Protecting housebuyers

The Sun 7/4/2006

BETWEEN 2000 and 2005, the number of complaints filed by housebuyers against developers was highest in 2004. A total of 5,450 complaints were received that year, registering a 16% increase over the previous year.

The statistics were tabled in a paper entitled "Report on Complaints Management System" prepared by the Monitoring and Enforcement division of the Ministry of Housing and Local Government.

During that record year, a large number of complaints had to do with late delivery of homes (22%), late payment interest imposed on housebuyers by developers (12%), developers refusing to pay liquidated ascertained damages claims (11%) and construction defects (10%). Of the 3,430 complaints received, 2,163 were settled.

"The paper also tabled the typical complaints raised by housebuyers and suggested methods of "settlement".

According to Monitoring and Enforcement division director Dr G Parameswaran, the gradual increase in complaints between 2001 and 2004 had more to do with the fact that house buyers were more conscious of their rights and channels of making known their grievances as opposed to being linked to the increase in the number of errant developers. "After the amendment to the Housing Development (Control and Licensing) Act 1966, which came to force in December 2002, house buyers have become more aware that they can make complaints against developers," he elaborates.

The Ministry is definitely stepping up efforts to protect house buyers and bring errant developers to book, and certain actions over the years are testimony to its efforts. For instance, the setting up of a Tribunal for Homebuyers Claims, as a result of the amendments to the Act, has certainly brought some relief to house buyers.

Under the tribunal, house buyers seeking damages amounting to not more than RM25,000 can seek quick redress against developers who flout the law. The claims, made on technical and non-technical issues, must be filed not more than 12 months from the date of issuance of the certificate of fitness or 12 months from the end period of the defects liability term as stated in the sale and purchase agreement.

Parameswaran says that the amendments to the Act not only provide more power to the enforcement authorities to bring developers to book, they also clearly spell out the obligations and responsibilities of developers.

"The changes make a lot of difference, having been brought into effect, we will soon see the impact of these changes as homes that were built then ate only now being completed over the last year. So issues are bound to be raised soon ," he explains.

In an interview with Propertyplus, Parameswaran addressed some issues that house buyers can take note off.

Propertyplus: You have a comprehensive table on the complaints received and the ones that were 'settled' . Can you elaborate on the most popular methods of settlement?

Parameswatan: Most of the complaints are contractual disputes between buyers and developers. The Ministry therefore has taken a neutral stand. Most of the 'settled' cases are through 'table talks' and discussions where the Ministry acts as a mediator or facilitator.

What has been the harshest action taken by the Ministry against developers?
Prosecution/conviction in court.

Most of the settlement methods suggested in the paper are to seek an explanation from the developer. How effective is this and what time frame is given to developers to make good? And who usually represents the developers - junior employees or directors? Isn't there any requirement for someone higher up in the company to be present as this could help make negotiations more effective?
The developer's reluctance in settling complaints from house buyers will affect their applications for and renewals of future housing development licences, advertisements and sales permits. The time frame given to developers to make good depends on the complexity of the complaints. For non-technical cases, developers are normally represented either by the managing director or legal advisor, whereas for technical cases, they will be represented by their consultants.

The other common method noted in the paper is to get advice from the Ministry's legal clinic. Again, is this just an advisory body or is it authorised to initiate legal proceedings? Where do house buyers go from here if the legal clinic merely offers advice? Do they have to go to their own lawyers if they want to file a suit? (this is assuming that they are not eligible to go to the Tribunal for Homebuyers Claims)
The legal clinic is a free service offered by the Ministry in collaboration with the Bar Council, especially to help house buyers from the lower-income group. This is for cases where purchasers wish to further enforce their rights under the Sale and Purchase Agreement through the civil courts and in certain cases, beyond the jurisdiction of the Housing Development (Control and Licensing) Act 1966. House buyers who have attended the legal clinic session will have to decide whether they wish to take the matter to court where they have to appoint their own lawyers. For those in the low-income group, they may seek the assistance of the Legal Aid Bureau.

There are some clear-cut cases where developers are in the wrong, for instance, in your-paper, one issue highlighted is when 'developers impose non-uniform administrative fees'. Under the revised conditions in the Housing Act, can't the Ministry act against the developers?
For cases on administrative charges by developers for sub-sales, the Ministry refers to Regulation 11 A of the Housing Development Regulations (Control & Licensing) 1989 effective from December 2002, failing which developers will be penalised under Regulation 13,

On enforcement, is there a time frame given to your team to get back to a house buyer from the date of the written complaint?
Based on the number and complexity of complaints and the strength of the Monitoring and Enforcement division, our client charter indicates that complaints will be attended to within 50 days of receipt of the written complaint. However, the nature of complaints varies and it could take a much longer lime for complaints to be resolved.

Developers who refuse to pay liquidated ascertained damages (LAD) are one of the main complaints by house buyers. Under the revision to the Housing Development Act, can't the Ministry take direct action against the developer, like imposing a fine or suspending their licence?
Currently, developers who refuse to pay LAD are administratively blacklisted and prevented from applying for new housing development licences, advertisements and sales permits. Legal action has been taken against some developers for non-compliance of the Tribunal for Homebuyers Claims Award.

What seems to be the most difficult or complicated complaint filed by house buyers? Why?
The most complicated complaints are those relating to abandoned housing projects. In some instances, the developers have been wound-up and buyers were having problem servicing their housing loans. Even during rehabilitation of abandoned housing projects, it is not easy to get the house buyers and other interested parties to come to a compromise as different parties have different needs and interests.