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Page 11
 
 
 
 
 
 
 

WHY CAN'T HOUSES  be built and sold like motor cars? 

Instead we continue to let  the buyer instalment finance the developer, although on paper the developer is ostensibly a contractor hired by the buyer and over  whom he has no control 

And RM100,000 is all you need to be a housing developer; you simply deposit the money with the Ministry; or better still you can set up a company with only RM250,000 as paid up capital. Astonishing but true. Sharebrokers must be worth millions before they can trade; yet a giant housing project can be advertised by such puny individuals and companies. It is a scandal that despite many collapsed projects the law governing housing development has not essentially been changed since 1966

The Consumer Association of Penang (CAP) has proposed a compromise formula to modify the Build - Then Sell idea , first mooted by  a former minister. The system of progress payments  should be abolished. Instead, buyers should only pay 10% down and the balance upon delivery.  The merit of this proposal is that the buyer can see for himself whether the unit is up to quality and whether the facilities suit him or her. Once satisfied the buyer arranges for a bank loan. CAP says that this new regime will eliminate the fly by night operator, the runaway developer who abandons the project, and the careless architect. 

Until that fundamental change is made CAP has proposed some amendments  to the Housing Developers (Control and Lincensing ) Act 1966 (Act 118) and Regulations 1989 and 1991 (Act 118 Regulations). We give a summary  below together with comments from lawyers LKC and LK in brackets.:

     A Certificate is when the architect or engineer has certified the completion of the building according to the bylaws and conditions imposed by the local authority, after all essential services including access roads, car parks, sanitary, water and electricity installation are complete
 
 

Delays in applying for CFO

Penalties should be imposed on developer who faisl to apply for CFOs.  Exceptions should be allowed only where circumstances are beyond the control of the developer

Penalties are meaningless without suspension of the licence

Changes to the plan should only be permitted where demanded by local authority, but certainly not at the whim and fancy of the developer

[LK comments:  The other problem is that many large developers put out that the project belongs to them, when in fact the project is actually under an independent company and when things go wrong they hide behind the corporate veil of the other company].

Duration of licences

Developers should be compelled to advertise the dates of the expiry of their  licence permits to advertise
 

Architects and engineers

There is no provision for punishment of engineers and architects who falsely certify completion of works. The present Regulation 13 is vague. CAP proposes imposition of a fine or jail term

Under the present Regulation, where the developer fails to obtain a loan on behalf of the buyer the the buyer has to pay interest on delayed payments. Amendments should be made to give time to the buyer to obtain a loan himself. It is only after a grace period that  interest may be imposed on late payments

   (2) Clauses 8 provides that in case of late payments of instalments the buyer pays interest. CAP  proposes that interest may only be imposed if it was the fault of the buyer

Termination of agreement

(1)  Clause 9 provides for termination of the contract by the developer in certain circumstances. CAP requires that the termination may only be made of the developer can show that the failure was the fault of the buyer

(2)  The law does not provide for the buyer with the right to terminate the contract. CAP proposes certain conditions whereby the buyer may terminate the contract and have back all his moneys. 

Size of area

At present there is an adjustment of payments based on area shown in the final plan. CAP proposes a maximum of 1% of the purchase price as the limit on adjustments but no reasons are given

[LKC comments: It is difficult to understand why our Parliament decided to make the buyer pay for what are called outgoings before he owns the property.  For decades starting from the time sales agreements were drawn up by lawyers in the Straits Settlements, the buyer only paid for outgoings when he was let into possession. This fair dealing is abandoned in the Housing Developers law]

Vacant possession

(1) When should damages be imposed on the developer where he delays completion within the time agreed? CAP says that the present Clause 20(2) fails to state the time limit. Time should be run from date of delivery under clause 20(1) to the date of actual delivery

(2) Delivery of possession. CAP says Clause 21 is unsatisfactory. To avoid bogus applications to the authorities CAP proposes the developer must show  "a complete application inclusive of approvals from the relevant departments," approvals being the thing
 

Defects liability period

The present law says that 18 months is the limit for complaints about defects. CAP says it should be 24 months
 

Stakeholder

CAP wants the stakeholder to be named
 

[LKC comments: The regulations provide that every contract of sale ...  be in the prescribed form, and that no amendment ... shall be made  without prior approval. Penalties are imposed for transgressions

[I think that the regulations clearly make so called supplementary agreements illegal, such as say those providing for more collections and the "sinking fund" The question is one of enforcement of the regulations. Something must be done to protect the buyer who is unaware of the law and tends to signs whatever papers are put before him]

[LK comments:  Rule 11(2) of the Housing Developers (Control and Licensing) Regulations 1989 provides: "No housing developer shall collect any payment by whatever name called except as prescribed in Schedule H". I think collection of  the 'sinking fund' is therefore unlawful. The problem is again with enforcement of the law than the law itself.]

[LKC comments: Despite the regulations some developers bind the buyers to pay them one per cent of the sale price when requested to note that they have sold their paper rights to the unit to another person. This is clearly unlawful; besides the developer is not a registered broker and is not entitled to "brokerage". And it is clearly unconscionable considering it only costs a few dollars to register the transfer of a motor vehicle at the JPJ or to file some form at the Registrar of Companies]

Service charges

Clause 16 does not give guidelines. CAP says  the Controller should be empowered to oversee the service charges and the developer should give a complete statement of all services and charges to be charged and proof of same.  Controller should be able to require details and a mechanism set tp for approval revision and denying of charges #