The Housing Development Act (amendment) Bill was debated in Parliament on 1 December 2011 and HBA was invited to brief the Members of Parliament (MPs) prior to its debate. The National House Buyers Association (HBA) lauds the positive engagement from YB Dato’ Seri Chor Chee Heung, Minister of Housing & Local Government in addressing the cumulative problems faced within the housing industry with the intention of providing further protection to house buyers against errant developers.

Within the parameters of this Act, there were a number of points brought up for discussion, and in this final installment, we shall cover the developers and issues of criminalization and penalties. This round up will also take into account the overview of HBA’s recommendations.

Re-Definition of ‘Housing Developers’

The inclusion of ‘a person or body appointed by a court of competent jurisdiction to be the provisional liquidators or liquidators for the housing developer in a situation of a housing developer’s company under liquidation’ is like a breath of fresh air in an area choked with the practices of wayward liquidators who flout housing legislation though they assumed the affairs of a de facto developer.

Curbs in place enable the legal obligations of the wound-up developer to be fulfilled by the liquidators. Currently, such wayward liquidators are regulated by the Companies Act and they refuse to abide by the directives of the Controller of Housing. This causes housing problems to turn uglier with house buyers left in a financial quagmire when liquidators act as they deem fit under the Companies Act, ignoring the plight and rights of house buyers under the Act. This re-defining puts to rest unfounded arguments by defiant liquidators and clarifies all parties who carry on with the role of the housing developer to be expressly bound and fall under the purview of the Act including liquidators or provisional liquidators.

While the Companies Act, 1965 governs the general conduct of liquidators in the winding-up of defunct companies, when the company is a housing developer, housing legislation must be read together with the Companies Act. In the event a lacuna exists in the Companies Act about housing issues, housing legislation must prevail over the Companies Act.

However, the Minister could have omitted to include ‘Receivers and Managers’ appointed by a Court of competent jurisdiction and by contract (under a Debenture) who carries on a project in succession and who is supposed to perform or undertake to perform the statutory and contractual obligations of such financially impaired housing developers. Perhaps, this point could be brought to Parliament for clarification. We suggest adding the words “receivers and managers or receiver” in between the words “the” and “provisional” to effectively cover everybody who takes over the housing development.

Identifying Criminals Both ‘Old’ and ‘New’

The amendments do not have retrospective effect and apply only to new housing projects.

If the amendments were retrospective, the number of developers potentially caught and facing criminal prosecution would be high. Consequently, this may be a big ripple of distress in the housing development industry. It may also result in purchasers terminating the contract of sale and possibly causing the number of sick, late and abandoned projects to increase, bearing in mind that developers may have cash flow problems paying back house buyers’ purchase monies. For this reason, it is agreed that the amendments would apply only to new housing projects.

While the amendments apply to new housing projects, enforcement on developers of abandoned projects prior to the Bill must be seen to be done and publicized. These efforts would complement the new amendments and would suggest that the government is serious and pro-active in addressing housing problems caused by errant developers.

In other words, while the Bill seeks to deter “new criminals”, it ought not be seen that “old criminals” could get away scot-free. Prosecution of “old criminals” would be equally important.

Who Are the Unlicensed Developers?

It has been reported that there are 195 unlicensed or ‘illegal’ housing projects. The Minister must explain to this August House what has happened that such ‘illegal’ activities to have thrived. Are those perpetrators being prosecuted and their directors brought to Court to face the law and punishment? If so, identification to the August House on all parties involved including the names of developers, project names, names of the architects, engineers and lawyers abetting them is crucial. The Banks/ Financial Institution and Development Financial Institutions involved in either bridging or end-financing loan facilities need to be identified as well. What is the Minister of Finance doing about it and is Bank Negara Malaysia aware of such blatant disregard of the banking laws? How could Banks finance illegal projects without land conversion, layout and building plan approvals, developer’s license, advertisement and sales permits, non-standard sale & purchase agreement etc.?

Deterrent Penalties Needed

The doubling of the fines and punishment would surely make frequent wrongdoers think twice and thrice before they embark on their wayward ways with the proviso that the wrongdoers are brought to book. Failure to do so would be contempt of Parliament.

Overview of the Act

No amount of law will be able to eliminate or solve the problems unless they are strictly enforced. As ‘the law is only as good as its’ enforcement’.

Pursuant to Section 24 of the existing HD Act, the Minister is empowered to make Regulations. There are numerous concerns on the ‘safety nets’ legislated to protect house buyers. The Housing Development Project Account (HD Acc) must be full proof as nearly all existing abandoned housing projects either have no money or have merger sums in their HD Acc where monies have been ‘schemed’ out from this account and measures need to be made to address this ‘leakage’. To pre-empt developers from resorting to their wayward acts, the Government should seek out feedback, views and suggestions from the National House Buyers Association (HBA) when making improvements to the Housing Development Regulations and the statutory Sale & Purchase Agreements in schedules G, H, I & J.

The Build-Then-Sell concept should be carried out without delay for the safety of future house purchasers as, in terms of public interest, this would be one of the most important aspects of the Government transformation plan to touch the lives of people unable to enjoy the prosperity that years of development policies have accrued to them. The Government does shoulder part of the blame for requiring all house sales and purchase transactions to be carried out by Sales & Purchase Agreements that allow construction to be abandoned with a delay in solution lasting a few decades.

From a macro perspective, it is not difficult to see that all these efforts to amend the Act are aimed at providing house buyers with more protection. This is due to the current highly risky and hazardous situation whereby house buyers make progressive payments before the houses are completed and ready for hand-over. What the BTS 10:90 sets out to achieve is to insulate house buyers from the risks and hazards of the present Sell-then-Build (progressive payment) mode. It also has a list of other goodness that will put the housing industry in a more orderly and sustainable footing.

NATIONAL HOUSE BUYERS ASSOCIATION [HBA]

 No. 31, Level 3, Jalan Barat, Off Jalan Imbi, 55100, Kuala Lumpur
Tel: 03-2142 2225 | 012- 334 5676 | Fax: 03-22601803