Making of the Housing Development Act
09/02/2002 NST-PROP By Shamsulbahri bin Ibrahim; Roger Tan Kor
One of the first things Datuk Seri Ong Ka Ting did when he became the Minister
of Housing and Local Government was to spearhead his ministry’s Steering Committee
on Legislative Drafting (“the Committee”) to re-look at the provisions of
the Housing Developers (Control and Licensing) Act 1966 (“the principal Act”)
and propose the necessary amendments to it. The last time the principal Act
was amended was in 1988. It was also amended in1972, revised in 1973 and further
amended in 1977.
The Committee met for the first time on 29 February 2000, and sat through
over the next 8 months in a series of meetings to deal with the many amendments
proposed by various parties. Deputy Minister Datuk Peter Chin also chaired
a number of meetings. The Real Estate and Housing Developers Association (“REHDA”)
was strongly represented with its President, Dato’ Eddy Chen Lok Loi, Deputy
President Tan Teng Boon and Executive Secretary Ms Ng Kuai Heng present in
almost all the meetings. Likewise, the consumer groups, Federation of Malaysian
Consumers Associations (“FOMCA”), Consumer Association of Penang (“CAP”) and
Consumer Associations of Selangor and Federal Territory sent their senior
office-bearers. Other members of the Committee are representatives from the
Ministry of Domestic Trade and Consumer Affairs, Department of the Director
General of Lands and Mines, Malaysian Institute of Architects, Association
of Consulting Engineers Malaysia, Master Builders Association Malaysia and
Construction Industrial Development Board; Controller of Housing together
with Shamsulbahi bin Ibrahim, the legal adviser of the Ministry of Housing
and Local Government and his senior officers, Prof. Salleh Buang, lawyers
Teh Sek Hock, Toong Gek Foong, S.Y. Kok and Roger Tan. Views from the Bank
Negara Malaysia, Association of Banks Malaysia, Koperasi CUEPACS Berhad and
the Bar Council were also either sought or received from time to time.
The final draft was submitted to the Attorney General’s Chambers in early
2001 for approval and the Cabinet approved the final draft in September 2001.
The Housing Developers (Control and Licensing) (Amendment) Bill 2001 went
through the Houses of Parliament in October and received the Royal Assent
on 24 January 2002. It was gazetted on 31 January 2002 and will come into
operation on a date to be appointed by the minister by notification in the
Gazette (“the Appointed Date”).
This is a major revamp of the principal Act emphasizing on preventive measures,
better protection of purchasers as consumers in addition to enhancing the
authorities’ investigation and enforcement powers.
Ss 3 and 4 of the Housing Developers (Control and Licensing) Amendment Act
2001 (“the Amending Act”) change the title of the principal Act to Housing
Development (Control and Licensing) Act 1966 (“the Act”) so that it does not
give an impression that the Act is aimed only at the housing developers but
that the Act will have general application to the purchasers as well as the
The principal Act is now divided into 7 parts, namely:
Part I : Preliminary (ss 1- 4)
Part II : Licensing housing developers (ss 5 – 6B)
Part III : Duties of a licensed housing developer (ss 7 – 9)
Part IV : Investigation and Enforcement (ss 10 – 10J)
Part V : Powers of Minister (ss 11 – 16)
Part VI : Tribunal for Homebuyer Claims (ss 16A – 16AI)
Part VII : Miscellaneous (ss 17 – 24)
Application of the Act
S 6 of the Amending Act deletes s 2(1) of the principal Act. With the deletion,
no person or body in West Malaysia who is a housing developer is now exempted
from the application of the Act. Previously, co-operative societies, statutory
bodies and bodies and agencies under the control of the Federal Government
or any State Government were exempted from the principal Act.
S 35 of the Amending Act provides that any society, body or agency undertaking
or causing to be undertaken any housing development where housing accommodation
had not been offered for sale before the Appointed Date is required to apply
for a licence under the Act within six months from the Appointed Date and
pending the decision of the Controller of Housing on the application for such
a licence, such applicant shall be deemed to be a licensed housing developer
under the Act.
S 7 of the Amending Act amends the definitions of “bank”, “finance company”,
“housing accommodation”, “licensed housing developer”, “prescribed” and “purchaser”.
It also inserts new definitions of “certificate of fitness for occupation”,
“Deputy Controller”, “local authority”, “stakeholder” and “Tribunal”.
Perhaps the amendment to the definition “housing accommodation” requires a
word or two. The definition of “housing accommodation” now reads as (with
the inserted words in italics): ““housing accommodation” includes any building,
tenement or messuage which is wholly or principally constructed, adapted or
intended for human habitation or partly for human habitation and partly for
business premises but does not include an accommodation erected on any land
designated for or approved for commercial development;”. This is to clarify
that buildings erected on commercial land such as service apartments will
not be subject to the Act.
Appointment of Controller, Deputy Controller, Inspectors and other officers
S 8 of the Amending Act rewords s 4 of the principal Act to the effect that
a new office of the Deputy Controller of Housing is now created in order to
assist the Controller in the discharge of the latter’s duties under the Act
as currently the Controller is also the Secretary General of the Ministry.
The Minister may appoint such number of Deputy Controllers as he deems fit.
The Controller and the Deputy Controllers shall also have the same powers
conferred on an Inspector of Housing under the Act. The newly worded section
also allows the Controller to delegate any of his powers and functions under
the Act to any Deputy Controller, Inspector, officer or servant appointed
by the Minister including his powers and functions in respect of investigation
of offences under the Act to any public officer or officer of a local authority.
It is hoped that with the powers of investigation capable of being delegated
to government agencies and local authorities throughout West Malaysia, enforcement
of the provisions of the Act will be more effective and better monitored.
S 10 of the Amending Act inserts new subsections (4A) and (4B) into s 5 of
the principal Act which empower the Controller to collect fees payable on
the grant of a licence and at such intervals during its validity period and
that no application for a licence shall be considered unless such fees which
will be prescribed shall have been paid to the Controller.
Conditions or restrictions for the grant of a licence.
S 11 of the Amending Act has made some significant changes to s 6 of the principal
Act as follows:
Subject to the Minister waiving it, no licence shall be granted if:
(a) a corporate applicant for a licence does not now make a deposit with the
Controller a sum of not less than RM200,000 in cash or in such other form
as the Minister may determine.
(b) a person or body of persons applying for the licence fails to make a deposit
with the Controller an increased sum of RM200,000 from previously RM100,000.
(c) the applicant is a company, at the time of application:
i. any one who is convicted of an offence involving fraud or
dishonesty or who is an undischarged bankrupt is holding office as director,
manager or secretary of the applicant or other similar office or position;
ii. any director, manager or secretary of the applicant has due
to a conviction of an offence under the Act been fined for a sum exceeding
RM10,000 or has been imprisoned (other than imprisonment in default of a fine
not exceeding RM10,000); or
iii. any person who had been a director of or had been directly
concerned in the management of the business of a licensed housing developer
which has been wound up by a court is a director or is directly concerned
in the management of the business of the applicant;
(d) the applicant is a society, any one who is convicted of an offence involving
fraud or dishonesty or who is an undischarged bankrupt is holding office as
president, secretary or treasurer of the applicant or other similar office
or position at the time of application.
(e) the applicant is a body of persons or firm, at the time of application
the applicant or any member or partner of the applicant has due to a conviction
of an offence under the Act been fined for a sum exceeding RM10,000 or has
been imprisoned (other than imprisonment in default of a fine not exceeding
(f) the registration of the applicant's architect or engineer has been cancelled
and has not been reinstated at the time the application is made.
For the purposes of sub-paragraph (c) above, the expression of “applicant”
shall include the holding company of the applicant or a subsidiary of the
applicant or a subsidiary of the holding company of the applicant.
New ss 6A and 6B have also been inserted to the effect that subject to the
direction of the Minister, the deposits referred to sub-paragraphs (a) and
(b) above shall be kept by the Controller until the expiry of the defects
liability period of the housing development. The Controller may after having
given the licensed housing developer an opportunity to be heard, forfeit the
whole or a part of the deposits if the licensed housing developer:
(a) is carrying on his business in the opinion of the Controller in a manner
detrimental to the interest of the purchasers or public;
(b) has insufficient assets to cover his liabilities;
(c) is contravening any provision of the Act; or
(d) has ceased to carry on housing development in West Malaysia.
Duties of a licensed housing developer
S 7 of the principal Act has been amended to require a licensed housing developer
to exhibit at all times in a conspicuous position in any office and branch
office of the licensed housing developer a copy of his licence, advertisement
and sale permit.
A licensed housing developer is also required to report to the Controller
not later than the 21st day of January and the 21st day of July of each year
on the progress of the housing development in such form as the Controller
may determine from time to time and to inform the Controller if the licensed
housing developer considers that he is likely to become unable to meet his
obligations to the purchasers at any stage of development before the issuance
of the certificate of fitness for occupation (“CFO”). This provision will
help the Ministry monitor the progress of every housing development and to
take necessary action to ensure that such housing development is eventually
In the meantime, the time for the licensed housing developer to submit its
audited report to the Controller has now been extended to 6 months from 3
months previously after the close of its financial year.
4 new sub-sections have also been inserted into s 7 of the principal Act,
namely requiring the licensed housing developer to:
* inform the Controller of the handing over of vacant possession of the housing
accommodation to the purchasers and submit a certified true copy of his architect’s
certificate certifying that the construction of the housing accommodation
has been duly completed and that water and electricity supplies are ready
for connection to the housing accommodation.
This provision will allow the Ministry to monitor the progress of handing
over of vacant possession in accordance with the Uniform Building By-Laws.
* inform the Controller if the appropriate authority has refused to accept
the submission of any document relating to the issuance of certificate of
fitness for occupation and submit the refusal letter from the appropriate
authority to the Controller.
This provision will enable the Controller to undertake the necessary investigation
to ascertain the reason why the particular local authority has refused to
issue or withheld the issuance of the CFO so that the Controller can take
the matter up administratively with the relevant local authority.
* ensure that the development of the housing accommodation has been carried
out in accordance with any requirements prescribed under any law regulating
buildings and has exercised all such diligence as may be required for the
issuance of the CFO and for the issuance and transfer of the titles to the
housing accommodation to the purchasers.
This is to impose on the licensed housing developer a statutory duty to ensure
that he shall fulfil all his duties and responsibilities as set out in the
* inform the Controller of the progress in the issuance of a separate or strata
title for the housing accommodation and the transfer of the said titles to
This provision will help the Controller monitor the progress in this area
which remains a problem particularly with sub-divided buildings.
Moneys held by stakeholder
This is the final 5% of the purchase price held by a solicitor as a stakeholder
to be released to the licensed housing developer pursuant to the sale and
purchase agreements (“SPAs”) which currently state that 2.5% thereof is to
be released 6 months after handing over of vacant possession and the balance
18 months after the handing over of vacant possession unless there are defects
in the subject property within these periods.
S7A of the principal Act is now amended to give to the stakeholder’s moneys
similar protection as the moneys held in a housing development account so
that in the event the licensed housing developer should be declared a bankrupt
or if it is a company, liquidated, the stakeholder’s moneys shall not be deemed
to be part of the property of the licensed housing developer and therefore
beyond the reach of his creditors. The stakeholder’s moneys then vest in the
official receiver or trustee in bankruptcy, as the case may be, to be applied
in accordance with the provisions of the SPAs. Further, the stakeholder’s
moneys shall not be garnished until all the liabilities and obligations of
the licensed housing developer under the SPAs have been discharged and fulfilled.
Sub-section (9) of S 7A has been amended to make it clear that the obligation
of a licensed housing developer to open and maintain a housing development
account will subsist so long as any sale and purchase of the property shall
take place before the issuance of CFO.
New s 7B – “Licensed housing developer”
Under the new s 7B, the expression “licensed housing developer” as referred
to ss 8, 8A, 11 and 12 shall mean to include any housing developer whose licence
S 8 of the principal Act as amended provides that where a licensed housing
developer proposes to enter into an arrangement or agreement to sell, transfer,
assign, dispose of or reconstruct his business relating to housing development
either by amalgamation or otherwise, the licensed housing developer is required
to seek the prior approval of the Controller.
S 8A is a new section on statutory termination of SPAs. S 11 confers powers
on the Minister to give directions for the purpose of safe-guarding the interests
of purchasers. S 12 confers on the Minister to give general directions as
he deems fit and proper for the purpose of ensuring compliance with the Act.
Hence, under the new s 7B, a licensed housing developer whose licence has
expired will still be caught by the provisions of ss 8, 8A, 11 and 12 and
are required to comply with the same. As what the Minister told the Dewan
Rakyat when tabling the amending Bill, the housing developers could not now
deliberately not renew their licences in order to “escape” from their obligations
under the Act. They are still required to seek the approval of the Controller
for any sale or merger of projects even though their licences may have expired.
New s 8A - Statutory Termination of SPAs
This new section proposed by REHDA is intended to permit termination of all
the SPAs when it is clear that the licensed housing developer is unable to
proceed with the housing development or any phase thereof especially during
an economic downturn. If both the licensed housing developers and most of
the purchasers agree to terminate their SPAs and therefore cease the construction
of the housing development or any phase thereof, it is in the mutual interest
of the parties to ensure this intention is carried out expeditiously without
the fear of being sued by the remaining purchasers.
However, strict conditions apply before this new section can be invoked by
the parties which are as follows:
* the approval of the Minister is required;
* the development has not commenced 6 months after the execution of the SPAs;
* at least 75% of all the purchasers who have entered into the SPAs have agreed
with the housing developer in writing to terminate the SPAs and each of their
written consent shall have been duly executed and witnessed by their solicitors
or a Commissioner for Oaths. For this purpose, joint purchasers irrespective
of any number shall be considered as one purchaser.
In determining any such application for approval, the Minister may require
such other documents or evidence as the Minister may determine including such
evidence which may satisfy him that the licensed housing developer is financially
capable of refunding to the purchasers and their financiers all the moneys
paid by them to the licensed housing developer if the Minister approves such
application. When giving his approval, the Minister may impose such conditions
as he may deem fit and proper.
If the Minister approves the application, the following shall apply:
* the decision of the Minister shall be final and shall not be questioned
in any court and it shall be binding on the licensed housing developer and
all the purchasers and no injunction shall be granted to restrain any person
from carrying out the decision of the Minister.
* all the SPAs including that of the remaining purchasers who have not agreed
to the termination shall be deemed to have been duly terminated.
* the licensed housing developer shall within 14 days from the date of receipt
of the Minister’s approval inform all the purchasers in writing of the Minister’s
* the licensed housing developer shall refund fully all moneys received by
the licensed housing developer from the respective purchasers free of any
interest within the period stated in the Minister’s approval.
* upon full receipt of the aforesaid refund, the purchasers shall forthwith
cause all encumbrances on the land to be removed and the cost and expense
for such removal shall be borne by and may be claimed as a civil debt from
the housing developer.
The penalty for non-compliance with this section is a fine not exceeding RM50,000
and to a further fine not exceeding RM5,000 for every day during which the
offence continues after conviction.
Powers of Investigation and Enforcement
Under the principal Act, the powers of investigation of the Controller or
an Inspector are wholly inadequate. S 10(1) empowers the Controller or an
Inspector to investigate from time to time under conditions of secrecy into
the affairs of or into the accounting or other records of any housing developer
and S 10(3) of the principal Act gives the Controller or an Inspector the
right of access at all times to the accounting and other records of the housing
developer or to require any person to provide such explanation or information
as he may desire. As the Controller and the Inspectors do not have the powers
to enter, search, seize and arrest, the Controller and the Inspectors are
powerless as many a time evidence is destroyed before the Ministry could even
act on an errant housing developer.
The Amending Act deletes s 10(3) of the principal Act and inserts 10 new sections
(ss 10A – 10J) to enhance the investigation and enforcement powers of the
Controller and the Inspectors. The new sections are grouped together with
s 10 under Part IV. However, in order to prevent any abuse of power by any
Inspector, the new ss 10I and 10J provide that no Inspector shall be entitled
to exercise any of the powers under Part IV without the prior authorisation
of the Controller and if asked, the Inspector is required to produce such
written authorization from the Controller.
The new s 10A provides that an Inspector may with a warrant of search issued
by a magistrate at any time day or night with or without police assistance
enter into any premises and search the premises and any person therein and
seize or detain any property or document. If it is necessary, an Inspector
may break open any outer or inner door of such premises and enter thereinto.
The magistrate may issue the warrant if there is reasonable cause to believe
that any premises have been used for or there is on any premises evidence
necessary to establish the commission of an offence under the Act. However,
if an Inspector has reasonable cause to suspect that by reason of delay in
obtaining a search warrant, the investigation would be adversely affected
or evidence of the commission of an offence is likely to be tampered with,
removed, damaged or destroyed, the Inspector may enter the premises and exercise
all those powers as if he were authorized to do so by a warrant of search.
Having said that, the Inspector must still have obtained the prior authorisation
of the Controller as required under the new s 10J. The other sub-sections
of s 10A provide for the preparation of a search list and set down the procedure
to be followed for the release of properties seized.
The new s 10B entitled “Search of Person” deals with a body search and a person
may be detained for such period as may be necessary to have the search carried
out which shall not exceed 24 hours without the authorisation of the magistrate.
No female person shall be searched except by a female Inspector. The new s10C
prohibits anyone from obstructing an Inspector in various specified ways from
exercising his powers of entry, search, seizure and detention. The new s 10D
empowers an Inspector to require the translation to be done by the person
possessing any book or document which is not in Bahasa Malaysia or English
into Bahasa Malaysia.
Under the new s 10E entitled “Power to examine persons”, if an Inspector suspects
any person to have committed an offence under the Act, he may order a person
to be examined orally in relation to any matter or order the person to produce
any book, document or thing which may assist in the investigation into the
offence or by written notice require the person to furnish a statement in
writing made on oath or affirmation providing information which may assist
in the investigation. The section also sets out the procedure of carrying
out the examination in addition to empowering the Inspector to seize any property
produced before him or use any record of an examination for the purposes of
prosecuting the accused person or another person whether under the Act or
any other written law.
The new s 10F authorises an Inspector to carry out investigation on any past
or present business associate or any person who is or who was concerned in
the control or management of the affairs of the suspected offender. The new
s 10G provides for another method of investigation to be conducted by a police
or public officer in which case the Controller and the Inspector shall render
the necessary assistance to the police or public officer. The new s 10H protects
any informer in any civil or criminal proceedings unless in a trial for any
offence under the Act, the court believes that the informer willfully made
a false statement or in any other proceeding the court feels that justice
requires the disclosure of the informer.
Powers of the Minister
S 11 of the principal Act empowers the Minister to give various directions
to safeguard the interests of the purchasers if the Controller is informed
or is of the opinion that a licensed housing developer is unable to meet his
obligations to his purchasers or is about to suspend his building operations
or is carrying on his business in a manner detrimental to the interests of
his purchasers. A new sub-section (ca) has been incorporated into sub-section
11(1) to empower the Minister to certify that the licensed housing developer
has abandoned the housing development. This may be necessary so that such
housing developer may then avail himself to the various schemes introduced
by the Government for the revival or restoration of abandoned projects.
S 11 currently empowers the Minister to:
* direct the licensed housing developer to take such steps as he may consider
necessary to rectify any matter or circumstance;
* direct that a person be appointed or himself appoint a person to advise
the licensed housing developer in the conduct of his business;
* with the concurrence of the Minister of Finance direct a company to assume
control and carry on the business of the housing developer upon such terms
and conditions as the Minister may determine;
* direct that the licensed housing developer present a petition to the High
Court for the winding up of his business; or
* take such action as the Minister may consider necessary in the circumstances
of the case for carrying into effect the provisions of the Act.
However, the Ministry has advised that these provisions are difficult to implement
because in order to do so, the Ministry may have to meet all the costs and
expenses arising therefrom including that of professional advisers and the
parties coming in to rescue the projects which may sometimes run into thousands
of ringgit. A new sub-section (1A) is therefore inserted into s 11 to allow
the Minister to specify that any cost and expense reasonably incurred by such
persons in carrying out such direction or decision of the Minister to be paid
from the housing development account or from moneys due to the account. An
amendment has also been made to S11(2) that every such direction of the Minister
shall be binding also on the purchasers.
Controller to report the conduct of an architect or engineer
Under the new s 13A, the Controller may report the conduct of an architect
or engineer to his respective professional body if the Controller is satisfied
that the professional’s conduct has prejudiced the interest of the purchasers.
This new provision serves as a warning to any errant architect or engineer
who acts unprofessionally in certifying the completion of the various stages
of the housing development.
Transfer or assignment of a licence
A new s 13B has also been inserted into the principal Act to prohibit any
transfer or assignment of any licence or any right attached thereto and such
transfer and assignment shall be void.
Public Servants and Application of Public Authorities Protection Act 1948
A new s 22A now deems the Controller, every Deputy Controller, every Inspector
and all members and officers of the Tribunal to be a public servant for the
purposes of the Penal Code and a public officer for the purposes of the Criminal
The new s 22B is interesting as it provides that the Public Authorities Protection
Act 1948 shall apply to any action, suit, prosecution or proceedings against
the Minister, Controller, any Deputy Controller, or any Inspector, the Tribunal
or any member or officer of the Tribunal in respect of any act, neglect or
default done or committed by him in such capacity. This means that any such
suit, action, prosecution or proceeding has to be instituted within 36 months
after the act, neglect and default complained of. If the plaintiff later loses
his case, he will have to pay costs taxed on a solicitor and client basis.
Right to initiate and maintain actions.
The new s 22C is a very important provision. It provides as follows:
“Notwithstanding anything contained in any written law or any rule of law,
a homebuyer as defined in section 16A shall be entitled on his own volition
and in his own name to initiate, commence, institute and maintain at any court
or tribunal any action, suit or proceeding against a housing developer or
any other person in respect of any matter arising out of the sale and purchase
agreement entered into between the purchaser and that housing developer unless
a contrary intention is expressed in any agreement, assignment or charge between
the homebuyer and his financier in which case the prior written consent of
his financier must first be obtained before he exercises any of his rights
under this section.”
Since the 1984 decision of the Federal Court in Nouvau Mont Dor (M) Sdn
Bhd v Faber Development Sdn Bhd (1984 2 MLJ 268), a person who has bought
a property without title from a housing developer and thereafter assigned
his contractual rights in a SPA to his financiers usually by way of a loan
agreement cum assignment as security for a loan granted to him finds himself
incompetent to found and maintain an action in his own name against any person
particularly the housing developer where there is a dispute over the property.
The Federal Court in the 1984 case which was later followed by the Supreme
Court in Hipparion (M) Sdn Bhd v Chung Khiaw Bank Ltd (1989 2 MLJ 149)
held that where the assignment is an absolute assignment not purporting to
be a charge only within the meaning of section 4(3) of the Civil Law Act 1956,
then the assignor purchaser is not entitled to sue the vendor in his own name
but the action should be brought by the assignee bank in its own name or by
the assignee bank in the name of the assignor. Of course, if the separate
title to the property is issued and transferred to the assignor, this problem
will not arise at all.
In the recent decision of the Kuala Lumpur High Court in Chan Min Swee
v Melawangi Sdn Bhd (2000 7 MLJ 111), the court held that even if the
assignment is not absolute, the assignor purchaser is still unable to sue
the developer without joining the assignee bank as a co-plaintiff or as a
defendant (if the assignee bank refuses) in the action. The court in that
case also held that the letter of consent drafted in qualified terms would
not give the assignor purchaser the locus standi to sue the developer.
The legal position is further complicated when various
High Court judges attempted to circumvent the superior courts’ decisions
Nouvau Mont Dor and Hipparion [see Loh Hoon Loi & Ors v Viewpoint
Properties (Sabah) Sdn Bhd (1995 4 MLJ 804); Max-Benefit Sdn Bhd v
Phuah Thean An & Anor (2001 1 MLJ 553) and Lim Hock Lai v Hwa Kwong
Development Sdn Bhd (2001 5 CLJ 515)]. However, our judicial system is
founded on the principle of stare decisis and the decision of Nouvau Mont
Dor by the Federal Court which stands at the apex of our judicial system
is still the law.
Therefore, this legal position is against the interest of the assignor purchaser
who now finds himself incompetent to file any action against the housing developer
without getting the assignee bank involved. The assignee bank also finds itself
inconvenienced by the persistent pleas of its borrower to file an action against
the housing developer over a dispute which is essentially between the borrower
and the housing developer and if the assignee bank should refuse, the assignor
purchaser may also hold the assignee bank to be in breach of a duty to him
to preserve the property.
The new s 22C is therefore timely as it seeks to protect those purchasers
who have entered into a SPA with a housing developer as the phrase “homebuyer”
as defined in the new s 16A includes a purchaser who has a dealing with a
licensed housing developer. This new s22C will not protect the other purchasers
such as purchasers of commercial properties or purchasers who have bought
a property from someone who is not a housing developer.
S32(2) of the Amending Act gives retrospective effect to the new s 22C in
that it applies to every agreement, assignment or charge lawfully entered
into between a purchaser and his financier before the Appointed Date.
The new s 22C which is a “legislative intervention” to protect the interest
of the purchasers applies “notwithstanding anything contained in any written
law or any rule of law.” It follows the provisions of section 4(3) of he Civil
Law Act 1956 and Nouvau Mont Dor and Hipparion decisions will now have no
application to such purchasers. However, the new s 22C also takes into account
the interest of the financiers who will have a say in the manner in which
any action is being brought against a housing developer so that the security
over the loan is not in any wise prejudiced.
It is expected that all loan and security documents between the assignor purchaser
and the assignee bank will now include a clause requiring the purchaser to
obtain the written consent of his financier before he commences any action
against a housing developer or any person. If the loan documents (including
an assignment by way of a charge) do not express the contrary intention or
have such a provision requiring the financier’s prior consent, then the purchaser
can proceed directly against the housing developer without the prior written
consent of his financier. If consent is required, all the purchaser need to
do when he commences any action against any person is to state or produce
the written consent of his financier in the writ or originating summons, as
the case may be. If the financier has given its consent, then the courts should
not still require the financier to be added as a party to the proceedings.
Of course, the financier can always withhold its consent if it desires to
be added as party to the action commenced by its borrower against the housing
Increase in Penalties and Power to Compound
The Amending Act has also increased the penalties for the following offences:
* the fine on conviction under s 7A with regard to the housing development
account is now increased from a sum of not less than RM10,000 to a sum of
not less than RM50,000 but which will not exceed RM500,000. The previous maximum
fine was RM100,000.
* any unlicensed housing developer or any unlicensed housing developer who
assumes or uses in relation to his business the words “housing developer”
or any licensed housing developer who fails to comply with any of the conditions
imposed on the licence will on conviction face a fine of not less than RM50,000
and not more than RM500,000. The previous minimum and maximum sums were RM10,000
and RM100,000 respectively.
* any housing developer who fails to perform his duties under s 7 or sells
or merges his business without the approval of the Controller under s 8 or
fails to comply with the Minister’s directions given under ss 11 and 12 including
failing to provide that Company directed by the Minister to take over the
housing developer with such facilities as the Controller may consider necessary
will on conviction be liable to a fine not exceeding RM50,000 and a further
daily fine of not exceeding RM5,000 if the offence is continued after conviction.
Previously, the amount was RM10,000 and the offender was liable to a fixed
daily fine of RM5,000.
* any one who continues to act as or hold office of a director, manager or
a secretary of a licensed housing developer after he has become a bankrupt
or suspended or compounded with his creditors or been convicted of an offence
involving dishonesty or fraud or any one who acts as or continues to act as
or hold office as a director or is directly concerned in the management of
the business of the licensed housing developer without the approval of the
Minister after that business of that licensed housing developer has been wound
up by the court will on conviction be liable to an increased fine of not exceeding
RM50,00 from the previous maximum sum of RM10,000.
* the maximum fine for offences where no penalty is expressly provided in
the Act will face an increased fine of not exceeding RM50,000 from the previous
maximum sum of RM10,000.
* any person who is a director, manager, secretary, agent, clerk or a servant
of a housing developer deemed to be guilty of an offence committed by a housing
developer will now on conviction face a fine of not exceeding RM50,000 from
the previous maximum sum of RM10,000.
The new s23A now empowers the Controller to compound any offence under the
Act or any regulation made thereunder. If the offence is compounded, no prosecution
shall thereafter be instituted as respects the compounded offence. S 24 of
the principal Act has also been amended to include more powers for the Minister
to make regulations, inter alia, to prescribe the fees payable under the Act
and prescribe offences which may be compounded and the method and procedure
for compounding such offences.
The Tribunal for Homebuyer Claims
The setting up of a tribunal to hear simple disputes between purchasers and
housing developers has been long awaited. S 25 of the Amending Act introduces
new Part VI comprising 35 sections dealing with the establishment of the tribunal
for homebuyer claims (“Tribunal”) and matters connected therewith. The new
Part VI is modelled upon the provisions of the Consumer Protection Act 1999
in relation to the Tribunal for Consumer Claims under that Act subject to
The main provisions about the Tribunal are as follows:
Jurisdiction of the Tribunal
The Tribunal is meant for homebuyers who have been defined to mean a purchaser
who has bought a property or has a dealing with a licensed housing developer
including the second purchaser who has bought the property from the first
purchaser. In other words, the Tribunal will not hear any third or subsequent
purchaser of the property.
The jurisdiction of the Tribunal is limited to hearing a claim not exceeding
RM25,000 unless the parties agree otherwise in writing. The claim must be
brought by a homebuyer no later than 12 months from the date of issuance of
the CFO for the property or the expiry date of the defects liability period
as set out in the SPA, whichever is the later. Any claim must arise out of
a sale and purchase agreement executed or a previous dealing between the purchaser
and the licensed housing developer occurring after the Appointed Date and
the writers understand this will be made clearer in the Tribunal regulations
that will follow.
The Tribunal will have no jurisdiction to hear any claim in respect of recovery
of land, or any estate or interest in land; the entitlement of any person
under a will or settlement, or on any intestacy; goodwill; any chose in action;
any trade secret or other intellectual property or any claim arising out from
personal injury or death. Neither will the Tribunal hear any claim if it arises
from a SPA or a dealing entered into between the homebuyer and an unlicensed
housing developer in which case the homebuyer may use the normal courts to
pursue the matter.
However, the Tribunal can still hear a claim even though there is no SPA entered
into between the parties if at the time when the cause of action accrues there
exists a previous dealing between the homebuyer and the licensed housing developer
in respect of an acquisition of the property. So, for example, if the purchaser
has signed any letter of offer or intent with a licensed housing developer,
he may bring the matter to the Tribunal.
In any event, the Tribunal should always attempt to assist the disputing parties
to negotiate for a settlement before the Tribunal proceeds to determine the
dispute unless it is not appropriate for the Tribunal to do so or the parties
are unable to reach an agreed settlement.
Membership of Tribunal.
The Tribunal shall comprise a Chairman and a Deputy Chairman appointed from
among members of the Judicial and Legal Service and not less than 5 members
who must be either serving in the Judicial and Legal Service or advocates
and solicitors of the High Court in Malaya who have practised for 7 years
or more. This allows the Minister to set up as many branches as possible throughout
West Malaysia to hear the disputes. The Chairman or Deputy Chairman or a member
of the Tribunal can sit alone to preside over any matter. All proceedings
of the Tribunal shall be open to the public.
Unlike the Tribunal for Consumer Claims where legal representation is absolutely
disallowed, lawyers are allowed in the Tribunal if in the opinion of the Tribunal
the matter in question involves complex issues of law and one party will suffer
severe financial hardship if he is not represented by a lawyer provided that
if one party is allowed to be subsequently represented by a lawyer then the
other party shall also be so entitled.
If application for legal representation is denied, it is still anticipated
that corporate housing developers who have their own legal officers will get
these professionally trained employees to appear to defend their companies.
Likewise, an individual who is also a lawyer can also appear to pursue his
claim against an unrepresented small time housing developer. If so, the Tribunal
may impose conditions as it considers necessary to ensure that the other party
is not substantially disadvantaged.
In fact, at the Committee stage, in the rare show of solidarity, both REHDA
and the consumer groups have argued for legal representation. It is hoped
that this provision will not be abused and that legal representation should
only be allowed in very, very exceptional circumstances such as where it involves
complex issues of law or where one party will suffer severe financial hardship
if he is not represented by a lawyer. The writers can foresee that the first
thing every corporate housing developer will do at the commencement of the
Tribunal proceedings is to apply for legal representation and it is hoped
that this application will be swiftly rejected so that this provision will
not defeat the spirit of setting up the Tribunal as an inexpensive, quick
and effective avenue for resolving disputes between the parties. Reasons for
its award must be given by the Tribunal.
Awards of the Tribunal.
The Tribunal shall make its award without delay and, where practicable, within
60 days from the date of first hearing of the dispute.
However, before the Tribunal makes an award, it may, in its discretion, refer
to a Judge of the High Court a question of law which is of sufficient importance
to merit such reference. Reasons for the award must be given by the Tribunal.
An award may require that a party pay money to any other party; the refund
of moneys paid; a party comply with the SPA; moneys be awarded to compensate
for any loss or damage suffered by the claimant; the contract be varied or
set aside, wholly or in part; costs to or against any party be paid; interest
be paid on any sum or monetary award at a rate not exceeding 8% per annum,
unless it has been otherwise agreed between the parties; or the claim be dismissed.
Every agreed settlement recorded by the Tribunal and every award made by the
Tribunal shall be final and binding on all parties to the proceedings and
deemed to be an order of a Magistrate’s Court and be enforced accordingly
by any party to the proceedings. The Secretary to the Tribunal shall send
a copy of the award made by the Tribunal to the Magistrate’s court having
jurisdiction in the place to which the award relates or in the place where
the award was made and the Court shall cause the copy to be recorded.
Criminal penalty for failure to comply with the award.
Any person who fails to comply with an award made by the Tribunal within the
period specified therein commits an offence and shall on conviction be liable
to a fine not exceeding RM5,000 ringgit or to imprisonment for a term not
exceeding 2 years or to both. In the case of a continuing offence, the offender
shall, in addition to these penalties be liable to a fine not exceeding RM1,000
for each day or part of a day during which the offence continues after conviction.
Regulations in respect of the Tribunal.
The Minister may make such regulations as may be necessary or expedient in
respect of the Tribunal to prescribe the responsibilities and control of members
of the Tribunal; the procedure of the Tribunal; forms to be used; fees and
the manner for collecting and disbursing such fees. These regulations are
required to be made before the Tribunal comes into operation and the writers
believe that the Housing Development (Tribunal for Homebuyer Claims) Regulations
2002 will be gazetted before or on the Appointed Date.
+However, when finalising the Housing Development (The Tribunal For Homebuyer
Claims) Regulations 2002, the earlier proposed provisions stating that the
Homebuyer’s Tribunal should only hear sale and purchase agreements executed
or a previous dealing which took place after the Appointed Date were removed.
*Shamsulbahri bin Ibrahim is the Legal Adviser to the Ministry of Housing
and Local Government and Roger Tan Kor Mee is an Advocate & Solicitor.