Housing Development Act: An overview and its wide-reaching powers

By Datuk Chang Kim Loong

 

IN the earlier article, we spoke about how the current Housing Development (Control & Licensing) Act, 1966 has more than enough powers to curb and punish errant housing developers, to safeguard the legitimate interest of buyers.

Let us look at some of the existing stringent rules and safety nets that are already within the existing laws for everyone to take note.

Sec 7A– (Duties to maintain HD Acc)

7A (4) The licensed housing developer shall not withdraw any money from the Housing Development Account except as authorised by regulations made under this Act.

7A (10) Any housing developer who contravenes or fails to comply with this section shall be guilty of an offence and shall, on conviction, be liable to a fine which shall not be less than two hundred and fifty thousand ringgit but which shall not exceed five hundred thousand ringgit and shall also be liable to imprisonment for a term not exceeding three years or to both.

Sec 7C – Freezing of the Housing Development Account

(1) If the Controller has reason to believe that a licensed housing developer is carrying on his business in a manner detrimental to the interest of the purchasers or is contravening any of the provision of this Act, the Controller may in writing order a freeze on the Housing Development Account and direct the bank or finance company, as the case may be, not to part with, deal in or otherwise permit any withdrawal of any moneys from the Housing Development Account until the order is revoked or varied or unless in accordance with any conditions as may be imposed by the Controller at his absolute discretion from time to time during the currency of the order.

Even with the HD Account, no great measure at preventing misappropriation of buyers’ money, has proved to be a great “burden” to those errant developers, going by their determination to avoid it. Meantime, we wonder whether the safety net was cast out, if ever at all, to salvage the failing projects.

This no more a million-ringgit question but again, how many of these defaulting developers have been prosecuted so far?

Here are other protections under the said legislation:

Sec 7 – Duties of a licensed housing developer

Sec 7(f) not later than the 21st day of January and the 21st day of July of each year or at such frequency as may be determined by the Controller from time to time or upon the request of the Controller, send to the Controller a correct and complete statement in writing made on oath or affirmation, in such form and containing such information as the Controller may from time to time determine, on the progress of the housing development which the housing developer is engaged in, carries on or undertakes or causes to be undertaken until certificate of completion and compliance have been issued for all the housing accommodation in that housing development

If it has been constantly and effectively monitored by the Minister and those under his or her charge with qualified personnel, symptoms of sickness (of a failing housing project) would have been diagnosed. Is something lacking in supervisory role vide Form 7(f)?      

Section 10A – Powers of entry, search and seizure

This Section was copied from the Income Tax Act and was included in the HDA amended in 2002 but has this ection been invoked to instill fear to the spine of those errant developers?

If so, how do you account for those recalcitrant / repeat offenders? It can’t possibly be that the Ministry is shy of publicity by not highlighting their achievement to the mass media.   

Sec 11 – Powers of the Minister to give directions for the purpose of safeguarding the interests of purchasers.

(1) Where on his own volition a licensed housing developer informs the Controller or where as a result of an investigation made under section 10 or for any other reason the Controller is of the opinion that the licensed housing developer becomes unable to meet his obligations to his purchasers or is about to suspend his building operations or is carrying on his business in a manner detrimental to the interests of his purchasers, the Minister may without prejudice to the generality of the powers of the Minister to give directions under section 12 for the purpose of safeguarding the interests of the purchasers of the licensed housing developer –

(a) direct the licensed housing developer in question to take such steps as he may consider necessary to rectify any matter or circumstance;

(b) direct that a person be appointed or himself appoint a person to advise the licensed housing developer in the conduct of his business;

(c) direct a company to assume control and carry on the business of the housing developer upon such terms and conditions as the Minister may determine;

(ca) certify that the licensed housing developer has abandoned the housing development;

(d) direct that the licensed housing developer present a petition to the High Court for the winding up of his business; or

(e) take such action as the Minister may consider necessary in the circumstances of the case for carrying into effect the provisions of this Act.

Stories of developers “falling sick” and incapable of continuing with their housing project is not something new. Just recently, local media highlighted yet another outcry from buyers suffering from another abandoned housing scheme.

Sympathies for these affected buyers are all written on the walls but what possibly can they do?

Under Section 10 of the HDA, it is stipulated that the Minister may direct the Controller or an Inspector to make investigation (under condition of secrecy investigate the commission of any offence under this Act or investigate into the affairs of or into the accounting or other records of any housing developer) if he “has reason to believe” (ada sebab untuk mempercayai) that the housing developer in question is carrying on his business in a manner detrimental to his purchaser (menjalankan kegiatan yang memudaratkan kepentingan pembeli); or “has assets insufficient to meet his liability” (atau sudah jatuh sakit).

This Section is further enhanced and amplified with the inclusion of Section 11 and 10A (Power of entry, search and seizure) and all the Sections as we earlier referred.

The Minister and the ministry have wide ranging powers to intervene and salvage a “sick and problematic project” and to offer “treatment to provide cure”, yet look at the numbers of abandoned projects emerging a dire financial picture for naïve and innocent buyers.

Individuals and the community are being harmed by the lax in enforcement and monitoring mechanism.

Conclusion

Public relying on the legislation are often get let down by the enforcers. It is only good on paper and it will continue to remain in our archives unless the existing laws are used to their full capacity.

The problem of enforcement was not because of the lack of laws. Enforcement programmes must be organised.

Do we honestly need new laws to purportedly “offer more protection” for the house buyers when the existing ones are adequate? Or are the Government blaming the “insufficient tools” vis-à-vis housing laws?

The public has been relying on the housing legislation and enforcers to protect, police, monitor and supervise the housing developers (whom they licensed) in their quest for homeownership and many are fed-up with the lack of enforcement when problems surfaced. Lack of enforcement and monitoring weakens the provisions of the Act.

Let’s face it: there is no solution to abandonment. We just have to prevent it from happening. Could pre-emptive measures be adopted and enforcement organised to avoid future abandonments? Your guess is as good as mine! – July 20, 2021

 

Datuk Chang Kim Loong is the honorary secretary general of the National House Buyers Association (HBA), a non-political, not-for-profit organisation manned by volunteers.

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

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