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26/10/2001 NST-PROP By Sheila Singam

The much awaited amendments to the Housing Developers (Control and Licensing) Act 1966 will lay the foundations for the Ministry of Housing and Local Government to further tighten the rules and regulations governing the industry.

Deputy Minister for Housing and Local Government Datuk M. Kayveas told Property Times  that the amendments are just the first stage that would pave the way for the Ministry to revamp the Housing Developers (Control and Licensing) Rules and Regulations 1989 and the Schedules G and H sale and purchase agreements.

"The Ministry will be empowered to introduce the changes to the rules and regulations and the schedules once the proposed amendments have been passed by the Dewan Negara. The changes are schedules for early next year," Kayveas said.

The amendments are a good beginning to a restructuring of the housing industry, but they are not the end. There may still be issues to be addressed, but we cannot wait any longer to pass the amendments, which have already taken two years to be drawn up. 

If we learn of the need for further changes, we will certainly introduce them for the betterment of the industry," he added.

The new amendments recently passed by the Dewan Rakyat will see extensive changes to the Act. Among them are a five-fold increase in fines for developers who commit offences, and increase in developers' deposits, continued liability for developers even after their licences have lapsed, formation of a housing tribunal, and ministerial powers to terminate sale and purchase agreements.

Kayveas was responding to consumer groups' critiscm of the new amendments, which they said had fallen short of expectations. Among the issues the consumer groups criticised are the low cash deposit required of housing developers, the conditions for renewal of a developer's licence, the lack of a clear definition on certificate of fitness and the quantum of claims that can be heard by the Tribunal for Homebuyers Claims.

Education and Research Association for Consumers Malaysia (ERA) president Marimuthu Nadason said: "We feel the amendments have still not addressed several issues that needed to be resolved."

House Buyers Association (HBA) secretary-general Chang Kim Loong said in a memorandum to members of Parliament: "While the amendments are considered expedient and vital as a stop gap measure...it is the Association's considered opinion that a complete review should be carried out on the existing Act to replace it totally with one that suits the present day conditions."

"HBA cannot comprehend why the cash deposit should be no less than M200,000 when it equates to a drop of water in a teacup to the developers," said Chang in the memorandum, despite the fact that under the new amendments, the cash deposit has been increased from RM100,000.

He said having a higher paid-up capital and deposit would ensure that developers would have their own funds to be converted to investment capital and not rely on purchaser's deposits and progress payments. The HBA had proposed that the paid-up capital be pegged at not less than 30 per cent of the land and project cost.

Chang said the new Section 6A of the Act that allows the Controller of Housing to keep the deposit until the expiry of the defect liability period for the housing project is still not consumer-friendly.

"The retention period of the deposit should be extended to at least one year after the expiry of the defect liability period," he said, citing the fact that this would allow the deposit to be accessible to aggrieved purchasers to defray their claims for compensation.

He called for the amendments to address issues relating to the refunding of the monies collected in the event the developer applies to the Minister to terminate the SPA under Section 8A.

"Shouldn't the cash deposit of RM200,000 be used to compensate purchasers for expenses incurred such as legal fees, stamp duties and interest paid on their loans? queried Chang.

Chang also said the amendments should make it mandatory for developers to obtain separate individual titles before a developer's licence is issued.

This was supported by ERA, whose legal advisor A. Jeyaseelan said that such a clause, if included in the Act, would eliminate the cases of delay in issuance of separate titles to house buyers.

Jeyaseelan also said the new amendment should have had a clause barring developers who had a record a abandoning their projects from undertaking new housing projects.

Marimuthu said the new amendments to Section 6 only barred developers who had been convicted or fined under the Act, or those whose prior housing development company had been wound up by a court from being granted a developer's licence.

"But how many developers have been convicted or wound up in court to date?" he pointed out, adding that the amendments would not prevent renegade developers who had not been been convicted from obtaining a developer's licence.

Jeyaseelan siad the amendment to Section 7 of the Act, which called for the developers to "inform the Controller if the appropriate authority has refused to accept the submission of any document relating to the issuance of the CF" would not expedite the CF but would just add another loop to the bureaucratic red tape.

However, HBA's Chang said this sub-section in the Act provided for the Controller to act as a watchdog over the CF problem and to ensure that they are issued in a transparent and efficient by the relevant authorities.

Another grievance that ERA has against the amendments pertains to Section 8A. Under the amendment to this Section, a housing developer can apply to the Ministry of Housing and Local Government for approval to terminate all SPAs for a housing project provided at least 75% of the purchasers agree.

"The amendments should also provide for house buyers to apply for a termination of the SPA if they feel the developer is unable to fulfill its obligation and provided the majority agrees," Jeyaseelan pointed out.

Both the HBA and ERA lauded the creation of Tribunal for Homebuyers Claims under the new amendments, but questioned the decision to cap the claims at RM25,000 which they said, is "too low".

In replying to the issues raised by the consumer groups, Kayveas reiterated that a number of them would be addressed when the changes to the rules and regulations and schedules are made.

He said the issue of developers of abandoned projects being given new licences to build houses would not arise as the ministry had already started to clamp down on such errant developers more than six months ago.

"We now check the status of a development company and its directors before we give out licences and we are very stringent in our criteria," he added.

Kayveas said in dealing with the CF issue, Section 7 of the Act had been amended to introduce the Controller of Housing as an avenue for developers to register their complaints on the refusal of relevant authorities to accept the submission of documents relating to the issuance of the CF.

"Prior to this, developers had complained they had no one to turn to. This clause gives them an independent one-stop centre they can go to, which will save time and effort on their part, contrary to consumer associations' claims," he pointed out.

He said the issue of vacant possession being given together with CF would be addressed in the changes to Schedules G and H of the Act.

On the cash deposit of RM200,000 and the paid-up capital of RM250,000, which the consumer associations had claimed was too low, Kayveas said: "It would be unfair and impratical to put a figure that is so high that we kill off small enterprises or family-owned businesses.

"We have to remember that property development contributes to the national economy, and we do not want to curb the efforts of the small but sincere develpers, which may collectively have an impact on the industry's growth," he added.

He said the quantum of compensation for buyers in cases where developers apply to the Minister under Section 8A to terminate the SPA would be addressed under the forthcoming amendments to the rules and regulations and schedules.

Meanwhile, the Real Estate and Housing Developer's Association (Rehda) has expressed the opinion that although the association welcomes the tightening of the Act to deal with errant developers, it is not in favour of more rules and regulations tht would put an added burden on "good" developers.

Rehda present Datuk Eddy Chen Lok Loi said raising the cash deposit for a developer's license to RM200,000 woujld place stress on smaller developers undertaking limited units. He added that even big companies with several projects that needed individual licences would be burdened.

"Their costs could be passed on to the buyers in the long run," he said.

Chen added that the penalties for developers who flout the Act are too severe.

"We feel that increasing the fine for developers who contravene the Act by five times to RM50,000 is a bit too harsh. In addition, the amendment states that developers who fail to comply with the decision of the Tribunal could be subject to criminal punishment of imprisonment which is too severe," said Rehda president. He pointed out that in other civil disputes, criminal proceedings are not instituted against any of the parties concerned and Rehda is unhappy about this clause in the amendment (section 16AD(1) of  the amended Act).

"We're also concerned about the amendments to Section 10 which gives power to raid developers' premises. We are worried that such searches can cause severe damage to the reputation of the developers," Chen said.