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New Housing Development Regulations Print E-mail
Saturday, 21 December 2002

Housing Developers (Control and Licensing) Amendment) Regulations 2002
Housing Developers (Housing Development Account) Amendment) Regulations 2002
Housing Development (The Tribunal For Homebuyer Claims) Regulations 2002
Housing Development (Compounding of Offences) Regulations 2002

Shamsulbahri bin Ibrahim
Legal Adviser,
Ministry of Housing and Local Government
and
Roger Tan Kor Mee
Advocate & Solicitor

This article was published in the ©Property Times, New Straits Times on 21 December 2002.
Reproduced with permission. All rights reserved.

Background

The Housing Developers (Control and Licensing) (Amendment) Act 2002 which was gazetted on 31 January 2002 came into operation on 1 December 2002. With that, the Housing Developers (Control and Licensing) Act 1966 will now be known as the Housing Development (Control and Licensing) Act 1966 (“the Act”).

Together with the Amendment Act 2002, the following regulations also came into operation on 1 December 2002:

(1) the Housing Developers (Control and Licensing) (Amendment) Regulations 2002 which seek to amend the provisions of Housing Developers (Control and Licensing) Regulations 1989 including the statutory sale and purchase agreements as set out in Schedule G (for landed properties) and Schedule H (for sub-divided buildings such as apartment/condominium unites) of the 1989 Regulations. After 1 December 2002, the 1989 Regulations will be known as Housing Development (Control and Licensing) Regulations 1989 (“HDA Regulations”).

(2) the Housing Developers (Housing Development Account) (Amendment) Regulations 2002 will amend the provisions of the Housing Developers (Housing Development Account) Regulations 1991 which will be known as the Housing Development (Housing Development Account) Regulations 1991 after 1 December 2002 (“HDA Account Regulations”).

(3) the Housing Development (The Tribunal For Homebuyer Claims) Regulations 2002 which set out the procedures for the administration of the Tribunal for Homebuyer Claims set up under the Act.

(4) the Housing Development (Compounding of Offences) Regulations 2002 will stipulate that certain offences under the Act may be compounded by the Controller of Housing (“Controller”).

Housing Developers (Control and Licensing) (Amendment) Regulations 2002

The main amendments are as follows:

(1) a housing developer is not required to follow the statutory Schedule G or H sale and purchase agreement if at the time of the contract of sale, the certificate of fitness for occupation (“CFO”) for the property has been issued and a certified true copy of which has been given to the purchaser.
This is to encourage the “build then sell” concept, which will prevent innocent purchasers becoming victims of abandoned projects if more developers would adopt this concept by selling completed properties together with CFO.

(2) a purchaser’s solicitor shall be entitled to a complete set of the contract of sale including the original and duplicate copies and all annexures free of charge from the developer subject to the undertaking of the purchaser’s solicitor to return the said documents intact in the event the contract of sale is not executed by the purchaser within 14 days from the date of receipt of such documents unless otherwise agreed by the developer.

This new regulation is to prevent the developer or his solicitor from withholding the pre-printed sale and purchase agreements from the purchaser or his solicitor unless certain fees have been paid by the latter. It also recognises the right of a purchaser to independent legal representation, that is, to have his own choice of lawyer representing him.

(3) as regards the sale of a property to which no separate or strata title has been issued at the time of the sale, the developer can only impose an administrative fee or any fee by whatever name called not exceeding 0.5% of the purchase price or RM500, whichever is the lower for giving its consent to an assignment, that is, for a purchaser or subsequent purchaser to resell the property. However, the developer cannot impose any fee at all for giving his consent if the assignment is for the purpose of securing financing in whole or in part for the purchase of the property. This regulation cannot be excluded by any agreement.

This partly confirms the 1992 High Court decision of Justice Datuk Mohamed Dzaiddin (as the Chief Justice then was) in Lim Seang Mee v Keepahead Holdings Sdn Bhd which was later upheld by the Supreme Court that a fair reasonable amount for endorsing the deed of assignment would be a sum of RM500. It also makes it an offence if any developer imposes a higher fee for giving his consent for the sale or if the developer imposes any fee in any amount at all for giving his consent to a purchaser for the purpose of obtaining financing.

(4) any advertisement and sale must be in accordance with the advertisement and sale permit as approved by the Controller. When applying for the permit, if the developer supplies any misleading statement, false representation or description of the particulars or information in the approved building plans and proposed advertisement or any other information as required by the Controller, he will be committing an offence under the HDA Regulations. In this respect, advertisement conveyed through the internet or in films such as via videotape, compact disc or video or digital compact disc will also be caught under the HDA Regulations.

(5) applications to renew the housing developer’s licence or the advertisement and sale permit have to be made 60 days before their expiry.

(6) other amendments include requiring the developer to provide more particulars when applying or renewing the licence and permit under the HDA Regulations. For example, the developer when applying for the housing developer’s licence is now required, among other things, to provide an estimated statement of projected cash flow and the latest form of annual returns to the Controller.

With these amendments, we wish to draw the attention of all the parties including the developer and his solicitors, architects, engineers and quantity surveyors and all those who aid, abet, counsel, procure or command the commission of the above offences that the penalty for contravening the HDA Regulations is a fine not exceeding RM5,000 or to a term of imprisonment not exceeding 3 years or to both upon conviction.

Housing Developers (Housing Development Account) (Amendment) Regulations 2002

There are substantial amendments to the Housing Developers (Housing Development Account) Regulations 1991. The HDA Account Regulations govern the operation and management of a housing development account which every licensed housing developer is required to open under the Act within 14 days after the issuance of the housing developer’s licence.

Exemption

The developer is exempted from the HDA Account Regulations, that is, to open and maintain a HDA Account if at the time of the sale, CFO for the property has already been issued and a certified true copy has also been given to the purchaser. Again, this is to promote the “build then sell” concept.

Opening of the HDA Account

Within 14 days after being informed by the purchaser of the name and address of his financier, the developer has to notify the purchaser’s financier of the name and address of the bank in which the HDA Account is kept and its account number.

Deposit made by the developer

The sum of RM200,000 which the developer is required to deposit with the Controller when applying for the housing developer’s licence can be made by way of

(a) cash;

(b) bank guarantee; or

(c) having a balance of RM200,000.00 at any one time in the HDA Account.

Deposit of all monies paid by purchaser

The developer is required within 2 banking days after the payment is made in cash, to issue a statement to the purchaser that such payment has been credited into the HDA Account.

Purchaser’s financier to pay direct into the HDA Account

A new regulation 4A has been inserted to require the purchaser’s financier to deposit, within 21 working days after receiving invoice sent by the developer in respect of the progressive payments relating to the purchase of the property by the purchaser, directly any payment made into the HDA Account with a statement to the developer and the purchaser that such payment has been made. Further, any payment to the developer’s solicitor as the stakeholder shall be paid directly to the solicitor with a statement to the developer and the purchaser that such payment has been made.
Withdrawals of monies from the HDA Account

The main amendments are as follows:

(a) the payment of legal fees in respect of the sale and purchase agreement of the housing accommodation will no longer be an item which justifies a withdrawal of any money from the HDA Account.

(b) withdrawals of monies from the HDA Account for the cost of carrying out soil investigations; earthworks; foundation works; building works; external works; site and boundary survey for each lot; infrastructure works; relocation of squatters; works related to infrastructure preparation instructed by the appropriate authorities; and other works have to be in proportion to the housing accommodations that have been approved under the developer’s licence.

(c) monies in the HDA Account may also be withdrawn for the purpose of meeting:

    (i) any cost and expense incurred by persons specified by the Minister in carrying out the Minister's direction or decision under section 11(1A) of  the Act;

    (ii) the payment of any liquidated damages pursuant to the housing development;

    (iii) the payment of any defect, shrinkage or other fault pertaining to the project during the defect liability period.

Conditions for withdrawal of monies from HDA Account.

Whenever a claim is made by the developer from the HDA Account, a copy of the notice of claim shall concurrently be submitted to the Controller.

Withdrawal of surplus monies from HDA Account

The developer can only withdraw any surplus monies in the HDA Account after:

(a) the issuance of the CFO for the housing development;

(b) the approval of the Controller; and

(c)  deducting the:-

    (i) the amount required to complete the housing development and the sale and purchase under all the sale and purchase agreements in respect of the housing development;

    (ii) 10% of the amount referred to in paragraph (i) for contingencies and inflation;

    (iii) all the claims on liquidated damages that have been settled.

Withdrawal on furnishing of banker's guarantee.

Regulation 10 is deleted and this means the developer can no longer withdraw monies in the HDA Account by furnishing to the Controller a banker's guarantee for such amount.

Withdrawal of all monies in HDA Account.

Regulation 11 has been amended to provide that withdrawal of all monies remaining in the HDA Account now require the approval of the Controller. Previously, the developer could withdraw all the monies in the HDA Account without any approval from any authority when the housing development has been completed and the solicitor for the developer has certified that the obligations of the developer in respect of transfer of title under all the sale and purchase agreements in that housing development have been fulfilled.

Controller may use money in the HDA Account

The new Regulation 11A entitles the Controller to use the monies in the HDA Account to ensure the completion of the development if he is satisfied that the development of a housing development is detrimental to the interest of the purchasers.

Auditor to make annual report

The new Regulations 12A and 12B provide that every auditor of a developer shall, within 6 months after the close of the financial year of such developer, make an annual report to the Controller as to the HDA Account and shall state in every such report whether or not in his opinion:-

(a) each and every deposit and withdrawal recorded in the account are in accordance with HDA Account Regulations;

(b) the accounting and the records examined by him are properly kept; and

(c) if the auditor has called for an explanation or information from the officers or agents of the developer, such explanation or information has been satisfactory.

Further, the auditor is required to immediately lodge a report to the Controller together with a full statement and relevant documents if he found any fraudulent act or misappropriation of money in the HDA Account and the auditor is bound to supply any information or document if requested by the Controller.

Penalty

The new Regulation 13A stipulates that any person who contravenes any provision under the HDA Account Regulations shall on conviction be liable to a fine not exceeding RM5,000 or to imprisonment for a term not exceeding 3 years or to both. In our opinion, “person” here includes the auditor, the purchaser’s financier and the banks which permit withdrawals of monies from the HDA Account in breach of the HDA Account Regulations.

Housing Development (The Tribunal For Homebuyer Claims) Regulations 2002

The Tribunal Regulations set out detailed but simple procedures for a homebuyer to file a claim against the developer. In order to preserve uniformity of laws, the procedures are almost similar to that of the Consumer Claims Tribunal established under the Consumer Protection Act 1999.
The main points to note are these:

Jurisdiction

The Tribunal will hear only claims brought by a homebuyer. A developer is not entitled to institute or file any claim in the Tribunal, but he can raise a counter-claim when responding to the claim filed by the homebuyer. The Tribunal will still hear the counter-claim even if the homebuyer’s original claim is later withdrawn or struck out.

The Tribunal should always attempt to assist the disputing parties to negotiate for a settlement before it proceeds to determine the dispute unless it is not appropriate for the Tribunal to do so or the parties are unable to reach an agreed settlement.

The Tribunal only hears a claim where the total amount in respect of which an award of the Tribunal is sought does not exceed RM25,000 unless the parties agree in writing that the Tribunal shall hear the claim in excess of the amount. However, the agreement must be entered into before the claim is lodged or if the claim has been lodged, at any time before the Tribunal has recorded an agreed settlement of the claim. Otherwise, the homebuyer should file his claim in excess of RM25,000 at the Sessions Court.

The claim must be based on a cause of action arising out of the sale and purchase agreement or a previous dealing between the homebuyer and the developer no later than 12 months from the date of issuance of the CFO for the property or the expiry date of the defects liability period as set out in the sale and purchase agreement.

Homebuyer

A “homebuyer” is a purchaser who has bought a property or has a dealing with a licensed housing developer including the second purchaser who has bought the property from the first purchaser. In other words, the Tribunal will not hear any third or subsequent purchaser of the property.

Legal representation

Unlike the Tribunal for Consumer Claims where legal representation is absolutely disallowed, lawyers are allowed in the Tribunal if in the opinion of the Tribunal the matter in question involves complex issues of law and the party will suffer severe financial hardship if he is not represented by a lawyer provided that if one party is allowed to be represented by a lawyer then the other party shall also be so entitled.

Housing Development (Compounding of Offences) Regulations 2002

These regulations provide that certain minor offences under the Act may be compounded by the Controller or any officer authorized by the Controller. The offer to compound an offence is for a period of 14 days, and if full payment of the sum offered is made on or before the expiry of 14 days, no further proceedings shall be taken against such person. Otherwise prosecution will be instituted without further notice.

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