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Stranded ...
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.

 

Protection

 

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.

 

Explanation

 

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 low;

  • 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.

 

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