Blacklisting not a cure for late, sick and abandoned housing projects

• The 109 developers blacklisted were mostly “due to non-compliance with regulatory requirements for their projects”. These administrative non-compliances pale against the clear violation of the abandoned housing projects, which should have been hauled to court for their blatant crime. 

It was recently reported that the Housing and Local Government Ministry (KPKT) has blacklisted 109 “errant developers”​ and their boards of directors.

Minister Nga Kor Ming said the move is aimed at curbing the practice of using new companies to hide their previous improper conduct.

“The majority of the violations involve failing to submit development status reports and audit reports to the authorities,” said Nga.

While the move is a step towards better control, the National House Buyers Association (HBA) would like to point out that blacklisting housing developers is not the answer to all of their follies, as the compounds are but a meagre sum that is negligible to the developers.

You think ‘blacklisting’ will stigmatise them?

On top of that, does the ministry not know that every property developer sets up separate subsidiaries or associate companies to undertake property development in Malaysia? This is called “risk spreading” or making itself “bankruptcy remote”. It’s considered good “tactical” administrative sense; because when one project fails, the parent and other companies are not affected. They are separate legal entities in law.

So, those problematic developers will set up separate companies to undertake other developments to circumvent the “blacklisting”. What is stopping these individuals from forming other companies using proxies? They will not use the same board of directors, whose names appear in the housing ministry’s record. They will proceed with using their grandmothers, in-laws or “out-laws”’ names. You think the ministry has got a record of their family trees to link them to the blacklisted companies and their board of directors?

There were past cases where the blacklisting was undertaken against the board of directors at the material time the project was abandoned. We have time and again reminded the past ministers and their charge that they must blacklist the entire board of directors from the day the developers’ license was granted by the ministry until the date the project was abandoned. This way you can “capture” the entire list of management personnel changes from beginning to end.

Besides blacklisting the company directors, further action must be taken against the wrongdoers. Look into Section 22 of the Housing Development (Control & Licensing) Act 1966 (HDA) via-a-vis: “Liability of director, manager and other officials for offences committed by companies and liability of a person for acts done by others”.

The objective of housing policy deterrents is to eliminate recalcitrant developers and protect house buyers’ rights. So, shouldn’t the ministry figure out how to go after those who control the company financially or fiscally? Perhaps, the government can name and shame the shareholders or even name the “shadow” ownership of these development companies and their holding companies, apart from their directors.

To set the record straight and to avoid institutional amnesia, it was HBA that lobbied and advocated for the “Public List of Abandoned Projects and Recalcitrant Developers” two decades ago, whilst the ministry was under the then leadership of MCA’s Datuk Seri Ong Kah Ting (now Tan Sri). We also had discussions, which the then Attorney General, Tan Sri Abd Ghani Patail collectively agreed with HBA that consumer interest should be prioritised against some misconceived notion of developers having privacy rights. This simple administrative step provided some temporary avenues for house buyers to research on the most important investments of their lives before entering into the contracts. This is the original intention of why we have a list of errant developers listed on the ministry’s website today.

For clarity, it is noted that when an offence is compounded, it generally means that the offender would not be stigmatised with a criminal record.

Some might wonder, why is KPKT reluctant to prosecute errant developers under laws that have penal consequences. The minister talks a tough game, but in reality, his words do not meet his ministry’s action.

The right question to ask the minister is: “How many developers of abandoned housing projects have been prosecuted in the Court of Law under Section 18A of the HDA since the law was amended on June 1, 2015?”

Criminalising housing abandonment

The pertinent amendments to the HDA were on the issue of criminalising housing project abandonment. This new amendment (which is actually not that new, since almost a decade has passed since June 1, 2015) makes it a crime for housing developers to abandon their projects, with jail sentences attached.

The said Section 18A states: “that any licensed housing developer who abandons or causes to be abandoned a housing development or any phase of a housing development which the licensed housing developer is engaged in, carries on, undertakes or causes to be undertaken shall be guilty of an offence and shall, on conviction, be liable to a fine which shall not be less than RM250,000 but which shall not exceed RM500,000 or to imprisonment for a term not exceeding three years or to both”.

Now, here comes the million-ringgit question. With so many housing projects abandoned, how many delinquent developers have been punished or even prosecuted under this Section 18A of HDA?

Not a single one, as far as we know.

Enforcement is still the key on whether the law is effective in protecting property buyers.

Read also 
Invoke Section 18A of the HDA to prosecute delinquent housing developers

The best legislation would remain as an ornamental piece unless strict enforcement is carried out against offenders. The public relying on the legislation is often let down by the enforcers. It is only good on paper and will continue to remain in our archives unless the existing laws are used to their full capacity.

Why is KPKT behaving like a toothless tiger when it comes to house buyers’ rights and entitlement, when the law and policy have armed this democratically-elected government to safeguard its rakyat’s interest?

The 109 developers blacklisted were mostly “due to non-compliance with regulatory requirements for their projects”. These are merely administrative compliances, where those licensed housing developers have failed/delayed/neglected to comply within their stipulated period to do so. These administrative non-compliances pale against the clear violation of the abandoned housing projects, which should have been hauled to court for their blatant crime.

Alas, the ministry seems to have got its priorities wrong. At this point, we have to wonder why there seems to be an insistent need to shield such criminality, when the policy and the law say otherwise.

What about those ‘unlicensed’ housing developers?

The housing ministry has updated its list of “unlicensed” housing developers on its website. As at March 31, there are a total of 173 housing developers which are “unlicensed” and have inflicted harm to their victims throughout Peninsular Malaysia.

The question is, why do these wayward developers go unpunished? Aren’t these cases more severe than those who fail to adhere to administrative compliances? We are not saying that these non-compliance failures are unimportant, but the ministry must weigh its gravity of harm inflicted on the innocent buyers.

We wonder whether there is a competition amongst ministries to collect the highest fines, with the minister boasting that KPKT has collected RM9.03 million in fines last year? 

Don’t just be quick in punishing these licensed housing developers — go after those unlicensed ones! After all, the housing laws and policy priority ought to be protecting house buyers’ interest rather than filling the government coffers.

Developers getting away with non-compliance of Housing Tribunal awards

Section 16AD states:
1) Any person who fails to comply with an award made by the Tribunal within the period specified by the Tribunal commits an offence and shall on conviction be liable to a fine which shall not be less than RM10,000 but which shall not exceed RM50,000 or to imprisonment for a term not exceeding two years or to both.
2) In the case of a continuing offence, the offender shall, in addition to the penalties under subsection (1), be liable to a fine not exceeding RM1,000 for each day or part of a day during which the offence continues after conviction.

There have been numerous cases of non-compliance with Tribunal awards, where the developers have refused/neglected/defaulted to obey the awards.
Many successful litigants have been let down by the lax and lack of prosecution proceedings against such defaulting developers. 
Again, we ask, when will KPKT and its enforcement agencies act against such injustice? 

This article is written by Datuk Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA).
HBA is a voluntary non-government and not-for-profit organisation manned wholly by volunteers.
HBA can be contacted at: 
Email: [email protected]
Website: www.hba.org.my 
Tel: +6012 334 5676
The views expressed are the writers’ and do not necessarily reflect EdgeProp’s.

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