Abandoned Housing Project/Failed Residential Project —Taman Harmoni, Lot 82, Mukim of Cheras, District of Hulu Langat, Selangor Darul Ehsan

Part Two

Fortunately, the project had been revived by the land owner–the State Secretary of Selangor (Perbadanan Setiausaha Negeri Selangor (‘SUK (Incorporated)’) through their project manager—Permodalan Negeri Selangor Berhad (‘PNSB’), until full completion and Certificate of Fitness for Occupation (‘CF’) was obtained on 1 July, 2005.  However, the rehabilitation was a loss making venture for PNSB and SUK (Incorporated).  Nevertheless, the rehabilitation was proceeded with, bearing on the reason that this project was for the social welfare of the low-income group in Selangor.  Further, the rehabilitation undertaken was not without difficulties.  Among the problems were the civil suit commenced by the defaulting developer (‘K&T’) against the rehabilitating parties, and the problem of getting the required consent from Syarikat Bekalan Air Selangor Sdn. Bhd (SYABAS), being the water authority in the state for connecting the temporary water supply, pending the completion of the final water supply which could take about one (1) year to complete, to enable the purchasers who had been awaiting for the delivery of vacant possession and occupation of the units, for the last 10 (ten) years since the signing the sale and purchase agreements, to obtain vacant possession and move into the completed units.

Problems in the Rehabilitation

Apart from having to inject funds to rehabilitate the project as the moneys available were not enough, there were some problems faced by PNSB in the rehabilitation of the project. The problems were:

a)        The Original Sewage Treatment Plan (‘STP’) built by the developer was not functional;

b)         The civil suit commenced by the developer (‘K&T’) against SUK (Incorporated), PNSB and MITC Sdn. Bhd (housing contractor) for the termination of the Joint Venture Agreement;

c)         The problem to adopt temporary water supply and requirement that PNSB had to provide a ground water tank with booster pumps system to replace the earlier requirement to build an elevated water tank imposed by Syarikat Bekalan Air Selangor Sdn. Bhd. (SYABAS – water authority);

d)        The failure of the contractor (MITC) to complete the project within the period as stipulated in the agreement warranting an extension of the completion period;

e)         The failure of the purchasers to effect new sale and purchase agreements (S&P) with PNSB and to nullify the previous agreements with K&T.  As a result, the loan funds in the hands of the end-financiers could not be released;

f)         Purchasers did not receive any compensation for late delivery damages and their pecuniary losses (such as they were subject to salary cuts payable to their financiers and rental payment) due to the abandonment from the defaulting developer.

On part of the purchasers, the difficulties that they had to bear were–the inability to occupy the purported units on time, having to incur other costs such as the rents and inability to get any late delivery compensation from the defaulting developer.

The housing developer company (‘K&T’) was wound up on the application of a contractor by name of Transwater Engineering Sdn Bhd on 18 June, 2004 at the Shah Alam High Court.  In the course of winding up of this defaulting housing developer company by the Official Receiver (‘OR’), there are many issues and problems which the OR have to face, namely:

1)        The directors of K&T failed to submit the Statement of Affairs to the Official Receiver (‘OR’);

2)        The directors of the wound up housing developer company (K&T) failed to come to the OR Office and failed to render necessary cooperation with the OR;

3)         Not all purchasers filed proof of debts (‘POD’);

4)       The provisional liquidator and the liquidator (OR) did not carry out rehabilitation;

5)        The wound up housing developer company has not left sufficient assets and moneys to be used to finance the rehabilitation costs and award damages and compensations to the aggrieved purchasers;

6)        Failure of the OR to expeditiously execute transfer form in favour of the purchasers who had paid all the purchase prices; and,

7)    Failure of the OR to implement effective arrangement and discussion with MHLG and the rehabilitating developer (PNSB) to protect the interest of the public purchasers.

 Problems After Rehabilitation

From the above case study, even though the rehabilitation had been completed, purchasers were still the ones aggrieved.  The grievances, firstly was the failure of the rehabilitating parties, in particular the main housing contractor—MITC, to repair the defective works.  Further, only 50 purchasers had, as at 31 December, 2007, taken the keys for the units.  The remaining purchasers had not, because their applications for housing loans have yet been approved by their respective end-financers or they had not executed the new sale and purchase agreements with PNSB or they had yet paid certain requisite fees to PNSB for effecting the new sale and purchase agreements.  Only a family has occupied the purported unit as at 31 December, 2007.  Among the consequences of these is–the Joint Management Body (JMB) for the flats cannot be established.  The JMB is the body who will ensure the maintenance of the flat and implement certain necessary duties for the benefits of the flats’ occupants.  This answers the problems raised by certain purchasers—no street lights being turned on at night, cleanliness of the flat, the issue of the security of the flats’ area and the flats ground area will be flooded when there is a heavy continuous rain as the drains are blocked with garbage and not subject to a necessary cleaning up. Currently, the general cost of upkeeping the flats is on the shoulder of PNSB, until the majority of the purchasers have moved in and the JMB has been established.

It is opined the above problems are partly due to the absence of a special rehabilitation legal regime to protect the interests of the stakeholders in abandoned housing projects (failed residential project).



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