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ON FRIDAY
NOVEMBER 14, 2014
BY
DATO’ PRETAM SINGH
DARSHAN SINGH
Enforcing
the
rules
T
HERE
are indeedmany rules
and regulations people need
to abide by so as to have
some order, a smooth flow,
for development to take place.
Establishing rules may be easy,
but following them throughmay be
a task.
Singapore was the first country
in the world in 1985 tomake it
mandatory for housing developers
to open and operate a special
housing development account. In
1991, Malaysia followed suit,
copying almost word for word, the
Singapore rules. Fortunately in
Singapore, abandoned projects are
unheard of. However, 23 years on,
Malaysia is still grappling with the
issue of abandoned housing projects
although the Housing Development
(Housing Development Account)
Regulationwas established for
nearly two decades . If this
legislationwere to be strictly
followed, abandonment of housing
projects would be an era of history
long gone because there is existence
of a strict withdrawal regime.
However, this is not the case.
ROLE OF BANKERS
It is the duty of the banks that
finance development projects to
ensure tat these development
projects are residential in nature
and are not passed off as
commercial units. A quick check in
the various advertisements that
appear in the newspapers shows
that there aremany projects being
passed off as “SOHOs” or “SOFOs”,
which are in fact residential units or
used for human habitation, as well
as business premises. By right, this
would require a housing developer
to have a special licence and
consequently, opening of a housing
development account, but this is not
practised.
Still, these projects were fully
funded by banks whose logos
sometimes appear on developers’
advertisements to lend credibility to
the projects.
In Abdul RahimBin Abdul
Hamid&4 Ors v PerdanaMerchant
Bankers Bhd [formerly known as
IntradagangMerchant Bankers
(M)] &Ors the court took the view
that it is the implied termof the
contract between the bank and the
customer, that the bankwill observe
reasonable skill and care. To finance
a project that should have been
licensed shows clear evidence of
lack of skill and care.
Bankers should also familiarise
themselves with the HDA account
regulations whereinwithdrawal
from the account is strictly
monitored as we are reminded of
the learnedwords of Salleh Abbas
Email your feedback and
queries to: propertyqs@
thesundaily.com
X
LP inHoo See Sen&Anor v Public
Bank Bhd&Anor [1988] 2MLJ 170
at 172 when his lordship said that the
Bank is holding the loan sumon
behalf of the plaintiffs as trustee.
The defendant as trustee has
fiduciary obligation under Section 2
of the Specific Relief Act 1950.
In the case of Ng ThiamSeng
&Anor v AMFinance Berhad
(formerly known asMBF Finance
Berhad) [2009] 4AMR 808 - the
court reminded bankers that the
duty to act in the best interest of the
principal includes acting with
diligence. Its duty extends beyond
sighting the architect certificate
certifying the stage of completion
and paying the amounts to the
developer.
It is therefore not open to the
defence that it was under
no obligation to keep vigil over the
progress of the construction of
the condominiumor that did not
have any notice of the stages of its
progress.
(Retrial is pending)
ROLE OF AUDITORS
It is important to note that auditors
of licensed housing developers have
an important role to play to
safeguard the purchaser’s interest
by effectively reporting on the
developer that they are required
to oversee.
The Act requires every auditor
of a licensed housing developer to
make a report to the controller of
housing, as to the annual balance
sheet and profit-and-loss (P&L)
accounts of the licensed housing
developer, for whom the auditor is
appointed and shall state in every
such report whether or not in his
opinion:
(a) the balance sheet and the
P&L accounts are properly drawn
up so as to give a true and fair
account of the state of the licensed
housing developer’s affairs;
(b) the accounting and the
records examined by himare
properly kept; and
(c) if the auditor has called for an
explanation or information from the
officers or agents of the licensed
housing developer, such
explanation or information has been
satisfactory.
The auditors also have to state
whether themonies in the housing
development account have been
withdrawn in accordance with
these regulations.
An amendment to these
regulations was made in 2002 PU
(A) 474/02 imposing further
responsibility on the auditors,
namely to within six months after
the close of the financial year of
such developer, make an annual
report to the controller of housing
as to the housing development
account and shall state in every
such report whether or not in his
opinion:
(a) Each and every deposit and
withdrawal recorded in the account
are in accordance with these
regulations;
(b) The accounting and the
records examined by himare
properly kept; and
(c) If the auditor has called for an
explanation or information from the
officers or agents of the developer,
such explanation or information has
been satisfactory .
I had a chance to peruse a recent
government gazette dated June 19,
2014 (Jil 58) HDANo: 160wherein
were published financial reports
under Housing Development
(Control and Licensing) Act 1966
(Act 118).
This is what the learned auditors
stated in their reports:
“Report onOther Legal and
Regulatory Requirements
In accordancewith the
requirements of theHousing
Development (Control and
Licensing) Act 1966 inMalaysia, we
also report that in our opinion:
(a) the accounting and other
records examined by us are properly
kept; and
(b) we have received satisfactory
information and explanations from
the officers and agents of the
Company as required for the
purposes of our audit.
We believe that the evidencewe
have obtained is sufficient and
appropriate to provide a basis for
our conclusion.”
“Based on the procedures
performed, nothing has come to our
attention that causes us to believe
that thewithdrawals from the
Company’sHousingDevelopment
Account no. HDA ... for the financial
year ended June 30, 2013, in all
material respects, have not been
withdrawn in accordancewith the
Regulations.”
“This report ismade solely to the
members of the Company, as a body,
in accordancewith Section 174 of the
Companies Act 1965 inMalaysia and
for no other purpose.We do not
assume responsibility to any other
person for the content of this report”.
“Based on our work done, nothing
has come to our attention that causes
us to believe that thewithdrawals
recorded in theHousing
Development Accounts have not been
made in accordancewith the said
Regulations.”
From the above it is apparent
that some auditors are clearly not
keeping to heavy responsibility
entrusted upon themby parliament
and the
rakyat
.
Lest they forget, any personwho
contravenes any provision under
these regulations shall be guilty of
an offence and shall, on conviction,
be liable to a fine not exceeding
RM5,000 or to imprisonment for a
termnot exceeding three years or
to both.
Followour column next week to
learn the purposes for which
monies in the housing development
account/regulations, may be
withdrawn.
City that suits premier lifestyles
SOUTHVILLE CITY
byMah Sing
speaks volumes. The freehold
428-acre integrated township
emphasises comfort and
convenience. It offers variety in
terms of spaces to live, work
and play in.
The groundbreaking ceremony
forMah Sing Southville City
@
KL
South’s direct interchange access,
which leads straight into and out
of the guarded and gated township
was recently held. Completion
is estimated by 2018, to coincide
with the vacant possession of
Southville City’s first phase
development, the Savanna
Executive Suites. Present to
officiate at the event wasWorks
Minister Datuk Seri Fadillah
Yusof.
At the event, Mah Sing group
managing director and group chief
executive Tan Sri Leong Hoy Kum
said, “Southville City
@
KL South is
a gated and guarded township
which promotes urban lifestyle
outside the city centre. In support
of the nation’s affordable homes,
especially for first-time home
owners, Southville City’s Savanna
Executive Suites offers service
apartments priced from
RM350,000 onwards.”
Southville City is ideally
located near educational, retail
and recreational venues, including
20 institutions of higher education
and six prominent golf clubs.
It has direct access to the North-
SouthHighway andmakes getting
into KL a breeze via theMex,
Silk, SKVE, Elite, Lekas and
KL-Seremban highways. The
integrated township has an
estimated gross development
value (GDV) of RM8.3 billion.
Open for sale are its Avens
Residence of 2 1/2 and three-storey
link houses; three-bedroom
apartments at Savanna Executive
Suites; and retail space at Savanna
Lifestyle Shops. For more, visit
theMah Sing website.
An artist’s impression of the front
facade of Savanna Executive Suites.
>Calling for effectivemonitoringof the housingdevelopment account to
prevent housingprojects frombeing abandoned