Have you ever seen an abandoned project? It peppers the country and can be seen along major roads and right in the heart of Kuala Lumpur next to big shopping malls and international hotels. They are eyesores and proof of business failures, the abandoned buildings becomes breeding grounds for dangerous mosquitoes and a host for other unwanted activities.
What about the buyers who have bought into this project? If buildings can cry, those abandoned buildings are weeping to be completed. And so are the cries of frustration by those ‘unlucky’ purchasers.
Picture this. Bare concrete house pillars stand amidst undergrowth and weeds. Black moss adds a little color to the concrete pillars. The building site is empty like a ghost-town. An eerie wind blows through the site.
What about the cost to the environment?
Compared to the old plantation or forest, the abandoned building site gives worry and heartaches. Buyers and their family members are encumbered with financial debts and nagging worries.
Banks and their lawyers chase buyers with letters of demand for the interests on the progressive installments paid to the developer up to the date the project is stalled or abandoned.
It gets uglier and uglier
If the developer is wound-up, the liquidator takes over the situation. Its mission is to harvest for the secured creditors whatever assets that are left in the project.
In one case, the liquidator wanted the buyers to pay 4% of the purchase price to verify the purchaser’s details. The buyers said “No” and the liquidator refused to transfer the titles to the buyers.
Left with the developer’s “abandoned and sick baby”, buyers face the disasters on their own due to no fault of theirs. They are constantly harassed by their banks from whom they had secured their housing loans, to pay the interest on the cumulative progressive installments. Apart from being harassed by their banks, the liquidator also preys on the buyers for his fees before he undertakes to complete the transfer of the titles to the buyers.
The dream of owning a nice home turns into a nightmare. Buyers are the innocent victims. Where can they go? How can they recover, let alone, stop their losses? Shouldn’t the errant developer be responsible? Why should buyers bear the developer’s business risk? Do buyers share the developers’ business profits? Do they share the developers’ other tangible assets?
The questions are tough. The mess is rooted in accountability. The relevant authorities keep silent.
There seems to be no special or comprehensive way to deal with stalled or abandoned projects. Letting buyers face the brunt of a stalled or abandoned project seems to be the way the problem is handled now. Where is the protection for buyers?
Special Purpose Vehicle (SPV)
Indeed, we at HBA are glad that the Ministry of Housing & Local Government has heeded our call to have a special task force to tackle abandoned housing projects. The said Ministry has recently established a special division named: ‘Bahagian Pemulihan Projek Terbengkalai’. Now, it’s high time to have a special vehicle to deal with stalled or abandoned projects. In the public interest, a special purpose vehicle (SPV) is needed. Essentially, special law is needed to establish the SPV.
Like Danaharta that was established with special law ie. the Danaharta Act, the SPV will have a special legislation ie the DanaProjek Terbangkalai Act or call it by whatever name.
The SPV that we suggest is solely intended to take over all abandoned projects and to promote the revival of these projects by injecting liquidity into them.
These goals are to be achieved through the acquisition, management, financing and disposition of assets and liabilities of the project.
Special law are enacted for the acquisition, management, financing and completion of stalled or abandoned projects through the SPV, concurrent with the appointment of special project managers with powers to administer and manage the projects till its due completion.
Among others, the SPV:
- will be funded by the government;
- may establish its own rules and procedures;
- has the power to acquire, manage and finance the project until completion;
- all assets in the project including the land is vested in the SPV;
- may engage special project managers and independent consultants to administer and manage the project until completion;
- may transfer titles to the house buyers;
- The land authorities are authorised to register the transfers of the titles;
- Interest in the progressive installments will stop until the project is revived and completed;
- is empowered to carry out investigations including perusing the records, books and accounts of the developer;
- the Public Prosecutor may prosecute the developer for offences committed under existing laws;
- Directors or officers of the developer can be penalised;
- Buyers are entitled to seek compensation from the developer.
Special law is the only means by which the acquisition, management, financing and completion of stalled or abandoned projects can be implemented promptly, efficiently and economically for the good of the public.
Special law is the only means by which special project managers may be appointed expeditiously to administer and manage these projects.
The SPV would serve its objective for a certain period as in the case of Danaharta Act.
Without the SPV, buyers will continue to be victims. The present system is one-sided. Buyers have to fight for their housing rights like untrained soldiers with one hand tied behind their backs.
The point is that buyers have to bear the developer’s business risk in a housing project. However, the developers’ business profits in the project are not shared with them. It is a selfish and greedy way to treat buyers.
It would be necessary for community leaders to realize the importance of gaining the trust and votes of buyers and their family members. This group can number 10,000 or more in a district. When buyers are protected, they logically vote for those who protect them.
It is time for the SPV to take effect. Buyers are entitled to more peace of mind when they buy houses to be built by developers. They do not want sympathies but solutions to their dilemma that are brought about through no fault of theirs. Surely, the authorities are not blind to their problems.
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