Email on issue of rehabilitation of abandoned housing project by liquidator

The email reads as follows:

Assalamualaikum

I have read many articles from you blog with regards to abandoned housing development. I am writing to seek your advice regarding my situation and also on behalf of the to other purchasers.

If you don’t mind, let me explain the brief story. We bought a semi D house in mukim … in 2008. There are only 10 houses in the development called taman … and the developer was …. Subsequently the developer was liquidated and …. has been appointed as the liquidator. At this juncture the houses were completed up to 75% except for electrical , water pump house and roadwork.

It has been more than a year but the liquidator has not made any progress. Latest news we heard that the liquidator is now  applying to the court for a scheme to revive development but with the condition that we need to top up almost RM 30 000 on top of the original purchased price. Some purchasers are not able to do so due to financial constraints.

In such a scenario, do we have any rights to demand that the liquidator complete the houses without any additional payments required from purchasers? Should they refuse , what other options do we have ?

I apologize that this email may disturb you but we would be very grateful to hear your opinion

wassalam

Dear Dr

Thank you so much for the prompt reply. I have another few questions if you don’t mind. If the S and P is terminated , I am not sure whether the liquidator will return our money because the title has been transferred .

If the liquidator terminate and give us the half completed house (as is where is basis) , I am not sure how to continue the development on individual basis since it is a Semi D.  I would appreciate your knowledge sharing on such case.

Wassalam

My answer:

Waalaikum salam

I sympathize with your fate.

My advice is this:

If you have an option, you should terminate the sale and purchase agreement and request the liquidator to repay all your moneys paid to the wound up developer. You can apply to the court to terminate sale and purchase agreement and ask the liquidator to repay all you moneys paid to the previous developer. Buy a new completed house. Full stop.

I think the liquidator has no source of money to rehabilitate the project. So that he asked you to top up. He also needs to get profit from the project as fees. If you think that you have adequate patience, please bear with the liquidator to complete the rehabilitation. If not, ie if your feel that this is not worthwhile, terminate the sale and purchase agreement and ask the liquidator to repay back all your moneys.

 This email is my personal opinion and made on without prejudice basis.

All the best.

Assoc. Prof. Dr. Nuarrual Hilal Md Dahlan, UUM, Kedah

If you want the completed house, you have to add up RM 30 k. You have to cooperate with the liquidator in order to complete. Nonetheless, you will be required by the liquidator to sign a waiver letter which states that the liquidator will not be responsible to any liability and faults of the wound up developer company. The waiver letter also may contain a statement that you waive all damages/compensations arising from the losses you suffered due to the abandonment. New S&P agreement may need to be entered into between you and the liquidator. The terms may be different from the original S&P and that your rights may be marginalized in order to protect the interests of the liquidator.

Question: Whether this new S&P has been approved by the Ministry of Housing?

If you are not agreeable to have your abandoned unit be revived due to complications and other troubles, you can/may terminate the S&P and claim for all the moneys paid to the developer, including damages until full settlement. In this case, you also need to file proof of debts and submit it to the liquidator. You will be considered as an unsecured creditor of the wound up housing developer company and may entitle to a refund of all your moneys and other damages.

The question whether the land has been transferred into your name does not matter as the contract imposes the developer to complete the house with vacant possession and with the CCC obtained. Even though the title has been transferred into your name, the developer is still in breach of the contract in that he has not yet completed the house, deliver vacant possession and provide the CCC.

I think in certain circumstance, it is appropriate for you to terminate the S&P and claim for refund and ask for damages. All these must be supported with court judgment.

This advice is made on a without prejudice basis.

 

One response to “Email on issue of rehabilitation of abandoned housing project by liquidator

  1. Professor Nuarul Mhd. Dahlan is perhaps one of the more authoritative sources of information with respect to this problem in Malaysia. His blog is also perhaps one of the more useful blogs considering the number of blogs in blogsphere in Malaysia, the vast majority of which are dedicated to people cursing and swearing against government and religion with no utility for the common man. Professor Dahlan’s blog addresses issues many especially amongst the legal fraternity do not wish to address.

    In conveyancing of property there are a number of responsible stakeholders. Of these is not just the developer and the buyer but also the bank as lender, the lawyer as trustee of the interests of the purchaser (or the bank) and the state as legislator and overall monitor of compliance to laws and corporate governance.

    If one looks analytically at the mess created by the collapse of the residential housing developments of the late 1990’s and the early to middle of this decade one cannot help but notice the absence of prosecution of failed developers of any magnitude that would tell us government has had its “eye on the ball” during this period.

    One would assume that when banks lend in such situations (undeveloped properties or off the plan), prudent banking rules require these loans (fundamentally mortgages) are secured by the bank. However from the complaints received here it appears the banks have not properly secured such loans if they have to resort to the borrower alone to satisfy the debt.

    In situations involving corporate failures the receiver then liquidator has a overriding role to protect the assets and the creditors positions when they are appointed by doing everything possible to preserve the remaining assets of the collapsed company, by discharging provable debts by calling in the companies debts from its debtors and by filing proceedings against those against whom the company has valid claims.

    An investigation into some of these corporate collapses demonstrate that none of this has occurred in the way in which the law prescribes it ought to be done. In other words the fraternity of auditors, liquidators and receivers (accountants) have failed the companies in their charge and through them the other stakeholders like the most vulnerable of them all the purchasers.

    Lawyers and there are many of them who have taken monies into trust have to a large extent not been called to account for the monies they have held in trust. Many on our own investigation have instead told their clients that since the developers have failed, all is lost and that’s the end of the story. At least tow mid tier firms in KL and the Kelang Valley we know of had then made their clients pay additional sums of money to write fictitious and unproductive letters to the banks and to the developers in order to satisfy the clients that they have been ‘battling for them’.

    In truth both firms had misappropriated the monies by placing token deposits with the developers whilst keeping the balance in their general trust or accounts for their own use. Others still had called on their clients for more top up funds “Because costs had risen higher than estimated when they booked a property” from the developer.

    What is required and I have stated this on numerous occasions previously is that government ought to hold a Royal Commission of Inquiry into the collapse of a large number of developers before the evidence becomes too stale to be admissible.

    To those of you still seeking to recover your losses, a class action is what is required. Liquidators, Banks and lawyers are insured against negligence and other acts of incompetence. You can recover from them and they will pursue the individuals insured by them.

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