HBA’s consultative committee have made
a study of the Regulations and noted that they were many loopholes that have
to be plugged as well as certain construction of words rendering it a ‘grey-area’
that errant developers deliberately flouted the laws by taking advantage over
ill-protected house buyers. It is on these perceived weaknesses that the HBA
would like to contribute by making some suggestions to amend the Regulations.
For whatsoever they are worth, they represent our views, which, we believe is
representative of the thousands of house buyers, who have always been on the
loosing end in their dealings with the housing developers and in the matter
of public interest. We back this statement by the fact that we have frequent
dealings with many house buyers who have received the short end of the stick
with their purchases. It is hoped that our views will lead to a more protective
Regulations for safeguarding the interest of house buyers.
Housing Developers (Control and Licensing) Regulations
1989
In the mid-eighties, the Malaysian economy
went into a recession. That was when the existing inadequacies and deficiencies
of the original Act manifested itself in the form of abandoned housing projects
and projects that never took off despite purchasers having paid a lot of money
towards the purchase of housing units. In some instances, up to 80% of the purchase
price had been paid while the project in terms of construction costs were less
than 35% of completion. Those were the times of recklessness and unruliness
in the housing industry. The problems caused by non-standard and inherently
unfair payment schedules coupled with unbridled terms of the contracts of sale
were then reviewed and addressed by the then Minister. Under the powers vested
in him, the Minister made the Housing Developers (Control & Licensing) Regulations
1989. There is now a need to further amend several sections in the regulations,
in tandem with the amendments in the parent Act.
While HBA recognizes the need for improvement in defining
the roles and responsibilities of housing developers and purchasers and other
involved parties, there are particular areas of the Regulations that are especially
in need of further work. In the sections below, we present the house buyers’
view of the most pressing issues, and the provisions that are most directly
problematic. This is followed by a review of clauses of the Regulations, which
we raise chiefly because of their impracticality, unenforcability, or other
pragmatic problems.
B. Recommendations
for Improvements
I)
Housing Developers (Control and Licensing) Regulations 1989
Regulation 3 - Application for Developer’s licence
3(1) (a) – “submit his application
in the form prescribed in Schedule A together with such documents as are specified
in section 5 (3) of the Act; and”. HBA urges the Minister to make it mandatory
to include:-
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a copy of an approval for the conversion of the lands for
building purposes and for the subdivision and proof of full payment of
the premiums and charges imposed by the relevant land office.
-
Recommend IDT individual titles necessity.
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A copy of a sworn statutory declaration set out
in Section 6(1) of main Act.
-
A certified copy of the Building Plans and Development
Order and proof of payment thereof imposed.
-
A copy of the sworn statutory declaration by each of
the directors that there has not been any two (2) complaints lodged against
him or her and/or the company reflecting their credibility in the industry
in tandem with the amendments of Section 6 of the main Act.
-
Payment of deposit with the Controller of Housing, not
less than two hundred thousand Ringgit (RM200,000) in cash or such
other form as the Minister may determine.
-
A copy of the latest audited balance sheet and
projection
of cash flow certified by Auditors.
-
A copy of the feasibility study for the intended project.
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Irrevocable letter of offer from banks or financial
institutions.
-
Copy of Form 49 (list of directors and secretaries) and
certification by the Secretary, in respect of directors, shareholders and
their shareholdings.
-
Copy of sworn statutory declaration that they are proxies
(where applicable).
-
Copy of geologist study (where applicable).
Regulation 3 (4) – HBA recommends
that the application fees for a housing developer’s licence be increased to
a more reasonable amount.
Regulation 4 – Renewal of a housing
developer’s licence
4(1) – renewal of the licence should be made within
a reasonable period prior to its expiry. There should not be a situation
where the licence would lapsed while application for renewal is still pending
processing by the Ministry’s licensing department resulting in a period of
‘twilight zone’.
4(2) – the requirements as recommended by us in Regulation
3 aforesaid should be application for renewals.
-
that the Developer has submitted the biannual report on the stipulated
dates to the satisfaction of the Controller
-
written confirmation from the participating Banks or financial institutions
that the Housing Development Account under 7(A) has been complied with and that
it has been diligently maintained.
Regulations 5 – Advertisement
and Sale Permit.
Regulations 6 – Particulars to be included in advertisement.
5(2) refers to Schedule D
-
under the column in the brochure, the tenure of the land should include
its expiry date and whether the land is subjected to ‘restrictions in title’.
A typical endorsement of the restriction is as quoted: “Tanah ini tidak boleh
di jual, di pindahkan, di gadai atau di cagar melainkan dengan kebenaran daripada
Pihak Berkuasa Negeri”.
-
To include whether separate title deeds are available or still under
the Master title.
5(3) – Any misleading, inaccurate or false representation
or description or economically unachievable representation or exaggerated information
which in the discretion of the Controller is a gimmick, shall be an offence
under the Regulations.
Regulation 8 – Restriction of
description of Advertisement.
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Projected monetary returns that cannot be guaranteed or are doubtful
in nature (Such as projected rental returns) should not be permitted.
-
Deceiving claims of panoramic views should not be permitted unless substantiated.
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Distances of housing projects to popular destinations should be realistic
in terms of travelling distance and not map distance. Likewise on travelling
time.
-
Claims that a particular project is situated at or close to any
popular and up-market location should be verified and proved.
-
Misleading price tag on a nominal number of lowest costing units
to entice potential buyers should not be allowed.
Regulation 9 – Renewal of advertisement and sale permit
-
the requirements as recommended by us in Regulation 5 aforesaid should
be application for renewals.
-
That the Developer has submitted the biannual report within the
stipulated dates to the satisfaction of the Controller.
Regulation 11 – Contract of Sale
11(2) – “No housing developer shall
collect any payment by whatever name called except as prescribed by the contract
of sale”
Additional Concern (1):
Deed of Covenants
Ancillary to the contract of sale is the Deed of Covenants,
which HBA urges the Minister to regulate. The Deed of Covenant has to have uniformity
to reflect the standardized conditions upon which the parties covenant to adhere
their pertinent rules for subdivided building. Developers have been using Deed
of Covenants or whatsoever name called it, drafted according to their whims
and fancies and very often lopsided in their favour, to compel home purchasers
to sign the Deed not mutually beneficial. House buyers too have been ignorant
and would generally sign whatever “their lawyers’ tell them to do so. In most
cases they are overwhelmed and blinded by the vision of owning their own dream
homes. It is a perfect recipe for developers to circumvent the statutory Contract
of Sales. It is high time that the Ministry provides in the Regulations for
a uniformed “deed of covenants” for all developers to adopt to ensure better
protection for buyers and to ensure that there is no uncertainty of rules and
bylaws. Surely, the Deed of Covenant can be standardized since Contract of Sales
(Schedule G & H) are standardized.
Additional Concern (2): ‘Consent Fees’ or Administration
Fees
One of the pertinent point that has to be addressed is the
arbitrary imposition of administrative fees or by whatever name called by the
developer for giving developers consent to Vendors in relation to sub-sale of
property. Quite often Developers
‘arm-twist’ house buyers to succumb to the payment of levies between
1% to 2% based on the transaction value. They do this by withholding endorsement
of their consent. Similarly, Developers withhold the giving of their consent
to the financial institutions, in cases of financing or re-financing and also
in situations where buyers institute legal proceedings against them for any
antecedent breaches under the contract of sale. These practices must be stopped.
HBA recommends that the ‘consent fees’ or by whatsoever name called, to be disallowed.
It will then be incumbent upon the Developer to expedite application of separate
individual title or strata titles as the case may be and transfer the same to
the owners.
In the event after the study by the Ministry, the so-called
fees cannot be waived, HBA is of the view that a nominal fee be charged in the
following rates:
-
RM250.00 or 1% of the transacted price whichever is the lower for property
that is RM250,000 or less;
-
RM500.00 or 1% of the transacted price, whichever is the lower for property
that is RM250,001 or more.
Additional Concern (3): Sale of Standard Contract of Sale
Documents
The regulation should stipulate that in cases where the buyers
have opted to appoint their own solicitors and not the developers’ panel lawyers,
then the buyers’ appointed lawyers should be entitled to a free copy of the
SPA from the developers’ lawyers, including all the schedules attached. The
Bar Council has issued a directive to this effect but this requirement is frequently
violated as there is no law to bind lawyers to conform to this. Hence we suggest
that there be a sub-regulation making this tenet mandatory. This will make it
easier and encourage buyers to appoint their own lawyers and not to leave it
all to the developers’ lawyers. In this way, their interests will not be compromised.
Regulation 13 – Penalties
HBA would like to recommend that the penalty for contravening
any part of the Regulations including the statutory contracts of sale (Schedule
G & H) and the proposed standardized Deed of Covenants, be increased to ‘not
less than RM50,000 and/or to a term of imprisonment not exceeding three (3)
years subject to not less than one(1) month. This is to reflect the gravity
of these regulations and to show the Ministry’s seriousness in wanting Developers
to strictly adhere to the laws of the Housing Industry.
II) Contract of
sale - Schedule G (Land and Building) & Schedule H (Subdivided Building)
Clause 5 – Loans
Clause 6 – Loans
from Federal or State Government or Statutory Authority.
As the Ministry may be well aware of, the process of loan
documentation is not as simple as it seems. It entails exchange of undertakings
(either from the Developer or Bridging Financier) and it would be time consuming.
These could also be experienced by government servants who obtain loans from
Bahagian Pinjaman Perumahan (BPP)who have to go through the red tape before
loan could be released. Very often these government servants has to plead to
the Developer for waiver of late payment interest. HBA has received a number
of complaints from government servants that even BPP letters seeking waivers
of interest imposed were refused by arrogant developers.
HBA urges that a reasonable time frame, say, three (3) months
interest free period from the date of initial purchase be granted across the
board to buyers who buys off the plans irrespective of the stage of constructions.
Clause 5 (4) of Schedules G & H
should be deleted
and substituted with a clause that give rights to the Purchaser, who have failed
to procure loan, due to whatsoever reason, to be able to rescind his Agreement
and seek refund of monies paid thus far. Very often, purchasers are ignorant
of the criteria required in obtaining loans. In their zest to possess a home
shelter for their families, they contract to buy a property without having the
relevant documents, bankers seek to provide a loan. Thus, they later find themselves
stranded. It is no doubt their fault but HBA urges the Ministry to consider
a way out of their dilemma.
Clause 8 – Interest on late payments
A reasonable period of say thirty (30) days from date of
the progressive billings would be fair prior to the Developer’s imposition of
interest at 10% per annum provided always that the Developer should diligently
sent out their billings within 48 hours from the date of notice.
Clause 9 – Default by Purchaser and determination of Agreement
This clause gives the perception that only the Vendor can
determine the SPA. It should be a fair bargain agreement giving options to both
parties. It should be seen more of ‘a two-way traffic’ and not giving the Developer
the upper hand.
Similar to clause 9 there should be corresponding clause
of “Default by Vendor and determination of Agreement by Purchaser” whereby
the fundamental rights of a Purchaser are preserved.
Clause 10 of Sch. G – Separate document of titles/transfer
of titles
Clause 10 of Sch. H – Separate strata title and transfer of title.
Sch. G 10 (1)
“ Upon the execution of this Agreement
the Vendor shall, as its own cost and expense and as expeditiously as possible,
obtain the issue of a separate document of title to the said Lot.”
The problem here is that “as expeditiously as possible” is
unacceptably vague. As it is the responsibility of the seller to provide the
said documents, a time frame should be imposed in this clause.
Accordingly, the Vendor will have to bear liability for the delays in
obtaining the said documents, and the purchaser should be reasonably compensated
for the delay.
Sch. H 10 (1)
“The Vendor shall, at its own cost and
expense, apply for subdivision of the said Building so as to obtain the issue
of a separate strata title to the said Parcel under the Strata Titles Act 1985.”
Under the Strata Titles Act, 1985, a time frame of six (6)
months is set for obtaining the said documents. As such, reasonable compensation
should be provided to buyers when there is a delay.
This clause would be superfluous should the Ministry accept
‘the concept of having separate titles prior to the sale off the plans’. We
have earlier recommended that it should be made mandatory to have available
separate titles even before the developer applies for a housing licence.
Clause 11 – Position and area of lot
With advanced technology, there should be no room for errors
in the system of measurements. This clause is encrypted in the Contract of Sale
in case of eventualities and HBA accepts it. However, HBA recommends that “the
Purchaser should be entitled to compensation if the final area is reduced by
more than 3% and the Developer is not allowed to charge more if the final area
exceeds the sold lot. 3% is accepted to be a fair and reasonable degree of accuracy
in construction industry.
In the case of Schedule H, it must be rationalized that the
Developer did not use any more land upon which the parcel lot is built. They
would have signed a Building Contract with their contractors at an agreed cost.
They should not be making benefits out of nothing.
Clause 12 – Materials and workmanship to confirm to description
Most buyers are layman and do not know much about the building
industry, save and except, to complain. They would not know the quality of the
materials whether they are inferior or not. More so, when the plastering work
are done, one would not know the quality of the bricks behind the plastered
walls. This is where the Architects come in. But when you have the situation
where the Architects are ‘employed’ by the Developer, corners are cut and works
are compromised. May we suggest that a mechanism in the form of a quality
assurance program mechanism be activated as a check and balance?
Clause 15 of Sch. G – Payment of outgoings
Clause 18 of Sch. H
Payment of outgoings including quit rent ……
should be
from the date of delivery of vacant possession with water and electricity connection
and not otherwise as stated.
Clause 16 of Sch. G – Maintenance of services
Clause 16 of Sch. H – Payment of service charges
There should have been a pre-determined amount a buyer
has to pay for maintenance of services prior to the local authorities taking
over. Very often, the statement ‘fair and justifiable proportion’ has been abused
by developers who insist that buyers pay one (1) year in advance at a certain
high charges. The Developer would withhold the release of the keys if the buyers
fail to pay up. We are certain that the maintenance charges can be pre-determined
by the Architects.
Clause 20 of Sch. G – Time for handing over of vacant
possession & Clause 21- Manner of delivery of vacant possession AND corresponding
clauses 22 & 23 of Sch. H.
HBA admires the boldness of Yang Berhormat Dato Seri Ong
Ka Ting to revolutionize the concept of vacant possession with Certificate of
Fitness (CFO) and ensuring the public that future vacant possession should come
with supply of electricity and water (running through the wires or pipes) as
reported in “The Sun” newspaper on January 22nd, 2002, a copy of
the excerpt is enclosed for easy reading.
SYABAS, for such a bold step forward.
Additional Concern (4): Liquidated Ascertained Damages
* Schedule G - Clause 20. Time for handing over vacant
possession.
“(2) If the Vendor fails to hand over vacant possession of
the said Building to which water and electricity supply are ready for connection
to the said Building, in time, the Vendor shall pay immediately to the Purchaser
liquidated damages to be calculated from day to day at the rate of ten per centum
(10%) per annum of the purchase price.”
* Schedule H - Clause 22. Time for handing over vacant
possession.
“(2) If the Vendor fails to hand over vacant possession of
the said Parcel to which water and electricity supply are ready for connection
to the said Parcel, in time, the Vendor shall pay immediately to the Purchaser
liquidated damages to be calculated from day to day at the rate of ten per centum
(10%) per annum of the purchase price.”
* Schedule H - Clause 24. Completion of common facilities.
(2) If the Vendor fails to complete the common facilities
in time the Vendor shall pay immediately to the Purchaser liquidated damages
to be calculated from day to day at the rate of ten per centum (10%) per annum
of the last twenty per centum (20%) of the purchase price.
In a contract of sale, the basic obligation of the selling
party is delivering subject matter, strictly abiding by both the requirement
of quality and delivering time described by the contract. The market practice,
whereby housing developers offer a discounted rate on the LAD or challenges
the plaintiff in court over the damages citing other laws is a breach of this
basic obligation. In favour of public interest, this clause should be made clear
and definite and house buyers should be able to seek a cost-effective claim
without the need of lengthy litigation.
In relation to the issue of liquidated ascertained damages
(LAD), HBA urges the Minister to re-construct the wordings with clarity by inserting
the words:-
“Notwithstanding anything contained in any written law or
rule of law, …….. in Clause 20(2) of Sch. G
and the corresponding Clause 22(2) and Clause 24(2) of Sch. H.
HBA’s rationale are as contained in the article titled Liquidated
Ascertained Damages annexed hereto and marked
‘Annexure II’.
III) The Third Schedule to the Contract of Sale (Sch.
G & H)
The Schedule of Payment
of purchase price is quite a good
arrangement, save and except, that there should be more emphasis and elaboration
on the works that each billing stages entails. The Lembaga Arkitek Malaysia
(LAM) has a detailed guideline which each architect has to strictly adhere to.
Annexed hereto and marked ‘Annexure III’ is a copy of the LAM’s General
Circular No. 1/2001. To ensure transparency on the part of the architect, the
guidelines by LAM could be adopted or at least elaborated.
May we recommend to the Ministry that the stakeholders retains
a certain percentage (say, 2.5%) of the balance payment payable under the Contract
of Sale, on the developer’s undertaking to expeditiously extract out separate
individual titles or strata titles, as the case may be. This withholding of
monies is to ensure that Developers complete their part of the bargain in the
Contract of Sale.
IV) Housing Developers (Housing Development Account) Regulations,
1991
8. Conditions for withdrawal of monies from Housing Development
Account.
“(1) No monies from the Housing Development Account of a
housing development shall be withdrawn by a licensed housing developer except
where the withdrawal of such money is supported by a certificate from the
architect or engineer in charge of the housing development stating that
payment is due to be made for that purpose or where such request is supported
by documents duly certified by the director, proprietor, partner or office-bearer,
as the case may be, of the licensed housing developer's company requesting the
payment.”
HBA recommends that a system of monitoring be set-up whereby
an independent party can verify that the withdrawals are authentic. The appropriate
independent party would be PAM or the Board of Engineers. These would reflect
more transparency in accounting of the Housing Developers (Housing Development
Account) Reg. 1991.
V) Homebuyers Tribunal
May we suggest that Clause 7 & 9 be re-worded for the purpose
to include settlement of the Awards made by the Homebuyers Tribunal referred
to in the main Act and for satisfaction of any Judgement made by the Courts
of Laws of Malaysia.
C. Conclusion
Our comments aforesaid are supplementary to our stand that
no amount of law will be able to eliminate or solve the problems unless they
are strictly enforced.
In closing, we would like to thank the Ministry of Housing
and Local Government for taking the time to review our Memorandum. It is clear
to us that many points need to be revised, while others require improved clarity
or expansion. We look forward to meeting with Ministry officials to discuss
our views, and in particular, we would like a similar opportunity be made available
to HBA to provide comment on draft and amendments to the Regulations.
Thank you,
Yours sincerely,
Datuk Hj. Zainuddin
Bin Hj. Bachik
President, House
Buyers Association
