2,000 developers’ licences are issued. “This means that
about RM400 million will be tied up at any one time,” Rehda’s Chen points
out.
Under the amendments, developers will be further scrutinised. A licence
will not be issued to a developer who has been fined more than RM100,000,
or whose company has a director who was involved in a housing development
company wound up by the court.
Developers will also not get their licenses if their consultant architects
or engineers have had their names struck off the roll of their respective
professional bodies.
Fines imposed on housing developers will also increase five-fold from
RM5,000 to RM25,000 and from RM100,000 to RM500,000.
Tabling the amendments in Parliament earlier this month, the housing
and local government minister had said the stiffer fines were to reflect
the severity of the offences as well as to deter developers from breaching
the law. (The amendments to the Act are expected to come into force
next year.)
But will stiffer fines work? Rehda’s Chen reckons they may but points
out that there are issues that the amendments do not address, for example,
vacant possession.
Rehda has made several recommendations to the ministry but these, Chen
says, have not been pursued. The association wants vacant possession
to be declared as soon as water and electricity supplies are connected
to the home.
Under the present law, the developer needs to obtain clearance from
many departments before vacant possession can be declared and the keys
handed over to the house buyers. This may take a long time, Chen says.
Open to abuse?
The new law empowers housing inspectors with authority to enter the
premises of the developer and ransack and seize materials, such as accounts,
for use in legal proceedings. In the past, a warrant from a magistrate
was required for such a purpose.
A developer says he is shocked by the power given to housing inspectors,
adding that it could be abused. “They have never even attempted to prosecute
errant developers before so why arm themselves with more power now?”
he asks.
The amendments also empower housing inspectors to compound minor breaches
such as those relating to advertising and sales permits. This is aimed
at clearing cases quickly.
Poor sales projects can be shelved
Recognising the fact that developers may not be able to proceed with
a project that is poorly received, the amendments allow developers to
terminate the sale and purchase agreement if they can secure the approval
of three-quarters of the buyers.
“This is a good move if the developer really cannot proceed, for example,
in an economic downturn. If the developer only manages to sell 20 per
cent of the units launched and he proceeds with the development, he
may get into trouble if he cannot sell the remaining units,” says Chen.
House buyers’ tribunal
Under the amendments, a house buyers’ tribunal for claims not exceeding
RM25,000 will be set up for speedy redress of complaints against developers,
a move that developers generally agree with.
They also agree that the legislation should not make it a criminal offence
if developers fail to pay the fine ordered.
Says one developer: “If the developer can pay, he should be made to
do so. But if he cannot pay, then take him to court and declare him
a bankrupt. It does not make any sense for him to be jailed or turned
into a criminal because he cannot pay a fine of RM3,000.”
Another developer agrees. He cautions that there has to be a check and
balance to ensure that the authority given to the tribunal is not abused.
Brickbats and bouquets considered, developers acknowledge that overall,
the amendments are a step forward for the housing industry and will
protect house buyers from unscrupulous developers. And even if these
translate into higher costs for the developer and, in turn, the house
buyer, hopefully, the increase will be justified. |
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