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HBA seeks to address weaknesses and loopholes in current legislation
A "Property Development Act" to cover all types of properties built by developers has been suggested as the answer to weaknesses and loopholes in the Housing Development Act.

House Buyers Association secretary-general Chang Kim Loong said such an Act would encompass the activities of all developers and not just developers who built housing units.

Although the loopholes in the Housing Developers Act will be addressed via proposed amendments to be tabled in Parliament soon, these amendments will only extend to the activities of housing developers, and will not cover developers in other sectors of the housing market.

Chang said a Property Development Act could prevent developers from circumventing the Housing Developers Act and ensure that they lived up to the promises made in their advertisements or sale and purchase agreements (SPAs).

He was commenting on the issue where some developers has used the loopholes in the existing Housing Developers Act to sell and construct residential properties other than "housing units'.

This includes cases where developers advertise that they are selling bungalow land, but then make it compulsory for buyers to engage their services to build a house according to specific pre-approved designs.

This is usually done in an oblique manner, where the developer engages a third party to undertake the construction of the unit. Inevitably, this third party contractor is either directly or indirectly associated with the developer.

Under this arrangement, the buyer signs two SPA: one with the developer as vendor for the land, and the other with the contractor for the house to be built on the bungalow plot.

Developers resort to this mode of selling projects as it does not require them to obtain a housing developer's licence or an advertisement and sale permit from the Ministry of Housing and Local Government.

"These developers are technically not within the ambit of the Housing developers" Act… that is why we need to put in place an Act that will regulate all categories of property developers," Chang said.

The Housing Developers Z (Control and Licensing) Act 1966 prohibits developers from undertaking a housing development unless issued by the Controller of Housing under the Act.

The act defines housing development as the construction or development of "more than four units of housing accommodation."

It also states that "no advertisement or sale shall be made by any licensed housing developer without an advertisement and sale permit having first been obtained from the Controller."

In a statement to the New Straits Times, Housing and Local Government Deputy Minister Datuk Peter Chin Fah Kui said developers who sold housing plots and requested buyers to enter into a construction agreement with a contractor could be charged for not having a developer licence if there was "enough evidence to show that the developers were in some way involved in the construction agreement."

He added that the developers were bound by the law to have a housing developer's licence as it could be said that they "intend to construct or cause to be constructed in any manner more than four units of accommodation."

Another example of developers circumventing the act to market housing units is where they sell stratified shop offices and advertise that these can be converted into residential units after purchase.

Chin said developers of commercial property did not fall within the ambit of the Housing Developers Act as it was only applicable to "housing accommodation" and not commercial units.

However, he warned that if they were found to be selling residential units without a housing developer's licence, the Ministry would bring charges against them.

He advised purchasers "to be more careful before purchasing property with ambiguous connotations in advertisements" inserted by developers.

"Buyers should check to see if what is stated in the advertisement is reduced in writing in their SPAs.

"They should also consider if the State authority will approve the application to convert the commercial units to residential use and ask themselves if they are willing to pay assessment, quit rent and water charges based on commercial rates," he said.

Federation of Malaysian Consumers associations deputy president N.Marimuthu said many developers resorted to loopholes in the law to sell their projects because of the long waiting period for approvals.

To be fair, these developers should not be the ones solely to be blamed. They may have tried to get approvals the direct way, but the waiting period can even go up to four years for some.

"Who is to bear the holding cost in these cases? The solution is to make it possible for these developers to obtain clearance and approvals for their applications within two weeks to one month from the relevant authorities.

"However, having said that, developers who put out misleading advertisements in relation to the sale of their properties should be charged under the Trade description Act," he said.

Marimuthu said stiffer penalties for errant developers, such as a jail term, had been proposed under the new amendments to the Housing Developers Act that would be presented in Parliament soon.

He said a proper system must be put in place to serve the interests of the industry. "Once a proper system is put in place, it can work for the people."