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By *Shamsulbahri bin Ibrahim & Roger Tan Kor Mee

Background

One of the first things Datuk Seri Ong Ka Ting did when he became the Minister of Housing and Local Government was to spearhead his ministry’s Steering Committee on Legislative Drafting (“the Committee”) to re-look at the provisions of the Housing Developers (Control and Licensing) Act 1966 (“the principal Act”) and propose the necessary amendments to it. The last time the principal Act was amended was in 1988. It was also amended in1972, revised in 1973 and further amended in 1977.

The Committee met for the first time on 29 February 2000, and sat through over the next 8 months in a series of meetings to deal with the many amendments proposed by various parties. Deputy Minister Datuk Peter Chin also chaired a number of meetings. The Real Estate and Housing Developers Association (“REHDA”) was strongly represented with its President, Dato’ Eddy Chen Lok Loi, Deputy President Tan Teng Boon and Executive Secretary Ms Ng Kuai Heng present in almost all the meetings. Likewise, the consumer groups, Federation of Malaysian Consumers Associations (“FOMCA”), Consumer Association of Penang (“CAP”) and Consumer Associations of Selangor and Federal Territory sent their senior office-bearers. Other members of the Committee are representatives from the Ministry of Domestic Trade and Consumer Affairs, Department of the Director General of Lands and Mines, Malaysian Institute of Architects, Association of Consulting Engineers Malaysia, Master Builders Association Malaysia and Construction Industrial Development Board; Controller of Housing together with Shamsulbahi bin Ibrahim, the legal adviser of the Ministry of Housing and Local Government and his senior officers, Prof. Salleh Buang, lawyers Teh Sek Hock, Toong Gek Foong, S.Y. Kok and Roger Tan. Views from the Bank Negara Malaysia, Association of Banks Malaysia, Koperasi CUEPACS Berhad and the Bar Council were also either sought or received from time to time.

The final draft was submitted to the Attorney General’s Chambers in early 2001 for approval and the Cabinet approved the final draft in September 2001.

The Housing Developers (Control and Licensing) (Amendment) Bill 2001 went through the Houses of Parliament in October and received the Royal Assent on 24 January 2002. It was gazetted on 31 January 2002 and will come into operation on a date to be appointed by the minister by notification in the Gazette (“the Appointed Date”).

This is a major revamp of the principal Act emphasizing on preventive measures, better protection of purchasers as consumers in addition to enhancing the authorities’ investigation and enforcement powers.

Title

Ss 3 and 4 of the Housing Developers (Control and Licensing) Amendment Act 2001 (“the Amending Act”) change the title of the principal Act to Housing Development (Control and Licensing) Act 1966 (“the Act”) so that it does not give an impression that the Act is aimed only at the housing developers but that the Act will have general application to the purchasers as well as the housing developers.

The principal Act is now divided into 7 parts, namely:

Part I : Preliminary (ss 1- 4)
Part II : Licensing housing developers (ss 5 – 6B)
Part III : Duties of a licensed housing developer (ss 7 – 9)
Part IV : Investigation and Enforcement (ss 10 – 10J)
Part V : Powers of Minister (ss 11 – 16)
Part VI : Tribunal for Homebuyer Claims (ss 16A – 16AI)
Part VII : Miscellaneous (ss 17 – 24)

Application of the Act

S 6 of the Amending Act deletes s 2(1) of the principal Act. With the deletion, no person or body in West Malaysia who is a housing developer is now exempted from the application of the Act. Previously, co-operative societies, statutory bodies and bodies and agencies under the control of the Federal Government or any State Government were exempted from the principal Act.

S 35 of the Amending Act provides that any society, body or agency undertaking or causing to be undertaken any housing development where housing accommodation had not been offered for sale before the Appointed Date is required to apply for a licence under the Act within six months from the Appointed Date and pending the decision of the Controller of Housing on the application for such a licence, such applicant shall be deemed to be a licensed housing developer under the Act.

Definitions

S 7 of the Amending Act amends the definitions of “bank”, “finance company”, “housing accommodation”, “licensed housing developer”, “prescribed” and “purchaser”. It also inserts new definitions of “certificate of fitness for occupation”, “Deputy Controller”, “local authority”, “stakeholder” and “Tribunal”.

Perhaps the amendment to the definition “housing accommodation” requires a word or two. The definition of “housing accommodation” now reads as (with the inserted words in italics): ““housing accommodation” includes any building, tenement or messuage which is wholly or principally constructed, adapted or intended for human habitation or partly for human habitation and partly for business premises but does not include an accommodation erected on any land designated for or approved for commercial development;”. This is to clarify that buildings erected on commercial land such as service apartments will not be subject to the Act.

Appointment of Controller, Deputy Controller, Inspectors and other officers and servant

S 8 of the Amending Act rewords s 4 of the principal Act to the effect that a new office of the Deputy Controller of Housing is now created in order to assist the Controller in the discharge of the latter’s duties under the Act as currently the Controller is also the Secretary General of the Ministry. The Minister may appoint such number of Deputy Controllers as he deems fit. The Controller and the Deputy Controllers shall also have the same powers conferred on an Inspector of Housing under the Act. The newly worded section also allows the Controller to delegate any of his powers and functions under the Act to any Deputy Controller, Inspector, officer or servant appointed by the Minister including his powers and functions in respect of investigation of offences under the Act to any public officer or officer of a local authority. It is hoped that with the powers of investigation capable of being delegated to government agencies and local authorities throughout West Malaysia, enforcement of the provisions of the Act will be more effective and better monitored.

Licence Fees

S 10 of the Amending Act inserts new subsections (4A) and (4B) into s 5 of the principal Act which empower the Controller to collect fees payable on the grant of a licence and at such intervals during its validity period and that no application for a licence shall be considered unless such fees which will be prescribed shall have been paid to the Controller.

Conditions or restrictions for the grant of a licence.

S 11 of the Amending Act has made some significant changes to s 6 of the principal Act as follows:

Subject to the Minister waiving it, no licence shall be granted if:

(a) a corporate applicant for a licence does not now make a deposit with the Controller a sum of not less than RM200,000 in cash or in such other form as the Minister may determine.

(b) a person or body of persons applying for the licence fails to make a deposit with the Controller an increased sum of RM200,000 from previously RM100,000.

(c) the applicant is a company, at the time of application:

    i. any one who is convicted of an offence involving fraud or dishonesty or who is an undischarged bankrupt is holding office as director, manager or secretary of the applicant or other similar office or position;

    ii. any director, manager or secretary of the applicant has due to a conviction of an offence under the Act been fined for a sum exceeding RM10,000 or has been imprisoned (other than imprisonment in default of a fine not exceeding RM10,000); or

    iii. any person who had been a director of or had been directly concerned in the management of the business of a licensed housing developer which has been wound up by a court is a director or is directly concerned in the management of the business of the applicant;

(d) the applicant is a society, any one who is convicted of an offence involving fraud or dishonesty or who is an undischarged bankrupt is holding office as president, secretary or treasurer of the applicant or other similar office or position at the time of application.

(e) the applicant is a body of persons or firm, at the time of application the applicant or any member or partner of the applicant has due to a conviction of an offence under the Act been fined for a sum exceeding RM10,000 or has been imprisoned (other than imprisonment in default of a fine not exceeding RM10,000).

(f) the registration of the applicant's architect or engineer has been cancelled and has not been reinstated at the time the application is made.

For the purposes of sub-paragraph (c) above, the expression of “applicant” shall include the holding company of the applicant or a subsidiary of the applicant or a subsidiary of the holding company of the applicant.

New ss 6A and 6B have also been inserted to the effect that subject to the direction of the Minister, the deposits referred to sub-paragraphs (a) and (b) above shall be kept by the Controller until the expiry of the defects liability period of the housing development. The Controller may after having given the licensed housing developer an opportunity to be heard, forfeit the whole or a part of the deposits if the licensed housing developer:

(a) is carrying on his business in the opinion of the Controller in a manner detrimental to the interest of the purchasers or public;

(b) has insufficient assets to cover his liabilities;

(c) is contravening any provision of the Act; or

(d) has ceased to carry on housing development in West Malaysia.

Duties of a licensed housing developer

S 7 of the principal Act has been amended to require a licensed housing developer to exhibit at all times in a conspicuous position in any office and branch office of the licensed housing developer a copy of his licence, advertisement and sale permit.

A licensed housing developer is also required to report to the Controller not later than the 21st day of January and the 21st day of July of each year on the progress of the housing development in such form as the Controller may determine from time to time and to inform the Controller if the licensed housing developer considers that he is likely to become unable to meet his obligations to the purchasers at any stage of development before the issuance of the certificate of fitness for occupation (“CFO”). This provision will help the Ministry monitor the progress of every housing development and to take necessary action to ensure that such housing development is eventually completed.

In the meantime, the time for the licensed housing developer to submit its audited report to the Controller has now been extended to 6 months from 3 months previously after the close of its financial year.

4 new sub-sections have also been inserted into s 7 of the principal Act, namely requiring the licensed housing developer to:

* inform the Controller of the handing over of vacant possession of the housing accommodation to the purchasers and submit a certified true copy of his architect’s certificate certifying that the construction of the housing accommodation has been duly completed and that water and electricity supplies are ready for connection to the housing accommodation.

This provision will allow the Ministry to monitor the progress of handing over of vacant possession in accordance with the Uniform Building By-Laws.

* inform the Controller if the appropriate authority has refused to accept the submission of any document relating to the issuance of certificate of fitness for occupation and submit the refusal letter from the appropriate authority to the Controller.

This provision will enable the Controller to undertake the necessary investigation to ascertain the reason why the particular local authority has refused to issue or withheld the issuance of the CFO so that the Controller can take the matter up administratively with the relevant local authority.

* ensure that the development of the housing accommodation has been carried out in accordance with any requirements prescribed under any law regulating buildings and has exercised all such diligence as may be required for the issuance of the CFO and for the issuance and transfer of the titles to the housing accommodation to the purchasers.

This is to impose on the licensed housing developer a statutory duty to ensure that he shall fulfil all his duties and responsibilities as set out in the law.

* inform the Controller of the progress in the issuance of a separate or strata title for the housing accommodation and the transfer of the said titles to the purchasers.

This provision will help the Controller monitor the progress in this area which remains a problem particularly with sub-divided buildings.

Moneys held by stakeholder

This is the final 5% of the purchase price held by a solicitor as a stakeholder to be released to the licensed housing developer pursuant to the sale and purchase agreements (“SPAs”) which currently state that 2.5% thereof is to be released 6 months after handing over of vacant possession and the balance 18 months after the handing over of vacant possession unless there are defects in the subject property within these periods.

S7A of the principal Act is now amended to give to the stakeholder’s moneys similar protection as the moneys held in a housing development account so that in the event the licensed housing developer should be declared a bankrupt or if it is a company, liquidated, the stakeholder’s moneys shall not be deemed to be part of the property of the licensed housing developer and therefore beyond the reach of his creditors. The stakeholder’s moneys then vest in the official receiver or trustee in bankruptcy, as the case may be, to be applied in accordance with the provisions of the SPAs. Further, the stakeholder’s moneys shall not be garnished until all the liabilities and obligations of the licensed housing developer under the SPAs have been discharged and fulfilled.

Sub-section (9) of S 7A has been amended to make it clear that the obligation of a licensed housing developer to open and maintain a housing development account will subsist so long as any sale and purchase of the property shall take place before the issuance of CFO.

New s 7B – “Licensed housing developer”

Under the new s 7B, the expression “licensed housing developer” as referred to ss 8, 8A, 11 and 12 shall mean to include any housing developer whose licence has expired.

S 8 of the principal Act as amended provides that where a licensed housing developer proposes to enter into an arrangement or agreement to sell, transfer, assign, dispose of or reconstruct his business relating to housing development either by amalgamation or otherwise, the licensed housing developer is required to seek the prior approval of the Controller.

S 8A is a new section on statutory termination of SPAs. S 11 confers powers on the Minister to give directions for the purpose of safe-guarding the interests of purchasers. S 12 confers on the Minister to give general directions as he deems fit and proper for the purpose of ensuring compliance with the Act.

Hence, under the new s 7B, a licensed housing developer whose licence has expired will still be caught by the provisions of ss 8, 8A, 11 and 12 and are required to comply with the same. As what the Minister told the Dewan Rakyat when tabling the amending Bill, the housing developers could not now deliberately not renew their licences in order to “escape” from their obligations under the Act. They are still required to seek the approval of the Controller for any sale or merger of projects even though their licences may have expired.

New s 8A - Statutory Termination of SPAs

This new section proposed by REHDA is intended to permit termination of all the SPAs when it is clear that the licensed housing developer is unable to proceed with the housing development or any phase thereof especially during an economic downturn. If both the licensed housing developers and most of the purchasers agree to terminate their SPAs and therefore cease the construction of the housing development or any phase thereof, it is in the mutual interest of the parties to ensure this intention is carried out expeditiously without the fear of being sued by the remaining purchasers.

However, strict conditions apply before this new section can be invoked by the parties which are as follows:

* the approval of the Minister is required;

* the development has not commenced 6 months after the execution of the SPAs; and

* at least 75% of all the purchasers who have entered into the SPAs have agreed with the housing developer in writing to terminate the SPAs and each of their written consent shall have been duly executed and witnessed by their solicitors or a Commissioner for Oaths. For this purpose, joint purchasers irrespective of any number shall be considered as one purchaser.

In determining any such application for approval, the Minister may require such other documents or evidence as the Minister may determine including such evidence which may satisfy him that the licensed housing developer is financially capable of refunding to the purchasers and their financiers all the moneys paid by them to the licensed housing developer if the Minister approves such application. When giving his approval, the Minister may impose such conditions as he may deem fit and proper.

If the Minister approves the application, the following shall apply:

* the decision of the Minister shall be final and shall not be questioned in any court and it shall be binding on the licensed housing developer and all the purchasers and no injunction shall be granted to restrain any person from carrying out the decision of the Minister.

* all the SPAs including that of the remaining purchasers who have not agreed to the termination shall be deemed to have been duly terminated.

* the licensed housing developer shall within 14 days from the date of receipt of the Minister’s approval inform all the purchasers in writing of the Minister’s decision.

* the licensed housing developer shall refund fully all moneys received by the licensed housing developer from the respective purchasers free of any interest within the period stated in the Minister’s approval.

* upon full receipt of the aforesaid refund, the purchasers shall forthwith cause all encumbrances on the land to be removed and the cost and expense for such removal shall be borne by and may be claimed as a civil debt from the housing developer.

The penalty for non-compliance with this section is a fine not exceeding RM50,000 and to a further fine not exceeding RM5,000 for every day during which the offence continues after conviction.

Powers of Investigation and Enforcement

Under the principal Act, the powers of investigation of the Controller or an Inspector are wholly inadequate. S 10(1) empowers the Controller or an Inspector to investigate from time to time under conditions of secrecy into the affairs of or into the accounting or other records of any housing developer and S 10(3) of the principal Act gives the Controller or an Inspector the right of access at all times to the accounting and other records of the housing developer or to require any person to provide such explanation or information as he may desire. As the Controller and the Inspectors do not have the powers to enter, search, seize and arrest, the Controller and the Inspectors are powerless as many a time evidence is destroyed before the Ministry could even act on an errant housing developer.

The Amending Act deletes s 10(3) of the principal Act and inserts 10 new sections (ss 10A – 10J) to enhance the investigation and enforcement powers of the Controller and the Inspectors. The new sections are grouped together with s 10 under Part IV. However, in order to prevent any abuse of power by any Inspector, the new ss 10I and 10J provide that no Inspector shall be entitled to exercise any of the powers under Part IV without the prior authorisation of the Controller and if asked, the Inspector is required to produce such written authorization from the Controller.

The new s 10A provides that an Inspector may with a warrant of search issued by a magistrate at any time day or night with or without police assistance enter into any premises and search the premises and any person therein and seize or detain any property or document. If it is necessary, an Inspector may break open any outer or inner door of such premises and enter thereinto. The magistrate may issue the warrant if there is reasonable cause to believe that any premises have been used for or there is on any premises evidence necessary to establish the commission of an offence under the Act. However, if an Inspector has reasonable cause to suspect that by reason of delay in obtaining a search warrant, the investigation would be adversely affected or evidence of the commission of an offence is likely to be tampered with, removed, damaged or destroyed, the Inspector may enter the premises and exercise all those powers as if he were authorized to do so by a warrant of search. Having said that, the Inspector must still have obtained the prior authorisation of the Controller as required under the new s 10J. The other sub-sections of s 10A provide for the preparation of a search list and set down the procedure to be followed for the release of properties seized.

The new s 10B entitled “Search of Person” deals with a body search and a person may be detained for such period as may be necessary to have the search carried out which shall not exceed 24 hours without the authorisation of the magistrate. No female person shall be searched except by a female Inspector. The new s10C prohibits anyone from obstructing an Inspector in various specified ways from exercising his powers of entry, search, seizure and detention. The new s 10D empowers an Inspector to require the translation to be done by the person possessing any book or document which is not in Bahasa Malaysia or English into Bahasa Malaysia.

Under the new s 10E entitled “Power to examine persons”, if an Inspector suspects any person to have committed an offence under the Act, he may order a person to be examined orally in relation to any matter or order the person to produce any book, document or thing which may assist in the investigation into the offence or by written notice require the person to furnish a statement in writing made on oath or affirmation providing information which may assist in the investigation. The section also sets out the procedure of carrying out the examination in addition to empowering the Inspector to seize any property produced before him or use any record of an examination for the purposes of prosecuting the accused person or another person whether under the Act or any other written law.

The new s 10F authorises an Inspector to carry out investigation on any past or present business associate or any person who is or who was concerned in the control or management of the affairs of the suspected offender. The new s 10G provides for another method of investigation to be conducted by a police or public officer in which case the Controller and the Inspector shall render the necessary assistance to the police or public officer. The new s 10H protects any informer in any civil or criminal proceedings unless in a trial for any offence under the Act, the court believes that the informer willfully made a false statement or in any other proceeding the court feels that justice requires the disclosure of the informer.