Down by law
05/10/2001 NST-PROP By Nicholas Mun

Excessive legislation in commerce and industry is a common complaint. The other side of the argument is spotty enforcement, which raises the issue of futility of such initiatives to put the house in order. There is no doubt force in these arguments, but what is often overlooked is that the mere existence of laws and the framework they put in place is sometimes sufficiently effective in curtailing the unbridled free enterprise of a capitalist market. And, so far as the property industry is concerned, we need the Housing Developers (Control and Licensing) Act, 1966 (HDA) more than we realise.

The framework it sets out is simple. It puts in place procedures that regulate the sale and purchase of houses through a series of restrictions in the form of licenses and permits, mandatory adoption of standard terms and conditions of sale, and how a developer’s sales proceeds are to be dealt with.

Notwithstanding the common complaint that the legislation lacks bite, it cannot be denied that it works. But what it lacks is scope in covering transactions in which buyers are in need of protection. And you can find a no better demonstration of this fact then by dealing with a property developer whose residential project falls beyond the clutches of the legislation.

One particular developer had included in its booking form a clause that states that the purchaser is deemed to have read and accepted the terms and conditions of the sale and purchase agreement (SPA). That clause was printed on the rear of the form, which of course the sales personnel made no attempt in bringing to the attention of the buyer. The truth of the matter is the buyer at the stage of signing the form had no inkling what the terms of the sale and purchase agreement were like. After al, he only discovered that repugnant clause several hours later after it was signed. One shudders to think what the developer would try to get away with in the SPA itself.

This begs the question as to why a developer would include such a clause in a booking form. It’s way too exploitative for its inclusion to be motivated by the desire to be in the best position of the transaction. After all, it is the developer who makes the offer to sell and buyers who accept that offer must do so on the conditions that have been set. What other motivation could the developer have other than to exploit the situation in a transaction that it already dictates?

So while heavier penalties are a step in the right direction for keeping the industry in line, what is also needed is an increase in the scope of the HDA. The framework of the legislation needs to be widened to cover projects that are quite obviously attempts by the industry to circumvent it.

Projects sold as serviced apartments are obvious examples. These are no more than condominiums when you look beyond the smoke and mirrors of housekeeping services and leaseback options that they throw at you. True serviced apartments are never for sale. They are meant for travelers whose duration of stay in the country make hotels impractical.

The industry needs to have its hands tied to some degree, and this can only be done by widening the scope of the HDA to afford protection to buyers of projects that are not within its present ambit. If necessary, new standard form agreements should be drafted to supplement the existing schedules G and H of the HDA. Tying developers down to standard forms will keep patently unfair terms out of the SPA.

On their own, heavier penalties just won’t cut it - not until we stop pussy-footing around the issue of enforcement. On the other hand, casting the legislative net further and wider will help ensure a more level playing field. Developers will then have no choice but to conduct their sales on terms that are fairer to buyers.

The industry is undoubtedly faced with a situation where a few bad apples have spoilt the basket and it is precisely for this reason that legislative disapproval is needed. After all, we can’t leave this to the conscience or sense of fair play of the errant few can we?