Last week, I presented the National House Buyers Association (HBA)’s: ‘tick where applicable” checklist to our newly minted Minister of Housing & Local Government, YB Datuk Seri Reezal Merican Naina Merican in my article published on 12.11.2021 entitled: HBA expresses wishlist for new Housing Minister
I have since received positive feedback from my fellow volunteers, friends of HBA, industry players, stakeholders, civil servants, politicians from both sides of the divide and housing developers (of the decent and responsible variety). I was reminded by them that there are other issues that are critical and should form part of the YB Minister’s agenda in the near future.
Thus, I was inspired to continue my narrative in this Part 2 on areas which need revisiting. If I were the Housing Minister, I would (in no particular order)………..
1. ‘Rein in’ and Regulate Liquidator’s conduct and fees
One of the amendments to the Housing Development (Control & Licensing) Act, 1966 (Act 118) (“HDA”) which took effect on 1.6.2015, namely Section 3 of the Interpretation extends the definition of ‘housing developer’ to include ‘a person or body appointed by a court of competent jurisdiction to be the provisional liquidator or liquidator for the housing developer’. The amendment to include a liquidator as a “housing developer” was intended to fill the void when a developer is wound up before completion of its duties.
As a result of the amendment, a liquidator will be subjected to the duties imposed by Act 118 and may be liable for breaching duties of a ‘de facto housing developer’. In theory, a liquidator should not be allowed to charge or impose any administrative fee when carrying out his duties (since he is assuming the affairs and responsibility of the defunct developer) contracted in the sale and purchase agreement. For e.g. functions such as updating the record of ownership and perfecting the transfer to a purchaser when a separate individual or separate title is issued is part and parcel of a developer’s duty, issuing a written confirmation of particulars (for sub-sale) under the HDA.
The reality is that liquidators who are appointed to manage the affairs of a defunct developer are charging a purported administration fee of between 2% – 3% of the purchase price for these functions. There are no guidelines to regulate charges by liquidators. The purchaser has no choice in the appointment and is left to a game of chance. The purchaser is at the mercy of the appointed liquidator where each liquidator is like a ‘little Napoléon’ of that particular housing development. The irony is that Section 22D of the HDA clearly states that a fee of not exceeding RM50 may be imposed for a written confirmation of the record of the beneficial owner of the property in the housing development and consent for the assignment. Why then are liquidators granted special treatment by having their charges grossly inflated from RM50 to 2% – 3% of the purchase price?
I have infact elaborated this issue in my published article entitled: ‘Liquidators making fortune from homebuyers’ misfortune’ Liquidators making fortune from homebuyers’ misfortune | EdgeProp.my on 9.7.2021 issue.
Was there a lacuna in the law that has been unearthed? Was there an ‘oversight’ made by the drafters of the law resulting in laws not been able to enforce and hence remained status quo or was it because the past Minister forgot to come up with the related ‘Regulations’?
2. Maintain “No” to DIBS for first-time house buyers
Every now and then, some quarters will accept developers’ mantra to re-introduce the Developers Interest Bearing Scheme (“DIBS”). It should be noted that Bank Negara Malaysia had prohibited and outlawed “any form of interest capitalisation scheme”.
DIBS or any other permutation similarly “schemed” cannot be allowed to re-surface because it risks creating a property bubble as prices are artificially increased and in turn, such increase creates a snowball effect of driving prices upwards creating an unrealistic demand. It indirectly encourages speculation as it creates an easy entry to purchase without taking into account the purchaser’s ability to sustain the loan through good and bad economic cycles.
Whatever the economic situation, the basic facts of DIBS are the same and made worse by the economic situation – it involves developer advancing the expenses of construction and other expenses which are to be collected later as debt from the purchaser with interest element factored in and therefore making the property more expensive.
False Market: The DIBS had created a false demand which in turn pushed up property prices making houses ‘seriously unaffordable’ to the average person.
3. The banishment of ‘oppressive En-Bloc strata sales’
It seems that the Ministry of Energy and Natural Resources was and currently is exploring new ways, including changes in legislation, under the pretext of facilitating strata property renewals or redevelopments in Malaysia. They wish to introduce an ‘en-bloc strata sale’ mechanism for stratified properties.
HBA is opposed to the entire idea as we are of the opinion that it is a mere facade to hide the true intention of overriding or eroding a host of other legislations currently in place to safeguard the fundamental rights to property owners. The said legislations include Land Acquisition Act 1960, the National Land Code, the Federal Constitution (right to own property), Strata Management Act, 2013 and Strata Titles Act 1985.
4. Private Lease Scheme (PLS) ~ ‘scheming’ the naive & unwary buyers
The Ministry of Energy and Natural Resources was seeking to amend the National Land Code, 1965 (NLC) by the introduction of a new proposed Chapter identified as ‘Register of Private Lease’.
In a nutshell, future home buyers may find themselves “renting” in perpetuity if the proposed private lease scheme makes its way into the NLC. The new chapter into NLC, would allow landowners (private corporations) to lease out their freehold land for development under a Private Lease Scheme (PLS).
Note that the term “leasehold property” is commonly used in Malaysia and refers to a State lease. This type of leasehold land is owned by State authorities, who have a moral obligation to renew the lease upon expiry.
In a PLS, the land for development is a freehold property and is owned by a private corporation. The land owner/ private corporation will let lease the land to a developer for a period of say, 30 years or 60 years or 99 years with the rights given to the developer to develop and construct landed/ stratified properties for sale to the public. The pertinent question is what is being sold to the public?
Under PLS, the sale and purchase agreement signed by the purchaser and the developer is not for the sale of the property, but for the sale of a lease over the landed or strata parcel. This effectively makes the purchaser a lessee of the property, and not the owner of the property, as assumed by most buyers in general. The current NLC does not allow for leases to be created for more than one person but the proposed PLS will contradict this provision.
The scheme also will result in land ownership in perpetuity as private landowners would have a monopoly on merely ‘renting’ out lands where landed/ stratified properties are built and they will have the absolute right upon the expiry of the said 30 years or 60 years or 99 years not to renew or continue with the lease. It will be subjected to terms and conditions (normally) favourable to the landowner making it their prerogative.
Most property purchasers are unaware of the implications of purchasing under a PLS and would assume that they are buying a leasehold property under the State government, which is not the case. It is disastrous to equate PLS to leasehold land. A lot of people are bound to miss the “forest for the trees” by buying a property under PLS, thinking that it is a state lease property. We believe that this new class of real estate ownership should be rejected: it differs from our existing culture of titled system of ownership. There is no safeguard of ownership to buyers and HBA objects to such deceiving schemes.
Read the following published articles on the rationale of our objections:
- Ramifications of leasing out freehold land under Private Lease Scheme – Ramifications of leasing out freehold land under Private Lease Scheme | EdgeProp.my (30.10.2020)
- End of Private Lease Tenure — what happens then? – End of Private Lease Tenure — what happens then? | EdgeProp.my (6.11.2020)
- Beware the oppressive Private Lease Scheme – Beware the oppressive Private Lease Scheme | EdgeProp.my (4.12.2020)
Unfortunately, the die is cast for certain developments in Johor who have used PLS though the laws are not in place. To minimize the damage done, there should be special legislations for certain gazetted economic zones like Medini, Johore with proper safeguards for the buyers. It cannot be allowed to be applied nationwide as it would ‘open a new can of worms’.
NB: This PLS scheme issue is currently subject of a court case at the Court of Appeal stage where HBA team of pro bono lawyers are involved. The Ministry of Energy and Natural Resources has since halted the idea of new proposed Chapter identified as ‘Register of Private Lease’.
5. Delete Housing Development Regulation (HDR) 11(3) ~ EOT abuse
At the stroke of a pen, compensation payable to a group of aggrieved house buyers are taken away by the then Minister and his Controller of Housing (past past government fault)
Between 2014 to July 2019, a total of 536 projects were granted ‘extensions of time’ (EOT) from the Minister and his Controller of Housing, which prohibited house buyers from seeking compensation in the case that their house completion is delayed. A house buyer typically can get compensation of 10% of the purchase price, if the developers exceed the mandatory 36-month timeframe.
The then Minister and his Controller of Housing obliges them under HDRegulation 11 (3) by granting housing developers an EOT (some between 6 month – 24 months). With the EOT, compensation for late delivery is waived. Is it right for the Minister to exercise this discretion in stealth as home buyers are usually not consulted prior to such applications for EOT, without any valid basis and obviously, at the disadvantage of home buyers?
In the decision of the Federal Court on 26.11.2019 in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals (2020) 1 CLJ 162, the Apex Court has effectively put to rest the unbridled attempts by the then Housing Minister/s and those under their charge to extend the ‘handover dateline’ from the mandatory 36 months to 48/ 54/ 60 months. The lengthy litigation were undertaken by HBA team of pro bono lawyers and was a victory for all house buyers,
We have been alerted that there are recent objectives to circumvent the Federal Court decision by invoking a different provision in the Housing legislation to replicate the same action. Is it a ‘Resurrection of EOT: Old Wine in New Bottles?’. Perhaps, the house buyers need to make another trip to the Courts to rectify the injustice via a civil suit with a prayer pertaining to the act of ‘Contempt of Court’ against whoever invokes the ‘Resurrection of EOTs’.
What is happening to the Housing Ministry? The Ministry is supposed to be the authority that many an aggrieved house buyer turns to in times of developer defiant of the law, the Ministry house buyers rely on for protection and for all the desperately needed interventions and assistance when a housing project is delayed or abandoned.
This gross abuse of power should be checked under the new Minister’s watch. Any decision which deprives the home buyers of their rights and entitlement should be exercised transparently, strictly and with open communications.
“Power tends to corrupt, and absolute power corrupts absolutely”-(John Emerich Edward Dalberg-Acton)
(To be continued…)
I reiterate that I am no Housing Minister and do not desire to be one. This article was written to articulate my aspirations for a better Malaysia.
Datuk Chang Kim Loong is the Hon Secretary-General of the National House Buyers Association (HBA) www.hba.org.my, a non-profit, non-governmental organisation (NGO) manned by volunteers.
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