Strict enforcement against errant developers is essential

ESSENTIAL CHANGES: In Part 3, we reproduce Proposals No: 5 to 8 of the HBA’s Memorandum to Parliament on amendments to the Housing Development (Control & Licensing) Act, 1966

5: 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 although they assumed the affairs of a de facto developer. Their unbecoming conduct had to be curbed so that the legal obligations of the wound-up developer will be fulfilled by the liquidators. Currently, such wayward liquidators place great emphasis on the fact that they are regulated by the Companies Act and refuse to abide by the directives of the Controller of Housing.

Such conduct causes housing problems to turn uglier and house buyers being left in a financial quagmire because the liquidators stubbornly act as they deem fit according to their whims and fancies under the Companies Act, ignoring the plight of house buyers and their rights under the Act. 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.

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

The current situation is that wayward liquidators refuse to recognise the housing legislation and conduct the liquidation process of the housing developer in ways contrary to the spirit of the housing legislation. In this light, the amendment is essential.

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 developer. Perhaps, this point could be brought to Parliament for clarification.

Our suggestion is to add the words ‘receivers and managers or receiver’ in between the words ‘the’ and ‘provisional’. This will effectively cover everybody who takes over the housing development.

6: Criminals – ‘New’ and ‘Old’: The amendments do not have retrospective effect. They apply only to new housing projects.

If the amendments were retrospective, the number of developers who would be caught by them and face criminal prosecution would expectedly be high. Consequently, this may cause 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 the purchase 1966money to the house buyers. 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 project prior to the Bill must be seen to be done and publicised. These efforts would complement the new amendments in that they 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.

7: Unlicensed Developer: It has been reported that there are 195 housing projects that are unlicensed and thus ‘illegal’. The Minister must explain to this August House as to what has happened that allowed such ‘illegal’ activities to have thrived. Are those perpetrators being prosecuted and their directors brought to Court to face the laws and the punishment?

If so, please identify to this August House all parties involved including the names of developers, project names, and the names of the architects, engineers and lawyers abetting them. Identify those banks/financial institutions and development financial institutions who are involved in either bridging or end-financing loan facilities.

What is the Minister of Finance doing about it and why isn’t Bank Negara Malaysia aware of such blatant disregard of the banking laws? How could banks finance illegal projects without land conversion, lay-out and building plans approvals, developer’s license, advertisement and sales permits, non-standard sale & purchase agreement and et cetera. The Rakyat suffers when enforcement is lacking and lax.

8: Penalties: The doubling of the fines and punishment would surely send frequent wrongdoers thinking twice and thrice before they embark on their wayward ways provided that the wrongdoers are brought to book. Failure to do so would be a contempt of Parliament.

Conclusion: Our comments aforesaid are supplementary to our stand that no amount of law will be able to eliminate or solve the problems unless they are strictly enforced. As the saying goes, ‘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 issue of ‘safety nets’ that are legislated to protect house buyers. The Housing Development Project Account (HD Acc) must be foolproof because nearly all the existing abandoned housing projects either have no money or have meagre sums in their HD Acc.

Monies have been ‘skimmed’ out from the HD Acc. and measures have to be made to address this ‘leakage’. To pre-empt developers from resorting to their wayward ways, the Government should seek out feedbacks, 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.

We beseech your Government to carry out the Build-Then-Sell concept without delay for the safety of future house purchasers. This is in fact an imperative given that the abandoned houses phenomenon is growing rapidly. Some information on the extent of the problem is stated herein.

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 who are not able to enjoy the prosperity that years of development policies should have given them.

Note: HBA is part of the drafting team that made amendments to the current legislation. Most of its recommendations have been accepted, according to Chang Kim Loong, Secretary-General of the HBA.

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
Email: info@hba.org.my
Web Site: www.hba.org.my

 

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