Managing and Rehabilitating Abandoned Housing Projects

In managing the rehabilitation of abandoned housing projects in Peninsular Malaysia, there are certain outset important matters which the Ministry of Housing and Local Government (MOH), the rehabilitating parties and especially the purchasers have to observe and carry out. Among these matters are:


1)       to call on the purchasers, the defaulting developer, MOH, local authorities and the bankers and financiers for a meeting informing the problem faced in the project and for discussing to rehabilitate the project including the appointment of the project manager or care taker to streamline the process of rehabilitation;

2)         to initiate the carrying out of certain viability and feasibility study over the project to facilitate the management of its rehabilitation. This study would involve the services of accountants, quantity surveyors and architects. Through this study, the rehabilitation costs, construction planning, information from banks[1] and financiers[2], purchasers[3], local authorities[4], technical agencies[5] and MOH[6] could be gathered, mobilized and streamlined for the due and smooth execution of the rehabilitation. Further, inherent and potential problems could be at the earliest stage be identified and settled. Thus, this would help the rehabilitating parties to carry out the rehabilitation successfully.

3)        thirdly, based on the above viability and feasibility study undertaken, certain problems and suggestions could be identified. For example, if the available funds in the hands of the end-financiers and the defaulting developer, are not enough, the next step is to confirm from which source could the rehabilitation be funded. The sources may be from the purchasers themselves agreeable to top-up the existing funds by their own moneys[7] or from other funders[8] or from their end-financier to increase the loans and for additional funding[9] or from other sources such as TPPT soft loan[10]. Other problems and matters relating to land authorities, technical agencies, local authorities, MOH, bankers, financiers etc must too be settled and finalized.

4)        only if all the above matters have been fully complied with, could then the rehabilitation be carried out, by appointing consultants (engineer, architect, quantity surveyor, property manager etc) and contractors to carry on the development until completion and CF could be obtained.

[1] The rehabilitating parties must contact all the lenders, bankers and creditors of the defaulting developer, the collateral and securities provided and the updated debts owed. These matters must be fully disclosed for the purpose of settling the defaulting developer’s debts and problems, as far as it is equitable and fair, for the smooth running of the rehabilitation.

[2] The rehabilitating parties must liaise with the end-financiers of the purchasers. This is to ascertain the balance loan unreleased, any legal action taken or still pending, debts owed and other relevant matters.

[3] Such as their addresses for further communications, their consensus for the rehabilitation, the collection of copies of sale and purchase agreements and other relevant documents received by the purchasers, and their cooperation. Certain difficulties may be encountered by the rehabilitating parties such as the recalcitrant purchasers, the unknown whereabouts of the purchasers, the deceased purchasers (in this situation, the rehabilitating parties have to appoint the personal representatives of the deceased) and the bankrupt purchasers (who refused to pay the loan to the financiers, on the ground that they could not get the houses). Among the solutions would be, to get their cooperation, to revoke their Sale and Purchase Agreements in case they refused to resume the purchase, appointing their personal representatives for the deceased purchasers and liaising with the Insolvency Department to sell the houses for the bankrupt purchasers. It should be borne in mind that to settle these problems, the rehabilitating parties would take certain duration and incur costs.

[4] Among the matters relating to local authorities are about the planning permission, building plan approval, permits to execute erection works, the issuance of CF, earthworks and other conditions, which are requested by the local authority for the purpose of rehabilitating the project. Similarly, the rehabilitating parties would take certain durations and incur costs in getting the requisite endorsement and permission from the local authority.

[5] The rehabilitating parties must liaise with the technical agencies such as TNB, TM Bhd, Department of Sewerage Service, Department of Public Works etc, for the purpose of getting their certification and support for the issuance of CF etc. Similarly, if there are problems, and to settle them, the rehabilitating parties would take certain durations and incur costs.

[6] In respect of MOH, the rehabilitating parties have to ascertain and inquire into the housing developer’s licence and advertisement and sale permit, the conditions imposed on the previous defaulting developers and the complaints received by MOH in respect of the problems to the project. The rehabilitating parties must also enquire whether there are any pending legal actions commenced by the aggrieved purchasers or other stakeholders. This information can be obtained by conducting inquiry to legal firms, banks, courts and Tribunal of Home Buyers. This would also take some time to complete, if there exist any. Similarly, to settle any problems arising from inquiry made, if any, the rehabilitating parties may incur costs.

[7] See for example in Bayshore Apartment, Lot 3979, Tanjong Bungah, NED, Penang. See file No KPKT/(05)/1910-1 and KPKT/(05)/1910-2.

[8] Such as happened in Taman Padang Tembak, Lot 688, TS 2, Mukim 16, NED, Penang. See file No KPKT/08/824/2605.

[9] In this situation, new supplemental loan agreements have to be executed between the end-financier and the purchasers.

[10] Such as happened in the case study of this writing.

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