New Act to protect housebuyer

19/02/2002 The Star

A NEW Act to further consolidate housing development and protect housebuyers was gazetted on Jan 31 after two years of discussions. CLARENCE CHUA looks at some of the clauses to find out how it will affect housebuyers and developers.

JUST before the 1997 Asian currency crisis hit Malaysia, David Lim bought a RM200,000 apartment in the suburbs just outside Kuala Lumpur, using his savings as part payment.

After obtaining a loan from the bank and paying the legal fees 12 months ago, his apartment is nowhere in sight.

The project was later abandoned and Lim was left in a lurch, not knowing what to do.

But with the Housing Development (Control and Licensing) (Amendment) Act 2001 gazetted on Jan 31 to replace the aging Housing Developers (Control and Licensing) Act 1966, thousands of housebuyers like Lim now have an effective recourse without having to take legal action.

According to Housing and Local Government Minister Datuk Seri Ong Ka Ting, Section 8A of the new Act permits termination of all the sale and purchase agreements (S&Ps).

Under this clause, if both the developer and 75% of the purchasers of a scheme agree to terminate their agreements, the construction will cease and all monies collected must be returned to the buyers.

However, before this can be done, the:

• APPROVAL of the Housing and Local Government Minister is required; and
• WORK must not have commenced six months after the signing of the S&Ps.

Apart from this, the developer is also required to report to the Housing Controller in January and July each year on the scheme’s progress and inform the Housing Controller if they are unable to meet their obligations to the purchasers at any stage of development before the certificates of fitness for occupation (CFs) are issued.

“This will help the ministry monitor the progress of every housing development and to take necessary action to ensure they are completed,” said Ong.

Although the House Buyers Association (HBA) applauds the ministry’s move, its secretary-general Chang Kim Loong said that it was still too early to gauge its effectiveness.

Citing an example, he said the new section 8A virtually gave developers the opportunity to declare that they are unable to proceed with the project and then apply to the Minister to invoke the section to nullify S&Ps.

“The funds collected would then be returned without interest. This is tantamount to a deposit taking activity in the form of a housing development,” he said.

The Housing Developers (Control Licensing) (Amendment) Bill 2001 went through Parliament in October and received the Royal Assent on Jan 24 and was finally gazetted on Jan 31 and will come into operation on a date to be appointed by the minister.

“We have not set a date yet because we are still in the process of setting up the Housing Tribunal which is another provision under the new Act.

“To set up the tribunal we need the co-operation of other Government agencies to find the right person to head it,” Ong said.

The setting up of the tribunal to hear simple disputes between purchasers and housing developers has been long awaited.

The tribunal is meant for buyers who have grouses against the developer or a purchaser who has bought the property from the initial buyer. It will not hear any third or subsequent purchaser of the property.

The jurisdiction of the tribunal is limited to hearing a claim not exceeding RM25,000 unless the parties agree otherwise in writing.

The tribunal will comprise a chairman, a deputy appointed from among members of the Judicial and Legal Service and not less than five members who must be either serving in the service or advocates and solicitors of the High Court in Malaya who have practised for seven years or more.

The minister can set up as many branches as possible in Peninsular Malaysia to hear the disputes. The chairman or his deputy or a member can sit alone to preside over any matter.

All proceedings of the Tribunal shall be open to the public.

The HBA, however, feels there should not be a limit on such claims but instead the scope should include any violation of the S&P.

“Setting up a tribunal is a good thing as it will ease the burden of the courts which has a backlog of about 300,000 cases. But what if there are disputes in CFs, late delivery, abandoned projects, misleading advertisements, cheating, bad management and maintenance and misappropriation of the sinking funds?

“You cannot put a price on these claims. If they have to be referred back to the courts then what is the point of the tribunal,” said Chang.

Among the major changes was Section 6 of the new Act, which deletes Section 2(1) of the principal Act. With this, no person or body in Peninsular Malaysia who is a housing developer is now exempted from the application of the Act.

Thus gone are the days where co-operative societies, statutory bodies and agencies under the Federal or state Government were exempted from the Act.

Another important clause in the Act aims to close in on unscrupulous developers by requiring them to deposit RM200,000 in cash or in such other form as the Minister may determine, under the control of the Housing Controller. This is in addition to the RM250,000 paid-up capital required of them.

Ong said the new Sections 6A and 6B have also been inserted to the effect that subject to the direction of the minister, the deposits shall be kept by the Controller until the expiry of the defects liability period of the housing development.

The Controller may after having given the licensed housing developer an opportunity to be heard, forfeit the whole or a part of the deposits if the licensed housing developer, has insufficient assets to cover his liabilities, is carrying on his business in the opinion of the Controller in a manner detrimental to the interest of the purchasers or public, contravening any provision of the Act or has ceased to carry on housing development in Peninsular Malaysia.

But despite the noble intentions of the Ministry there still remain certain defects in the new Act that worries the HBA, particularly the amendments made to Section 3 which redefines “housing accommodation”.

“This is the biggest step backwards in terms of protecting housebuyers. It concerns those who buy homes in commercial areas. The redefinition will have more cumulative problems, as it would exclude those buying apartments that are built on commercial properties like Pudu Plaza, which is a mixed residential and commercial building.

“Developers can build a shopping complex on a commercial land below and an apartment next to it without having to apply for a developer’s licence or adhere to the Act because they now fall outside that ambit of housing accommodation,” Chang said.

He said at the end of the day, the success of the new Act would boil down to enforcement.

“We can have as many laws as we want but without enforcement it’s not going to make any difference,” he said.

Victims like David Lim and thousands like him will still continue to suffer under the hands of unscrupulous developers if there is laxity in enforcement.