01/12/2003 Malaysian Business-Housing & Property
By National House Buyers Association of Malaysia
What happens when your house is
uncompleted and what you can do about it
When Mohamad Sukran bought a a RM112,00
single-storey house in October 1997 after scrutinising the show unit at a property
launch, he happily thought he had fulfilled his duty as the man of the 'house'.
His wife had just two months earlier given birth to twins.
According to his sale and purchase
agreement (SPA), his house should be completed in 24 months, that is, by October
1999. However, to date, the project is only 45% completed, and his letters to
the developer give him no indication as to when the project can be handed over.
In the meantime, he is renting a small apartment and paying a monthly rental
of RM800. He now has another child, making the apartment too small for his family.
'Every time I contact the developer's
office, they promise to complete the project, but up till now, nothing has been
done, whereas other projects by the developer has been completed with keys handed
over, says Mohamad. 'My request to substitute another house in the completed
project was not entertained. Please advise me on how to get help.'
This is the dark side of housing
development. What happened to Mohamad and many other property buyers is one
of the worst nightmares in buying 'off-plan' which is the delivery system in
Malaysia on purchase of new property. Projects are abandoned all over the country.
In all the buyers' predicament we
have heard or read about, there is a constant theme: no communication from the
developer or authorities. When the developer reneges, the result is untold aggravation,
despair and, often, financial hardship.
Under the stipulated SPA (Housing
Development (Control & Licensing) Regulations, 1989, there is no provision for
purchasers of abandoned projects except on late-delivery claims. This is no
consolation to house buyers as claiming for late delivery is another legal tussle.
A delay of a few months is acceptable and easier to handle by both vendors and
purchasers but there is no legitimate excuse for being years late in delivering
a home. House buyers are left at the mercy of the developers.
There are several explanations on
this sad situation. First, anyone can call himself a housing developer and build
homes for sale - the required licensing is no test for competency, financial
solvency or even literacy. If the developer is incompetent, there is no one
to stop him or make him correct the mistakes made.
Second, many developers are under
capitalised. The economic slowdown affects them, as seen from the frequent excuses
given by such errant developers. When legally challenged, they can always file
for bankruptcy or court protection.
Ministry of Housing & Local Government's
role in reviving stranded housing projects
From the information
retrieved from the Ministry's website (www.kpkt.gov.my/artikel/perumahan/menu.html),
abandoned housing projects are defined as:
All work at site has ceased for
at least six months or work has yet to completed after the scheduled date
of completion as stated in the SPA;
The developer admits to his inability
to complete the project; and
The Ministry feels that the developer
cannot fulfil his obligations as a developer.
After the Ministry has identified
the uncompleted or delayed projects, it begins to gather details on these proejcts
before identifying the parties that can revive them. This is usually done with
the help of the original developer, a new developer, the financier of the project
or the house buyers' action committee.
Nevertheless, the Ministry has its
share of problems in its revival and rehabilitation efforts, such as:
The number of house buyers is too
Foundation work has not begun or
is still in its infancy stage;
The original developer has wound
up his business and the financiers of the projects have up the land up for
auction. In this case, the new developer taking over the projects has to start
the process all over again, including issuing new SPAs;
Parties with vested interests such
as the landowner, developer, creditors and buyers often do not want any negotiations
and prefer to settle the matter in court.
What buyers can do
For unfortunate buyers of uncompleted
projects from licensed housing developers our advice is to form an organised
group to liaise with the Ministry of Housing & Local Government for action to
be taken. We, at HBA, have assisted numerous groups, and you may visit our website
or attend our "Meet the Public Sessions" on Saturdays. However, you have to
be open minded and work hard as an action group to see progress.