By Chang Kim Loong
IN addition to the current task of regulating residential property development (RPD) projects, there have been suggestions by the Ministry of Housing and Local Government for it to also regulate commercial property development (CPD) projects.
Currently, the technical aspects of CPD projects such as the Development Order are regulated by the local councils where the projects are located. This does give a minimum level of protection to buyers of such projects.
A focus group was set up to discuss, obtain feedback and draft the proposed Commercial Development Act (CDAct).
The group comprising stakeholders across the property sector including government agencies, regulatory bodies, property developers, professional bodies, the National House Buyers Association (HBA) and Association of Abandoned Property Owners, had convened a meeting in Putrajaya on Feb 12.
RPD projects can be defined vis-à-vis as projects undertaken for purposes of private dwelling and are currently governed under the Housing Development (Control and Licensing) Act 1966 (HDAct).
They include landed residential projects and residential stratified high-rise projects such as apartments and condominiums. It should also be noted that projects meant for residential dwelling but developed on land designated as commercial status such as serviced apartments and also the Small Office Home Office (SOHO) which incorporates elements of housing accommodation are already governed under the HDAct.
Should the Housing Ministry be concerned over the plight of buyers of “part housing and part business” or mixed development property constructed on commercial land, the definition section of the HDAct on “housing accommodation” can and should be amended to include such mixed property, if the current definition is found to be inadequate.
CPD projects, on the other hand, are property development projects which are commercial in nature and include resorts and hotels, shopping malls, shophouses/ offices/lots, factory buildings, medical centres, and office buildings.
Lately, there have been CPD projects which are selling stratified office buildings bearing concepts such as Small Office Flexible Office (SOFO), Small Office Virtual/Versatile Office (SOVO), Small Office Modular Office (SOMO), Small Office Lifestyle Office (SOLO), and Small Office Cyber Office (SOCO) catering to different segments of purchasers.
From our observation, the invitees of the focus group appeared to be in a daze as to the extent of “commercial properties” proposed to be regulated under the proposed CDAct. The appointed facilitators were of little or no help since they, too, were unsure as to the types of properties falling within the proposed CDAct.
The HBA recorded its concerns and reservation to the suggestions that the Housing Ministry is to undertake the task of regulating the CPD industry for the reasons outlined below.
Unresolved problematic housing projects
The residential property sector in Malaysia appears to be functioning well but is still fraught with many issues, some of which are decades old.
The common problems plaguing RPD projects range from simple problems such as shoddy workmanship and inferior quality standards to more complex problems such as abandoned projects.
Some house buyers are still waiting for their projects to be completed more than 20 years after signing the sale and purchase agreement. The Housing Ministry has released the updates of “List of blacklisted housing developers” in Malaysia as of Feb 29 inter-alia:
List of unlicensed housing developers (106 developers)
List of developers who defied the Tribunal (TTPR) Awards (299 developers)
List of developers who failed to settle their compound fines (380 developers)
List of developers involved in abandoned housing projects (188 projects)
To give credit where it is due, the Housing Ministry has been pro-actively working together with HBA and other like-minded NGOs to attempt to resolve some of these problems.
However, every year, more problems arise in the RPD sector such as new delayed, sick or abandoned housing projects. Under the HDAct, the Housing Ministry’s role is wide ranging, covering licensing, policy making and enforcement to investigation.
For example: The current HDAct provides for legislation in areas such as Section 7A (opening of housing development account) and Sections 7(f) (lodgment of quarterly/biannual report – a correct and complete statement made under oath in such form and substance on the progress of the housing development undertaken until the certificate of completion and compliance (CCC) is issued.
Other legislation include Section 10 (Investigation and Enforcement); Section 10A (Power of Entry, Search and Seizure); Section 10E (Power to examine person/s); Section 11 (Power of the Minister to give directions for the purpose of safeguarding the interests of the purchasers); Section 12 (Power of the Minister to give general directions) and Section 18A (Criminalising of abandonment of housing development).
The Housing Ministry already has its hands full with the RPD sector. Would it have the capability and resources to effectively regulate both the RPD and CPD at the same time?
If the ministry is in the position to regulate CPD, then HBA believes it should use the same resources to focus on resolving consistent problems faced by purchasers such as abandoned projects, and prosecute defiant and wayward developers.
Despite there being provisions for enforcement, why has no developer been jailed for abandoning projects or operating without a valid housing developer’s licence? Why are the statistics for “delayed”, “sick” and “abandoned” housing projects still increasing?
Sick projects are those facing delays of more than 30% compared to the actual expected development or the expiry period of the sale and purchase agreement. There are a whopping 316 “sick” housing projects in Peninsular Malaysia as of Jan 31.
Why has the process of vacant possession with strata titles been derailed? Why have disobedient liquidators (“defacto” housing developers) not been reined in? Why are developers allowed to continue to collect “booking fees” when it is illegal?
We have all the right laws but lack of enforcement. It is quite logical that if the Housing Ministry is unable to find solutions to the problems within the RPD sector, it is unlikely it will fare any better in tackling CPD.
Another ‘kettle of fish’?
Buyers of CPD projects can be considered to be more sophisticated investors who do not need the protection of the Ministry of Housing or whichever ministry is tasked to regulate CPD.
The majority of RPD buyers can be categorised as the average rakyat who just wants a roof over his head. Most house buyers are not financially savvy or legally trained and would not see the need to engage an independent financial or legal adviser when buying a house.
To them, a house is not an investment but just a home for their own stay and shelter or perhaps as a long-term savings asset for their children’s education or their own retirement plans. They take pride in owning a home. This group of layman buyers rightfully deserve the protection of the Housing Ministry.
CPD projects, on the other hand, attract a different segment of buyers who are not looking for a roof over their head or savings asset for their children’s education but as an investment tool and business abode. Buyers of CPD projects can be considered as more sophisticated investors who are supposed to understand the risk associated with such investments.
This group of sophisticated investors have the learning curve and are expected to engage their own independent financial or legal adviser when buying into CPD projects. Perhaps, once the Housing Ministry puts its house in order, then the government could reconsider such “protection” for this category of buyers.
The Housing Ministry may not have sufficient expertise and resources to take on the role as the regulator for the CPD industry. The technical aspects of CPD are different from RPD and there are also different social and economic drivers between the two types of projects.
The Housing Ministry could do more harm than good to the CPD industry if it takes on the role that it is currently not equipped to handle.
The ministry should focus on its very role as the regulator, guardian and policing for the RPD sector as there is still much to do to tackle the current problems affecting the industry.
It should not stretch itself too thin and become inefficient. Its plate is full of existing problems which have issues of neglect, failure, omission and inability to resolve and remain stagnant. The Housing Ministry should not take on the additional role to regulate the CPD sector. Don’t bite off more than you can chew. Stay on the course until current problematic issues are fully resolved.
Datuk Chang Kim Loong is the secretary-general of the National House Buyers Association (HBA)
