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 MEMORANDUM from House Buyers Association in respect of the proposed amendment to Housing Developers (Control & Licensing) Act, 1966 under Bill No: 36/2001

12th October, 2001

House Buyers Association (HBA) applauds the positive response from Yang Berhormat Dato Seri Ong Ka Ting, the Minister of Housing & Local Government, in addressing the cumulative problems related to the housing industry. HBA compliments the Minister in renaming the Act to “Housing Development (Control & Licensing) Act 1966 as the perception of the public on the previous title was that the law was drafted by and for the developers.

HBA congratulates the Minister for the timely initiative on the exigencies of the matter to propose amendments to the Act. Some of the Sections (new and old) have been sufficiently improved, inter alia, Section 6(e)(f)(g) & 6(1A); Section 7 (h)(i)(j) & (k); New Section 7B; New Section 10A – 10J and the positive formation of the Tribunal for Homebuyers Claims to reflect the seriousness of the Ministry in addressing the problems of the house buying public in seeking solutions and remedies and giving more power to enforce the letters of the law.

While the amendments are considered expedient and vital as a stop gap measure to curb undesirable trends presently practised by errant housing developers in the building industry, it is the Association’s considered opinion that for the long term, a complete review should be carried out on the existing Act or to replace it totally with one that suits the present day conditions in order for it to take us through the new millennium. This contention is prompted largely on the basis that the existing Act which was passed in 1966 might be construed as having surpassed its effectiveness over such a long period of time and in the chase taken by developers to build houses to cater for the market.

Nevertheless, our committee have made a study on the proposed amendments and noted that they were intended to streamline the existing Act as well as to serve as deterrents to developers who had deliberately flouted the laws by taking advantage over ill-protected house buyers. It was on these premises, that HBA would like to contribute by making some comments on the proposed amendments. For whatever they are worth, they represent our views which, we believe is representative of thousands of house buyers who have always been on the losing end in their dealings with the housing developers. We back this statement by the fact that we have frequent dealings with many house buyers who have got into trouble with their purchases. It is hoped that our views will lead to a more protective Act for the better protection of house buyers.

1.  Proposed amendments to Section 3


The definition of “housing accommodation” should not be re-defined. The

 redefinition will have more cumulative problems as it would exclude those having

units that are built on commercial properties for example, Pudu Plaza which is a

mixed residential and commercial building, although the land is designated for / or

approved for commercial development.


HBA is of the stand that those housing accommodations should not be excluded from the Act.


2. Proposed amendment to Section 6

HBA cannot comprehend why the cash deposit should be ‘not less than’ RM200, 000 when it equates to a drop of water in a tea-cup to the developers. Housing developers are not petty traders and a cash deposit of RM200, 000 is only a small sum. Even a single storey home in Puchong costs more than that. We do not understand the rationale for such a minimal imposition when the cost of houses has increased many folds since the inception of the Housing Developers Act 1966, that was 35 years ago.

HBA’s stand is that to enable developers to be serious in their commitment in building houses and development of housing schemes, the developer must have a paid up capital of at least 30% of the land and project cost of that particular project. For instance, if the project and the land cost is RM100 million (which is merely a medium-sized housing scheme) the paid up capital should be RM30 million. This would make the housing industry open to those developers who are serious and experience enough to take up a project. The developer cannot simply rely on the purchaser’s deposits and progressive payments to roll and to fund the project. The developer should have their own funds to be converted to investment capital while the balance of project funds would normally come from the Bridging Financier who would in the current trend grant a margin of 70%.

·        It must be made mandatory that developers obtain separate individual titles before a license is issued. Very often you find developers not paying the land office’s conversion premium and fees for separate titles (from master title) and that leaves buyers in the lurch.

·        The necessity of a soil study on soil settlement and suitability for housing should be made compulsory.  

3. Proposed New Section 6A


This Section is not consumer friendly. It does not benefit the aggrieved purchasers in their dealing with the developer should they breach their contract. The retention period of the deposit by the Controller should be extended to or least one (1) year after the expiry of the defect liability period.



i)    Shouldn’t the deposit be accessible to aggrieved purchasers to defray against their claims and compensations?

ii)   What if there are ongoing disputes between the feuding parties?

iii) In situation where strata titles here not been obtained, shouldn’t the deposit be retained until such time when developers have obtained them?

4. Proposed amendment to Section 7


HBA concurs with the proposed amendments. We further propose that it should be made mandatory that the developer should:


 “provide a copy of the list of purchasers, their addresses and telephone numbers (if any) and the same to be conspicuously exhibited on the notice board of the Ministry of Housing and the sales office of the developers.”


This is to reflect transparency and to ensure that the true situation on ‘sold’ units, in particular the ‘bumi-lots’. It will also prevent developers from creating artificial ‘hot demand’ to unfairly entice buyers. House buyers can also refer to these lists to form ‘watch groups’ to keep an eye on their investment and also to act as ‘eyes and ears’ of the supervisory authorities. As you know, the number of house buyers far exceed the population of civil servants.


5. Proposed New Section 8A


This Section appears to give developers the notion that the business of housing development is a ‘no risk venture’. It gives the housing developer the opportunity to collect vast amount of money from house buyers solely for their own gains. They can then declare that they are unable to proceed with the project and then apply to the minister to invoke Section 8A for the nullifying of the SPAs. The funds that were collected and utilized would then be returned to the buyers free of interests. It is tantamount to a ‘deposit taking activity’ disguised as a housing developer.


The following issues should be addressed:-  

i) In the event that the Minister invoke the statutory termination of the Sale & Purchase Agreement, shouldn’t the cash deposit of RM200,000 referred to in New Section 6A be utilized to compensate the purchasers as to their expenses (legal fees and stamp duties on SPA, legal fees and disbursements on the loan documentation, processing fees etc)?


ii) What about the interest paid to service the bank account should the purchaser take a 100% loan margin?


iii) Shouldn’t the developer bear the legal cost and expenses for the removable of the banks charge / assignment?


iv) Shouldn’t the Banks’ consent be first had and obtained prior to termination of the SPA?


v)  Shouldn’t be there be a time frame, say, seven (7) days to refund the deposit?  

The proposed New Section 8A (11), Any ‘ person’ should be substituted by “Any licensed developer”


6. Proposed New Section 10H


Perhaps, there could be a suggestion to give “incentive of awards to informers”  


7. Proposed New Section 16A – Tribunal for Homebuyers Claims


The spirit of the inception of Tribunal for Home Buyers Claims is good as it is intended to allow those aggrieved house buyers to seek redress at the tribunal as an alternative to civil courts where cases are often bogged down. We see the capping of the claims to RM25,000 as targeting a certain sector of society. We have our reservations. However, time will tell on the effectiveness of the proposed tribunal.


8. Proposed New Section 16Y (2)  


Both Section 16(M) & 16(Y) seems self contradicting if the tribunal is only given jurisdiction to hear matters of RM25, 000 and below. Would they then be empowered to give such remedies?   


There should also be a reservation for “other relief which the tribunal deems fit and just”.  


9. Proposed New Section 22C line 11


Very often the written consent of the Purchasers’ financiers are subjected to numerous conditions. The latest trend among the Banks & Financial Institutions is to impose conditions that whenever money is received through successful litigation for LAD (Liquidated Ascertained Damages) it will form part of the bank’s proceeds.


They will usually demand that such proceeds go towards the reduction of their purchaser’s loan sum. In the case of Pak Ki Yau vs Kumpulan Promista Sdn Bhd (CLJ 1999) in Civil Appeal in 1999 Judicial Commissioner Clement Skinner has decided that ‘notice to the Bank should be sufficient’ 


Accordingly, HBA urges that the Ministry should relieve the Purchasers’ burden of “having to seek prior written consent” and change the wordings to “having given prior written notice”.  


10.  Proposed New Section 35  


This Section is too vague. It should be fine tuned to reflect its objective. The cross sections do not seem to correspond. There do not appear to be a section 16AD in the principal Act referred to in line 3 of this section.  


Generally the new sections 8A, 10A-10J, 11, 16AI & 24, have given the Minister vast powers and HBA is certain that the Minister would exercise the power entrusted to him cautiously with fair and balance treatment to house buyers. HBA urges the Minister to exercise his powers to amend the Housing Developers Regulations, Schedule H & G and to provide for a standardized Deed of Mutual Covenants for all developers to adopt to ensure better protection for purchasers and to ensure that there is no uncertainty of house rules.


HBA earnestly wishes and urges the Minister to consider re-regulating Clause 23 of Schedule H & G (i.e Manner of delivery of vacant possession) to adopt the concept of ‘Vacant Possession only upon issuance of Certificate of Fitness for Occupation.’


HBA takes this stand based on the following grounds:-  

i) the taking over of vacant possession without the CFO is meaningless and detrimental to the buyers because they are still unable to move into their houses;


ii) from the date of ‘deemed’ taking over of vacant possession, the buyers take over responsibilities of the security of the houses. How can they do so, when they are not allowed to move in? The houses would be subjected to vandalism, theft, and other hazards, all on the buyers’ expense;


iii) the defect liability period starts running and gets shorter and shorter. How are  the buyers able to identify any defects when they are not allowed to stay in the houses while waiting for the CFO? In the extreme case, if the issuance of CFO is delayed by eighteen (18) months or more, then the defects liability period would have run out before the house buyers could even move in!!!  

HBA further urges the Minister to consider the Amendment Bill 2001 in relation strictly to “Enforcement” to be retrospective. This is to allow the Ministry to address the present dilemma that house buyers are facing. It will also ease the Ministry’s frustration on the claim that they “currently do not have the teeth to bite”.  

Our comments aforesaid are supplementary to our stand that no amount of law will be able to eliminate or solve the problems unless they are strictly enforced. As the saying goes, ‘THE LAW IS ONLY AS GOOD AS ITS ENFORCEMENT’.

Thank you,

Yours truly,

Chang Kim Loong

Secretary – General

Dated this 12th October, 2001


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