To sell-and-build or build-and-sell?

The Sunday Star
Roger Tan

WHEN Malaysia should adopt the “build-then-sell” (BTS) concept seems to be a hot issue these days among housing industry players, especially after Prime Minister Datuk Seri Abdullah Ahmad Badawi said in 2004 that we should look into the feasibility of adopting it.

But how feasible is the BTS concept when for the past 40 years the inveterate “sell-then-build” (STB) system has been so ingrained in our housing industry?

Firstly, it must be emphasised that our current laws do, in fact, encourage developers to practise BTS as the STB system has also over the years become the bête noire of those who champion the rights of house buyers.

Currently, a developer is not required to open and maintain a housing development account or adopt the statutory Schedule G or H sale and purchase agreement (SPA) if the properties offered for sale have already been issued with the certificates of fitness for occupation (CFO).

This is partly the result of a revamp of the housing laws pushed through by the Housing and Local Government Minister Datuk Seri Ong Ka Ting in 2002.

During his first term of office, Ong managed to revamp our housing laws, and some of the changes include:

- The inception of the Tribunal for Homebuyer Claims.

- Extending protection to purchasers of housing units built by Federal and State government agencies and statutory bodies.

- Enhancing the investigation and enforcement powers of housing inspectors as well as increasing manifold, penalties for various offences.

- Requiring developers to submit periodical progress reports.

- Amending the Uniform Building By-Law 25 to state that in the event Form E has been submitted to a local authority and CFO is not issued within 14 days thereafter, then CFO will be deemed to be issued and this amendment has been gazetted by all the State Authorities.

- Giving the purchaser a right to terminate the statutory SPA due to his inability to obtain financing as a result of his ineligibility of income, in which case he is entitled to a refund of 99% of all monies paid to the developer.

But all these do not seem to impress the proponents of BTS who still feel that this is one concept which Malaysia should embrace as soon as possible. But groups like the National House Buyers Association do acknowledge that it may be too early for us to adopt a full form of BTS.

So they are now supporting a hybrid form of BTS whereby a developer can sell housing units before completion, but he may only collect a certain percentage of the purchase price (e.g. 10%) upfront with the balance payable only upon delivery of the housing unit with CFO. This system, first mooted by Ong, is better known as the 10/90 system.

The idea first came about in July 2004 after Ong’s trip to Australia to study the BTS concept practised there.

It appears to be modelled upon S9AA of the Sale of Land Act 1962 of the State of Victoria which provides as follows:

(1) A person shall not sell a lot in a plan of subdivision (whether certified or not) to anyone except a statutory body or authority if the plan has not been registered by the Registrar, unless-

(a) the contract for the sale of that lot provides that the deposit moneys payable by the purchaser are to be paid-

(i) to a legal practitioner or licensed estate agent acting for the vendor to be held by the legal practitioner or licensed estate agent on trust for the purchaser until the registration of the plan of subdivision; or

(ii) into a special purpose account in an authorised deposit-taking institution in Victoria specified by the vendor in the contract in the joint names of the purchaser and the vendor until the registration of the plan of subdivision; and

(b) the deposit moneys payable under the contract do not exceed 10 per cent of the purchase price of the lot.

(2) The deposit moneys paid by the purchaser prior to the registration of the plan under a prescribed contract of sale of a lot shall be paid (as the case requires)-

(a) to the legal practitioner or licensed estate agent acting for the vendor; or

(b) into a special purpose account in the authorised deposit-taking institution in Victoria specified in the contract in the joint names of the purchaser and the vendor.

(3) An account established under sub-section (2)(b) may be drawn upon only with the signature of both the vendor and the purchaser or the personal representative of the vendor or purchaser (as the case may be).

Much has been written elsewhere about the merits of the 10/90 system. But what are some of its drawbacks?

Firstly, section 9AA is not about selling and delivery of a housing unit. It is about a sale of land prior to the approval of plan. Thus in comparison, the issue of fairness does arise whether 10% is a reasonable sum to bind a developer as it is more akin to a situation where the winner takes all and the loser loses everything.
Secondly, is it fair for the purchaser to opt out of the sale if the completion of his housing unit is delayed when he can be adequately compensated with damages for late delivery?

Further, can a purchaser also opt out for any other reason? Whilst a developer is most likely to get the purchaser’s financier to undertake to pay the 90% of purchase price upon completion, there is really nothing to prevent a purchaser to opt out, say if upon completion the property price should plummet to a level which does not make sense for the purchaser to continue with his purchase.

Under these circumstances, is the developer entitled to specific performance? If not, will this not lead to the completed project being abandoned?

It is envisaged that under this practice, the developer will impose many conditions allowing him to withdraw from the contract, for example, if not many units are sold.

Financial institutions may not also come on board to finance a project unless a certain number of units have been pre-sold.

Therefore, is Schedule G or H SPA still required to be used? If so, it really does not make a lot of difference from the present system and the 10/90 system may in fact cause the purchaser to be embroiled in more legal battles over the current usual late delivery and poor workmanship complaints.

In this respect, it may not be so attractive for the developers to adopt the 10/90 system if they still have to comply with the existing strict housing development laws and State Governments’ polices on bumiputra ownership, low-cost housing and improvement service funds for infrastructure.

In fact, we should pride ourselves as one country which requires developers to follow a statutory SPA and open a housing development trust account compared to other countries which practise the STB concept.

What is more important is the provision of affordable housing to the people. The BTS and 10/90 concepts are more commercially-driven with little emphasis on the social aspect of a housing development.

While the purchaser’s rights may be strengthened under the 10/90 concept, he may be more disadvantaged economically as his need for affordable housing may no longer be within his reach.

We should focus more on the enforcement aspect and give a little more time for the 2002 amendments to bite in and if necessary, strengthen further the current laws.

Since the revamp of the housing laws in 2002, we have seen a vast improvement in the housing industry – reduction in abandoned projects, effective enforcement and effective dispute resolution by the Tribunal for Home Buyer claims.

It may be too soon to adopt a system which is not universally practised.

Roger Tan was a member of the Housing & Local Government Ministry’s Steering Committee on Legislative Drafting which drafted the 2002 amendments to the housing laws. He is currently also a member of the Bar Council.

He never came home from the walk

New Straits Times

By Lee Siew Lian and Dennis Wong

KUALA LUMPUR, July 2: In a Chinese cemetery just outside Yong Peng, Johor, is an empty tomb.

Retired contractor Tan Sue Yong had bought the burial plot and built the tomb some 20 years ago, in the cemetery somewhere along the road to Paloh.

Preparing for the inevitable is a common practice among older Chinese folk, especially those who came here from China to seek a better life, and Tan would stop by the tomb once in a while to clean it up.

Five years ago, the elderly 83-year-old went for a walk and did not come home. His family first searched along his usual route, then around the town, and eventually nationwide.

Neighbours, MCA branch members, the police, Rela volunteers, many people tried to help. His family put advertisements in the newspapers, but he could not be found.

Tan is still missing today. He would be 88 this year.

His family is still grappling with the consequences of not knowing where he is, or what happened to him, and whether he is still alive.

"It’s a terrible feeling, not knowing. There’s no closure," said his younger son, Roger.

Frustration and uncertainty have left lasting marks on the family.

Roger’s 81-year-old mother, Swee Mei, has recurring dreams about him. So does Roger and his other children, and grandchildren.

When they see him in their dreams, they beg him over and over again: "Tell us where you are."

And always, they wake up just as it seems he is about to speak.

A month ago, Roger’s niece had the same dream. And earlier this week, Roger’s nine-year-old daughter told him she dreamed of Ah Kung again.

"I told her I dreamed of him, too," said Roger, a faraway look in his eyes.

Tan Sue YongTan first came here to work in 1937. He returned home to Fuzhou province four years later, and finally in 1947, he left China for good and settled in Selangor with his wife.

Life was hard for the family, which remained poor for many years. Slowly, he saved enough money to buy some land to plant rubber, and another piece to build a house for his wife and six children.

Roger, 43, is his second youngest child. He has another older son and four daughters.

Even after Tan retired as a land-clearing contractor, he remained fiercely independent, walking some 10km every day to check on his small estate on the Yong Peng-Paloh road.

That was where he wanted to go two days before he went missing.

Roger, who had popped home to visit his parents, persuaded him to be driven there. Returning home, however, his father insisted on walking.

"So I had to follow behind him in the car until we reached home," he said. That was the last time Roger saw his father.

Speaking of his father makes Roger visibly emotional. His voice thickens and his eyes glisten with tears as he tells how his father remained fiercely independent even as he aged.

Roger, a lawyer, said his family is trying to be realistic, and to move on.

"He was suffering from dementia and his age is advanced. No one is looking after him. It’s difficult to see how an old man like that could survive."

Roger said his mother appears to have accepted that her husband may have died. He himself thinks it unlikely that his father is still alive.

But his heart finds it hard to accept what his mind has reasoned out.

"Something inside tells you: Don’t give up even that little hope that you harbour," he said.

Last month, his mother and his siblings decided to consult a feng sui master for advice on what next to do.

The man conducted a few rites, and then told them they would dream of him over the next few nights. Then they would know either where he is, or that he was no longer alive.

In the end, it was Roger who dreamt about his father speaking.

Roger is the only Christian in the family, and does not subscribe to traditional beliefs.

But he is the one his father loved the most, and the most determined to keep looking.

"In the dream, he said he is in Kuala Terengganu."

Now, the family is struggling with another dilemma. Where do they start? Who do they call?

If he was not coming home, the feng sui master said, the family should put a few of his things and his clothes into the tomb, and conduct the last rites.

That this is all they can do for the man who did so much for them, eats away at Roger, who has paid a moving tribute to his father on the website www.missingourdad.com.

"After all he has done with his life, for us, to have an ending like this. This is the most agonising part."

Lawyers involved in scuffle to face action

New Straits Times
By Neville Spykerman

JOHOR BAHRU, Thurs. - The Johor Bar Committee today said that the scuffle during its elections last Saturday had tarnished the image of the profession and has been referred to the Disciplinary Board.

Johor Bar Committee representative to the Bar Council Roger Tan said such conduct and behaviour could not be tolerated.

The New Straits Times on Monday reported that a verbal dispute between lawyers R.R. Mahendran and S. Gunapati became physical during nominations for the post of the Bar Committee chairman.

"The committee deplores the incident and has resolved that the matter be immediately referred to the Disciplinary Board for further actions pursuant to Section 99(3) of the Legal Profession Act 1976," he said.

Tan said the decision was taken in view of the seriousness of the matter.

The drama on Saturday unfolded when Mahendran addressed the floor and asked whether a lawyer who had been "convicted" and fined RM10,000 by the Disciplinary Board was qualified to stand for State Bar committee chairman.

It was reported that S. Gunapati took offence to Mahendran's query, and a heated verbal exchange erupted.

Mahendran claimed that Gunapati, one of the two candidates nominated for the post of Chairman, then struck him on the head from behind.

Gunapati denied the allegation, and said he had been going up to speak at the podium when Mahendran deliberately tripped him.