How effective is the new amendments to the new HDA? Part 2

How effective is the new amendments to the new HDA? Part 2

 

RE-DEFINITION OF ‘HOUSING DEVELOPERS’

The amendment to include ‘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’. This area of uncertainty has been suffocated by wayward liquidators who defy the housing legislation though they assumed the affairs of a de’facto developer. Their unbecoming conduct had to be curbed so that legal obligations of the wound-up developer will be fulfilled by the liquidators. Currently, such wayward liquidators place great emphasis that they are regulated by the Companies Act and thus refuse to abide by the directives of the Controller of Housing. This re-defining will put to rest unfounded arguments by such defiant liquidators and will make it clear that all parties who carry on with the role of the housing developer shall expressly be bound and fall under the purview of the Act including liquidators or provisional liquidators.

(Please note: There is a group of vested parties who have been making attempts to have the current Housing Minister suspend this section of the law).

 

PENALTIES

The doubling of the fines and punishment would surely ensure frequent wrongdoers to think twice and thrice before they embark on their wayward ways. 

 

 

ENFORCEMENT IS THE CRUX (OF WHAT THE LAWS ARE MADE OUT TO DO)

HBA has repeatedly stated that any law is only as effective as its degree of enforcement. To enact all these Acts in Parliament and to sit back and expect the industry players to toe the line whereby house buyers’ rights and interests are protected, is but an elusive and naïve dream.

HBA’s fundamental belief is that even the best of legislation to counter a particular situation would just remain an ornamental piece unless strict enforcement is carried out against offenders, without fear or favour, so as to instill into them the respect and fearful feeling that the law commands.

There are a couple of lingering questions that remain in our mind as to why some authoritative and ascendable sections in the current housing legislation have not been invoked or sparingly been enforced at best, inter-alia:

 

SECTION 7C. FREEZING OF THE HOUSING DEVELOPMENT ACCOUNT

(1) If the Controller has reason to believe that a licensed housing developer is carrying on his business in a manner detrimental to the interest of the purchasers or is contravening any of the provision of this Act, the Controller may in writing order a freeze on the Housing Development Account and direct the bank or finance company, as the case may be, not to part with, deal in or otherwise permit any withdrawal of any moneys from the Housing Development Account until the order is revoked or varied or unless in accordance with any conditions as may be imposed by the Controller at his absolute discretion from time to time during the currency of the order.

(2) No bank or finance company, or director, officer or employee of the bank or finance company, as the case may be, shall be subject to any claim or demand by or liability to any person in respect of anything done or omitted to be done in good faith in pursuance of or execution or intended execution of or in connection with the execution or intended execution of an order of the Controller under subsection (1). 

(3) Any person who fails to comply with an order of the Controller under subsection (1) shall be guilty of an offence and shall be liable to a fine not exceeding one hundred thousand ringgit.

 

 

SECTION 10A. POWERS OF ENTRY, SEARCH AND SEIZURE

This Section was copied en-bloc from the Income Tax Act and was included in the HDA amended in 2002; but has this section been invoked to instill fear in the spine of those errant developers? If so, how do you account for those recalcitrant and repeat offenders?

 

SECTION 11. POWERS OF THE MINISTER TO GIVE DIRECTIONS FOR THE PURPOSE OF SAFEGUARDING THE INTERESTS OF PURCHASERS

(1) Where on his own volition a licensed housing developer informs the Controller or where as a result of an investigation made under section 10 or for any other reason the Controller is of the opinion that the licensed housing developer becomes unable to meet his obligations to his purchasers or is about to suspend his building operations or is carrying on his business in a manner detrimental to the interests of his purchasers, the Minister may without prejudice to the generality of the powers of the Minister to give directions under section 12 for the purpose of safeguarding the interests of the purchasers of the licensed housing developer –

(a) direct the licensed housing developer in question to take such steps as he may consider necessary to rectify any matter or circumstance; 
(b) direct that a person be appointed or himself appoint a person to advise the licensed housing developer in the conduct of his business;
(c) direct a company to assume control and carry on the business of the housing developer upon such terms and conditions as the Minister may determine;
(d) certify that the licensed housing developer has abandoned the housing development;
(e) direct that the licensed housing developer present a petition to the High Court for the winding up of his business; or
(f) take such action as the Minister may consider necessary in the circumstances of the case for carrying into effect the provisions of this Act.

Stories of developers ‘falling sick’ and incapable of continuing with their housing project is not something new. Just recently, local media highlighted yet another outcry of buyers suffering from another abandoned housing scheme.

Under Section 10 of the HDA, it is stipulated that the Minister may direct the Controller or an Inspector to initiate investigation (under condition of secrecy investigate the commission of any offence under this Act or investigate into the affairs of or into the accounting or other records of any housing developer) if he ‘has reason to believe’ that the housing developer in question is carrying on his business ‘ in a manner detrimental to his purchaser’ or ‘has assets insufficient to meet his liability.

This Section is further enhanced and amplified with the inclusion of Section 11 and 10A (Power of entry, search and seizure) and all the Sections as we earlier referred. The Minister and his Ministry have wide ranging powers to intervene and salvage a ‘sick project’ and to offer ‘treatment to provide cure’, yet look at the numbers of abandoned projects which emerges; a dire financial picture for naïve and innocent buyers. Individuals and the community are being harmed by the lax in enforcement and monitoring mechanism. 

Public rely on the legislation and are often let down by the enforcers. It is only good on paper and it will continue to remain in our archives unless the existing laws are used to their full capacity. The problem with enforcement is not because of the lack of laws. Enforcement programs must be organized and enhanced.

With the appropriate laws in place, the Housing Ministry should now back it up by serious enforcement. Stricter enforcement and custodial sentences against errant developers will help clean up the housing industry. But has the ‘cure-all’ formula for the consumers’ plight finally arrived with the recent amendments to the HDA? Will the heartaches, the headaches and the myriad of woes long suffered by the large number of Malaysian house buyers become a thing of the past?

 

 

CONCLUSION

The crux of the problem lies in the system of delivery, ie the sell-then-build (STB). This is when buyers are totally exposed to the business risks / mercy of developers. Why should the buyers share in the business risk of the developer? After all, they are not shareholders and they do not enjoy the profits and the perks of being in a cosy air-con room with chauffer driven cars.

And this is the key reason as to why the government had to enact laws in its purported attempt to “protect” house buyers. Yet, looking at the number of abandoned projects and the number of involved house buyers who are suffering various degrees of financial hardship, we surmise that no amount of legislations would totally eradicate such problems against wayward developers. The building industry is just like any other business and is not excluded from business risks.

Any housing project can either succeed or fail. In the majority of cases they succeed and the involved house buyers can count their blessings. When a housing project fails, the involved buyers are left in a lurch. Unfortunately, no amount of legislation can guarantee the success of any housing project; or, for that matter, any business venture. And since the success or failure of any housing project cannot be guaranteed by any party, it is only fair for the people to expect the government to institute a system that totally, or to a large extent, insulates house buyers from such business risks/uncertainties.

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