House Buyers’ Dream for 2009 – The Ideal Housing Minister
The perfect minister of housing would have to understand about the pitfalls of house buying from housing developers and not just the profit that housing developers make or not. Such a person would have to understand what it is like to start out on the stressful journey of homeownership and not getting the dream home.
Whilst we are well aware and appreciative of the contributions of the housing industry towards the social and economic development of the country, we must also be mindful that house buyers play a more important role in being customers to the industry. As such, for the industry to be sustainable, the interests of both parties (developers and their customers: house-buyers) in the equation need to be taken into serious consideration. Whilst the industry players are privileged to walk the corridors of power, house buyers, on the other hand have only an inaudible voice in the wilderness.
HBA tries hard to level this lop-sided playfield. We seek to protect the rights and interests of house-buyers whilst at the same time; we are not in opposition to any of the legitimate rights and interests of developers. We are also well aware and we are grateful to other numerous individuals and NGOs who are working tirelessly in various capacities towards the betterment of our housing industry.
Despite our voluntary efforts, there still exist an enormous number of issues; some irritating, some serious and a lot critical, which need to be urgently addressed, to ensure that there is some form of orderliness in the housing arena.
Why the Minister of Housing and not any other person? Because the Minister has the power under the laws to protect house buyers and house buyers with problems look to the Ministry for help. It follows that the Minister should be the national icon on house buyers’ protection.
Resolutions for 2009
The following are the fourteen (14) resolutions (in no particular order) that the Minister should seriously and urgently adopt to create changes to the housing industry for its betterment. They are neither exclusive nor exhaustive. Additions, fine tunings and adjustments are as inevitable as the country’s changing social and economic landscape.
1. Will have the guts to maximise housing – abandoned or failed projects are wasted housing resources
The ideal minister promptly concerns himself with the plight and the nightmares faced by tens (if not hundreds) of thousands of innocent and unwary house buyers who have lumbered themselves with problems created by those errant and unscrupulous developers. These problems range from the irritating ones like leaking roofs, defective rectification works and uneven floorings to the serious one where housing developers hand over houses (landed and stratified) that are of sub-standard or unacceptable quality, no connection of water and electricity despite Certificate of Fitness been issued and no title deed (individual and strata). But these problems pale in comparison with the nightmares faced by victims of abandoned projects. The buyers, in most cases the low and middle sector of society, are left in a state of financial despair within a legal quagmire with no solution in sight. They are lumbered with housing loans that are partially disbursed and for which they have to continuously pay interests; there are no houses for them to take over to occupy and they continue to pay rents to shelter their families. A perfect minister would not leave aggrieved house buyers to fend for themselves.
He would be sensitive to their sufferings and will make contact with them to really and seriously feel the sufferings that they are going through. He will place himself in the thick of action and ensure that the legitimate rights of the buyers are not shortchanged. He will gather housing experts and related players to seek immediate solution and be determined to resolve such unsatisfactory state of affairs. He will ask himself where laws for the protection for house buyers have failed.
2. Take action to prevent failures
From the history of failures to protect house buyers, he will see to it that, firstly, the path that leads to such a pathetic situation is completely blocked. That is, to close the flood-gate, so that there will be no more house buyers, not during his term, becoming victims of abandoned projects. Secondly, he will encourage measures, including drastic ones to be promptly and vigorously executed to relieve the sufferings of these innocent house buyers.
3. Listen to the house buyers – progressive system helps developers but not house buyers
The ideal minister must listen to the house buyers. When house buyers say that the progressive payment system is no protection from failed projects and financially unsound developers, an alternative system must be found. House buyers have spoken and asked that the house buying system be changed from the progressive system to a 10:90 system. The ideal minister must be bold enough to see to it that only developers who have financial clout sell houses completed or following the 10:90 system thrives. If housing developers whined that new legislations will add to the cost of construction and therefore house prices will increase, the ideal minister is not worried as he is also intelligent to know that the developers are really saying that it will cost them more to complete houses in time and build houses right the first time. Is there something wrong with that? The ideal minister also knows that the market determines the cost of houses, not the legislations in place to protect house buyers.
4. Developers must be financially stable to offer sales of their units - 10:90 system or complete built-then-sell is the way to do it
The way to prevent future house buyers from becoming victims of failed housing projects is for the industry to adopt the 10:90 system (10% of purchase price on signing of agreement, and 90% only paid upon completion) that has come into effect from 1st December, 2007, although on an optional basis - the option being given solely to the developers. The Minister should see to it that, the “progressive payment”' system is phased out, and new developments comes under the 10-90 system.
In the 10-90 system, developers may sell their products before they commence construction when all the necessary approvals have been obtained. Buyers sign the Sale & Purchase Agreement and pay a deposit of 10% of the selling price. Buyers do not make any more payment until the houses are completed with Certificate of Completion and Compliance (CCC), water and electricity available for tapping and running as well as vacant possession with keys. This is more meaningful.
The serious risks of abandoned projects that house buyers presently face is totally removed. House buyers are insulated from the business risks that should rightly be borne by developers and their financiers. Presently, house buyers carry a large proportion of the business risks involved. They start paying even though the houses that they have purchased are nowhere near completion. They continue paying progressive payments until such time when the houses are completed. If, for whatever reason the construction of the houses are disrupted or abandoned, they are the ones who bear the brunt. House buyers should not carry the risks because they are not business proprietors like the developers and the financial institutions.
We believe that the quality of houses will also improve with the 10-90 system because developers will not risk the likelihood of dispute with buyers over quality, come full payment time. Presently buyers having paid up 95% prior to hand over time, have little or no bargaining power over the quality of their houses. Litigation in civil court in most cases is out of question due to financial and other problems. This situation has been exploited by wayward developers. With 10:90 concept, developers have to seriously focus more on building better quality houses and executing greater care and responsibilities in ensuring that the houses are constructed in accordance with specification and proper workmanship manner if they harbour hope that their ‘finished product’ to be saleable upon completion of the house.
The risk faced by developers that buyers may renege and refuse to complete the sales when property price has dropped at time of hand-over is negated by the forfeiture of the initial 10% paid upon the signing of the SPA plus other possible specific performance liabilities. These are part and parcel of doing business; there is no such thing as a ‘risk-less business’. Businessmen are in for the risk; the higher the risk the higher the profits :)
5. Build Close Working Relationship with State & Local Governments.
The ideal minister knows that houses are built on land and land is exclusive State Government matters. As such, the minister and all his men must work hand-in-hand with State Authorities to jointly and speedily protect house buyers. The minister will set up a communication method with State Governments to exchange the list of blacklisted developers, updates on status of construction and application of individual titles.
6. Study applicable laws to promptly arrest failed projects, for eg. the possibility of forfeiture of land in abandoned projects
Land ownership in Peninsular Malaysia is governed by the National Land Code, 1965 (Act 56) in force since January, 1966. The NLC empowers the land administration authorities to confiscate/seize any land where any of the conditions of usage have been breached and/or for failure to pay quit rent. The abandoning of any housing project is clearly in breach of the development order and other legislations. The ideal minister will lobby for the State authorities to take drastic measures, including forfeiture of such land so that the forfeited projects can be revived and the completed houses delivered to their rightful purchasers/ owners. The Selangor Darul Ehsan State authority has already embarked on two (2) cases in Kuala Selangor and the Minister should also fast track all revival applications to alleviate the sufferings of the affected buyers
7. Make full use of the powers given by Parliament
The perfect minister should know that the powers given to him through Acts of Parliament is not for decoration but must be seen used. The minister should embark on a campaign of vigorous enforcements so that the offenders will not get away scot-free. He will demonstrate to the industry players that the rules of law will be enforced without fear or favour and that the Ministry means business. He will pass a strong message to the industry players that breaches of rules and regulations are be taken seriously and offenders are caught promptly to the full extent of the law.
Once the message sinks in, there will be less recalcitrant parties, who under the present situation, knows that their chances of getting away with any misdeed is indeed very good! Presently all the legislations are not providing the deterrence factor that they were set out to provide, due to the appalling state of enforcement.
Even the best of legislation to counter a particular situation would just remain as ornamental pieces unless strict enforcements are carried out against offenders, without fear or favour, so as to instill into them the respect and fearful feeling that the law commands. Sections 10 (Investigate & Enforcement); S10A (Powers of entry, search and seizure); S11 (Powers of Minister to give directions for the purpose of safe-guarding the interests of purchasers); S12 (Power of the Minister to give general directions) are powers to ‘throw the book’ at errant developers. Efforts should not be spared against those errant and unscrupulous developers who create havoc to the development of the housing industry and tarnish the good name of those responsible ones.
8. Enforce Housing Tribunal Awards
The ideal minister should see to it that all decisions awarded by the Home Buyers’ Tribunal are promptly complied by the defaulting developers. Given reasonable time, the recalcitrant ones will face criminal charges under Section 16AD (Criminal penalty for failure to comply). The minister should send shivers down the spines of potential errant developers, so that they respect and promptly comply with the ruling(s) of the Home Buyers’ Tribunal, established for the very purpose of allowing speedier legal redress from aggrieved house buyers in their quest to buying a home. He shall not spare the individual directors of the developer company and that of their shareholders who hid behind the corporate veil.
9. Understand that with new developments, new homeowners’ communities are formed
Developers who involve themselves in maintenance and management are to be blamed because of their lack of accountability and transparency. Not all developers understand or wish to help build new communities. It is essential to note that residential projects today involve the bonding of owners and their family to form new communities. Especially with strata titled properties, share ownership of common properties is synonymous with shared responsibility.
As an after sales service, developers can do their part to help owners form their respective managing bodies. Wise developers know that their interest in a housing project is short-term: to sell and make profit while for the owners their interest is either as a home or for nest egg investment. While some responsible developers have made efforts to educate their purchasers to form such bodies, there are errant ones that choose to fight their purchasers every step of the way. More so, in developments where there are substantial unsold units.
There is no requirement for the basic facilities that a strata development must have to cater for the bodies to be formed at a later stage. Facilities like meeting rooms and halls are a must for this type of development where important decisions are made. We have seen residents meeting being held at car park lots in developments where such basic facilities are not provided.
10. Education of the Industry Players
Industry players ie. Developers/ consultants and professional bodies will be encouraged to educate their staff that their professional and their social responsibilities go hand in hand. They should not adopt a purely uncompassionate technical mindset. Conscience and sense of fair play should be imbued amongst all the individuals in the housing industry. The lines of communication between buyers and developers should always be open. This isn't only to the benefit of buyers but also developers for the following reasons:
- Buyers can be informed of ongoing and future projects;
- It complements a developer's move to be more transparent and accountable in its management of stratified projects; and
- It allows a developer to resolve whatever problems it may have with its buyers directly rather than through the media, which may be potentially detrimental to a developer's image and reputation.
- institute an awareness campaign leading to the drawing up of the House Buyers’ Bill of Rights
11. Establishment of an Ombudsman.
The minister should lobby for the establishment of an Ombudsman within the governmental system so that any grievance against any governmental department can be speedily and effectively attended to. The existing Public Complaints Bureau located within the Prime Minister’s Department, serves little more than a post office.
12. The National Housing Policy
There should be a National Housing Policy to provide firm direction for matters related to housing in Malaysia from a wider, in-depth, comprehensive scope and in a more balanced manner. Factors such as environmental destructions and damage to resources should be controlled. There shall be strict enforcement of laws to ensure well-being of the people and for our next generations. It is vital to ensure that infrastructural, industrial, economic and commercial development is not at the cost of the people’s well being and health. It will encompass all of the above subjects plus more that will certainly emerge when the brainstorming process is set in motion.
13. See to it that ‘protection of house buyers’ is top most priority
A minister is often sought after to grace housing corporations’ events and launch projects. An ideal minister would not allow himself to be used as a publicity tool or subservient to housing developers to exploit during the launching of their products. Before gracing any project launching he will have research and investigate the standing of the requesting party. In any project that is any project that is subsequently abandoned, I would suffer the brunt of the frustrated buyers in their quest for redemption; it would indeed be pretty embarrassing situation for me, my colleagues and my family. My stand is that I will only cooperate and support deserving developers who have proven their sense of responsibility and who have impeccable track records. Checking the creditability of the people behind the company ie Board of Directors and shareholders will be part of my background checks before I get suckered in for nothing.
14. Better Support for the NGOs.
The ideal minister shall work closely and provide relevant NGOs with greater moral and financial support. He should be aware that many of the effective programmes relevant to housing in the country, particularly those at community level, are being implemented and funded by the NGOs. Several housing NGOs are doing excellent works in Malaysia and by working closely with them, we believe that the Government’s job would be easier.
But alas, there is no such thing as an ideal person or for this matter a perfect and “Ideal Minister of Housing” and all of the above is none but an elusive dream. Nevertheless, our extended dream is that some fortunate soul who sees our light and who has the guts and galls to make changes, will make it to be the Ideal Minister and then responsible developers and perfect homes would be the norm.