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Liquidators appointed by MDI can no longer charge homebuyers exorbitant fees


The National House Buyers Association (HBA) lauds the government’s recent move and decision to limit the fees of liquidators appointed as agents by the Malaysian Department of Insolvency (MDI) to RM500. However, HBA notes that further improvements could and should be undertaken by the government and have proposed some counter-proposals for MDI to consider.

malaysia property development 2022
© nizamkem/ 123RF.

When a property developer is wound up before the completion of its duties and contractual obligations, a liquidator fills the void and takes on the responsibilities of the defunct property developer, such as completing the construction of the buildings or facilities left behind, delivering vacant possession, applying for individual or strata titles and subsequently to distribute the title deeds to the purchasers, so as not to leave the purchasers in a lurch.

This is applicable to both residential and commercial properties.

Why are the fees charged by liquidators unreasonable?

The Malaysian Department of Insolvency (MDI) or Jabatan Insolvensi Malaysia (JIM) has received numerous complaints against errant private liquidators who were appointed (as agents) to manage the affairs of a defunct property developer, especially in a situation of applying, distributing, transferring and ‘signing off’ of individual and strata titles to their rightful purchasers (referred to as ‘the last mile’).

Liquidators purportedly charge an administration of between 1% – 3% of the original property purchase price or the subsale home sale price for performing these functions of a developer. In some cases, additional charges are tagged as ‘vetting fees’ for the liquidator’s appointed solicitors to vet the forms and documents. The liquidators will even make the homebuyers pay for the former’s lawyers’ professional fees. The unhealthy practice of liquidators imposing such exorbitant administrative fees for executing the transfer of individual titles to purchasers has now become a norm.

The fee is purportedly used to cover the liquidator’s costs in retrieving the related documents which have been purportedly destroyed or misplaced by the developer and verifying the same with the purchase proofs provided by purchasers. Consequently, a straightforward perfection of transfer becomes a costly affair.

© Datuk Chang Kim Loong

Unilateral impositions of such fees by liquidators are devoid of any legal basis. Furthermore, the sum imposed is ridiculously high and is far more than enough to cover reasonable administrative costs involved. This casts doubt on the motive of collecting such fees and raises the question of whether the liquidators are unjustly enriching themselves at the expense of bona fide property purchasers who are already in precarious positions without their individual titles.

PEMUDAH establishes that liquidators appointed by MDI cannot charge more than RM500

The National House Buyers Association (HBA) would like to thank PEMUDAH helmed by YB Menteri (Economic) Dato Seri Mustapa Mohamed and co-chair YBhg Dato Dr Ir Andy Seo for the excellent decision on 26.9.2022 for MDI to rein in private liquidators, especially those agents appointed by MDI – where henceforth, the fees charged to homebuyers shall be pegged at RM500 for functions that relate to undertaking the ‘last mile’. The appointed agents are, however, allowed to charge additional charges and expenses for costs incurred. For example, in situations where the master title/s has been lost, lodgement of a police report, making of statutory declaration for replacement of title/s and application for its new issuance and whatever related to it.  Such additional charges must be reasonable and transparent. This is in line with MDI’s current fee and expenses of RM500 being the Liquidator’s fees or Gaji Pelikuidasi.

Hence, we hope all agents/ liquidators comply with MDI’s decisions, in collaboration with PEMUDAH. It all boils down to strict compliance now. Agents/ Liquidators who are unable to apprehend and embrace the task at that pricing should gracefully decline the appointment.

READ: What homebuyers should know about private liquidators who take over from a wound-up developer?

Suggestions for improvement from HBA

© carballo/ 123RF

Despite this much-awaited step forward in ensuring fairness to the hapless house buyers, HBA notes that further improvements could and should be undertaken by the government, namely to the new pegged fee of RM500 should not only take effect prospectively but retroactively (but not to the extent of making the liquidators refund any overcharged fees).

We have put forth certain additions to the government policy pertaining to the liquidator’s fee in order to ensure fairness to all affected house buyers to prevent such extortion-like practices in the future.

1. The proposed RM500 capping on the fee should also be applicable to title deeds already being applied, submitted and/or being processed at the Land Office for issuance

This is in line with the policy of “vacant possession simultaneously with strata title” (VPST) that has been stipulated since June 1, 2015, as per the amendments to the Housing Development (Control & Licensing) Regulations.

There have been enough cases of distressful consequences experienced by property owners when their developers have deliberately failed, neglected or refused to apply for and transfer the strata titles to purchasers, even when the latter have paid in full. The VPST was the mechanism to close the floodgate to avoid developers shunning their obligations. It was serious enough for the government to enact new statutory provisions, amend existing ambiguous laws (to plug the loopholes) and repeal redundant sections of the Act to achieve this much-needed transformation.

2. To insert the word “reasonable” into the phrase “additional charges/costs/other expenditures” that liquidators are allowed to impose for difficult cases.

There are instances, where the master titles are misplaced and cannot be found whereupon the agents have to lodge police reports and formal applications to the Land Office for replacements.

In such situations, HBA agrees the MDI- appointed liquidator is allowed to charge additional fees, costs or miscellaneous expenses at a reasonable rate to be certified by the MDI as necessary work and not at a percentage of the market value of the house, left to the absolute discretion of the liquidator. This loophole should also not be a backdoor for the said liquidator to continue the extortion-like practice of imposing the liquidator’s legal fees on the house buyer.

3. The fee of RM500 should also be applied retrospectively to existing cases and not just to future appointments of liquidators

This is based on the grounds that the liquidators have been illegally imposing the percentage fees on house buyers and this illegal practice should not be condoned further by the government.

Although MDI reasoned that the buyers have signed written contracts with the respective liquidators and they cannot renege on the deals, HBA would like to point out that normally, contracts are drafted with an exit clause or material-change-of-event clause to cater for change of administrative practices and amendments to existing policies. The contract needs to be relooked at for its full effects and entitlements. HBA is confident that MDI would have adopted this prudent contractual practice when entering into contracts with the liquidators. Hence HBA urges MDI to review its contracts with the appointed liquidators to ensure the government’s policy is applied across the board to all present and future liquidators.

HBA sincerely hopes the government will expeditiously honour its commitment to look into these additional proposals of the HBA as there are still hundreds of affected house buyers who are held at ransom by unscrupulous and avaricious liquidators.

Liquidators not appointed as Agents by MDI must be regulated under HDA (Act 118)

HBA has repeatedly reminded the housing minister and those under the ministry’s charge of the need to ‘rein in the conduct of those so-called court-appointed officers, namely liquidators. This is legally possible as the definition of a housing developer and a licensed housing developer under the Housing Development (Control & Licensing), 1966 (referred to as Act 118) does include a liquidator. Therefore a liquidator is already a “de facto developer” under Act 118 since the amendment of the definition years ago. With this, the housing ministry should not use “lack of mechanism” as an excuse for not regulating liquidators.

The National Housing Department or Jabatan Perumahan Negara (JPN) under the patronage of the Ministry of Housing & Local Government have also received numerous complaints against errant liquidators, receivers and managers (R&M) and judicial managers.

JPN has assured HBA that a new set of regulations will be formulated to cover the scope, role and remuneration scale. The aim is to regulate the conduct of liquidators, judicial managers and R&M with an emphasis on curbing dysfunctional acts, penalties for non-compliance, investigation, enquiries and criminal prosecution, among others.

It is clear under Act 118 that the liquidator can play an important role. As we have stated, Act 118 was amended to include a liquidator in the definition of a housing developer in the event the housing developer goes bankrupt. The underlying rationale is for liquidators to attempt a revival of the abandoned project within the legal provisions stated in Act 118 and its regulations to protect the interests of the purchasers. Nonetheless, we may require further legislation to clarify the duties and powers of the liquidator under Act 118.

This article is written by Datuk Chang Kim Loong, honorary Sec-Gen of the National House Buyers Association (HBA) which is a voluntary non-government and not-for-profit Organisation manned wholly by volunteers.

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