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Showing posts with label National House Buyers Association (HBA). Show all posts
Showing posts with label National House Buyers Association (HBA). Show all posts

Thursday, March 2, 2017

Protecting house buyers' interest


I REFER to the reports “Court: No power to grant extension” and “A fair and right judgment, says housing developer” ( The Star, Feb 28 - Developer has to compensate buyers for delays of projects, Court says).

The High Court decision declaring as ultra vires (beyond one’s legal power or authority) the Housing and Local Government Minister’s granting of a one-year extension of time (EOT) to developers to complete a delayed housing project and thus denying house buyers liquidated and ascertained damages (LAD) provided for under the sale and purchase agreement is timely, sound and indeed meritorious. It is hoped that the decision would be maintained should the minister decide to appeal it.

The Housing Development (Control and Licensing) Act 1966 was enacted for the protection of home buyers.

The long title of the Act (paragraph stating Parliament’s intent for the Act) says: “An Act to provide for the control and licensing of the business of housing development in Peninsular Malaysia, the protection of the interest of purchasers...” This makes clear that the housing development business is regulated to ensure that the protection of home buyers’ interest is paramount.

Two eminent judges, the late Tun Mohamed Suffian, former Lord President of Malaysia, and the late Tan Sri Lee Hun Hoe, the longest serving Chief Justice of Borneo, stated this in two landmark cases respectively.

Suffian LP (Sea Housing Corporation v Lee Poh Chee): “To protect home buyers, most of whom are people of modest means, from rich and powerful developers, Parliament found it necessary to regulate the sale of houses and protect buyers by enacting the Act.”

Lee Hun Hoe CJ (Borneo) (Beca (Malaysia) Sdn Bhd v Tan Choong Kuang & Anor): “The duty of observing the law is firmly placed on the housing developers for the protection of house buyers. Hence, any infringement of the law would render the housing developer liable to penalty on conviction.”

Respectfully, it is submitted that the decision to grant the developer of a housing project extension of time and thus deny the home buyers’ statutory rights to LAD ought to be exercised with diffidence. The decision, if any, ought to be made with the Act’s long title in mind, namely, “for the protection of interest of purchasers”.

In doing so, some aspects to consider are:

> In granting EOT, how will home buyers’ interest be protected?

> LAD is agreed monetary payment for home buyers’ losses for delay in completion of a housing project. Is denying home buyers’ the LAD by the EOT tantamount to protecting their interest?

Although Section 11(3) of the Act states that the developer under “special circumstances” may apply to the Controller of Housing for EOT, it is submitted that Parliament and the long title of the Act surely did not intend LAD to be wiped out by “a stroke of a pen”.

To avoid doubt, “special circumstances” would mean act of God or natural disaster, for example earth quake or tsunami, and not business or economic related challenges or hardship.

The above view would make legal sense of Section 11(3).

Again, the High Court decision is lauded.

Home buyers’ interest is of paramount importance under the Housing Development (Control and Licensing) Act 1966. The Controller of Housing’s or Minister’s decision, although seemingly made “by a stroke of a pen”, must materialise or recognise this intent. Failing to do so would be ultra vires the Act.

May the redeeming light of the Housing Development Act (Control and Licensing) 1966 continue to shine effervescently and protect effectively home buyer’s interest for many years to come.

This letter is dedicated to the National Housebuyers Association, its great team of lawyers, professionals and volunteers for their sterling and pro-bono efforts to speak up for and preserve home buyers’ interest.

Source: ROBERT TAN,  Home buyer and author of Buying Property From Developer: What You Need To Know And Do, Petaling Jaya

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Tuesday, February 28, 2017

Developer has to compensate buyers for delays of projects, Court says


 
Take them to task: According to the liquidated damages clause, condo buyers can claim 10 per annum of the purchase price for the delay

KUALA LUMPUR: The Housing Controller has no power to grant an extension of time to developers who delay the completion of housing projects, the High Court has ruled in a landmark judgment.

This means a housing developer has to pay compensation to the affected buyers for delays in the delivery of vacant possession.

High Court (Appellate and Special Powers) judge Justice Hanipah Farikullah also held that the regulation which empowers the Controller to modify terms of the contract of sale was ultra vires the Housing Development, Control and Licensing Act.

The judge said this in allowing an application for judicial review by 71 buyers of the Sri Istana condominiums in Old Klang Road against the Housing Controller and Urban Well-being, Housing and Local Government Minister.

Their lead counsel Datuk Wong Kok Leong told The Star the judge held that the minister’s decision to grant the developer an extension of time to complete the project via a letter dated Nov 17, 2015 was invalid.

In the letter, the minister had granted the developer a 12-month extension to complete the project.

“This means that the Housing Controller has no power to grant an extension of time to housing developers for any delay in completing their projects,” Wong said.

“Now, the developer has to pay the liquidated damages (a pre-determined sum) for late delivery of vacant possession of those condominium units.”

Wong called the decision a landmark judgment as many project developers seek extensions to complete their projects in Malaysia.

“This is a victory for all house buyers. With this ruling, the housing developer can’t just go to the Housing Controller for an extension of time to complete the project in order to avoid paying the liquidated damages to house buyers.

“This is because if an extension of time is allowed, house buyers lose their rights to claim damages for late delivery of vacant possession,” he added.

Wong explained that according to the liquidated damages clause, the condo buyers can claim 10% per annum of the purchase price for the delay.

In their application for judicial review, the condo buyers stated that they wanted to quash the decision allowing BHL Construction Sdn Bhd an extension of time for the delivery of vacant possession from 36 months to 48 months.

They also asked the court for a declaration that Regulation 11(3) was ultra vires of the Housing Development Act (Control and Licensing) Act.

Wong said the judge has ordered the parties to address the issue of costs on the next date for case management.

When contacted, SFC Mohamad Rizal said the judge also allowed a similar application involving another group of condominium buyers involving the same developer and project.

Source: By  m. mageswari, royce tan, thean lee cheng, eugene mahalingam, The Star

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Thursday, April 2, 2015

Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks, Islamic banks and other financial institutions).

Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work does not necessarily commensurate directly with the loan amount.


Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.


So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.  

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits, after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over thetenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonder whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.

Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from soft copy. The bank no longer need to print them and should not charge for such documents. Alas, this has been continuing till to date. Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty, if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Buyers Beware By Chang Kim Loong

Chang Kim Loong is the honorary secretary-general of the national House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

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Sunday, February 1, 2015

Reponsible housing developers' traits and qualiies expected


Traits of a responsible housing developer

KNOCK, knock! Any “good” housing developers out there?

I am reluctant to use the words “good developers” as the words are not in my vocabulary. However, there are responsible ones and more are joining this category.

The qualities of a responsible developer are to be emulated, if you can find them.

The housing industry has come a long way since the advent of large-scale housing development in the late 50s and early 60s. The players in those times were bona fide entrepreneurs. Most probably, conscience ruled and pride in workmanship, timely delivery of quality and affordable houses were their hallmarks.

The present delivery system of “sell-then-build” through progressive payments is fraught with risks for the unsuspecting house buyers. These second generation housing developers, “good” or bad, are used to the lucrative profits from the housing industry. This is so because the post-independence period has been a period of high population and economic growth. Hence, the demand for housing is ever increasing. In a sellers’ market, the buyers are always at a disadvantage. When greed is inversely proportionate to conscience among industry players, the situation can get very bad indeed.

We often hear of developers lamenting about the shortage of workers (legal or illegal, skill or inexperienced), shortage of building materials, complying with new laws or regulations that made it hard for them to complete their projects on time. At the same time, we also hear of projects making multi-million ringgit in profits for the developers and we do not see or hear news of housing developers retiring or quitting the business entirely.

This would mean that the housing development is still a lucrative business. In fact, more rookie developers are joining the arena because the sell-then-build system allows them to make money from people’s money.

It has become a ‘riskless venture’ where profits are guaranteed, and in the worst scenario, the government will mop up the abandoned housing project, befitting the adage: Profit Privatised, Losses Nationalised’

Enough of the bad ones, we at HBA do keep our ears opened for the qualities of responsible developers to be emulated. In the first place, how do buyers judge if their developers have been responsible? The construction industry is a unique field. It is one of a few professions where no formal education is required.

There is no formal award giving ceremony by buyers to tell the world their developers have been ‘good’ and responsible.

There are also some other things the responsible developers do that prove they have a passion for their profession. Here are some of the traits practised by responsible developers.

Attention to environment and existing neighbourhood

Responsible developers do not just depend on their buyers to pass the word around about their reputation. No new project is an island. There are existing neighbouring projects, trees etc. A responsible developer ensures the existing neighbourhood is not disturbed by their new development.

If there are complaints, such as cracks, a landslide and floods that the new construction is causing to the existing neighbours, they are quickly attended to. They also ensure that the existing roads are kept clean regularly from construction activities.

Amenities, facilitiesand infrastructure

Developers who provide adequate amenities and facilities like playgrounds, schools, markets, community halls and even police booths are not only fulfilling the obligations imposed by the local council but also their social responsibilities to society. These developers are commendable as good corporate citizens. It enhances their image too. There are also developers who invest and build infrastructure first prior to selling their houses.

Takes pride in quality and timely rectification

Whether low-cost or high-cost houses, chasing the developer to rectify shocking defects, bad workmanship is a nightmare to buyers who lose out while waiting for repair works.

Responsible developers do their own quality checks before handing over their products. Caring developers do practise the following before handing over their products:

• Adopt quality checks at all stages of construction, test and commissioned utility supplies;
• Clear and clean individual units and construction site of debris;
• Ensuring the Certificate of Compliance and Completion (CCC) is obtained with the handover of units;
• Retain a team of competent workers to do rectification promptly if there are complaints on defects.
• Keeping sufficient stock of products like floor tiles of the same quality and make.
Some developers even extend the mandatory defects liability period of 24 months. We have also heard of developers providing alternative lodgings for their buyers while waiting for defects to be corrected.

Timely delivery

Time is the essence of the contract of sale and purchase. Houses should be delivered within the time stipulated in the sale and purchase agreement ie within 24 months for ‘land and building’ and 36 months for ‘building intended for subdivision’. If, for whatever reason, there are delays, compensation should be paid immediately to buyers without second thoughts or finding devious ways to ‘short-change’ the buyers.

Responsible developers keep their buyers informed of delays and tell them of the next expected delivery date. Some buyers even told us of the extras they have received at delivery time, which surely endear them to the developers. These are some of the ‘welcome packs’ that they have received: useful gifts like a key box; warranties from paint companies, auto-gates, pest control, electrical appliances; certificates of treatment for termites / pest control; a certified copy of the CCC issued by the architect and certified copy of the building plans and plans that relate to electrical wiring and water piping so as to facilitate future renovation.

Interest charged

One clause in the sales contract states that the buyer is responsible for late payment interest. It is a common complaint by buyers that their developers would charge interest for late payment even though it is the fault of the end-financier or their lawyers doing the legal documentation. Responsible developers assist in ensuring that the documentations are in order and the buyer is not burdened with any late payment interest.

Joint Management Body (in stratified projects)

Responsible developers assist their buyers to form committees and be prepared for the formation of the management corporation. These developers realise that the projects they have developed will eventually pass to the owners to maintain and manage.

Encouraging community living

Developers who encourage forming of resident/ owners association are a welcome lot. Some even go to the extent of contributing monies for the formulation of buyers representative group for a meaningful channel to voice grievances. Some even provide meeting facilities and allocate a multipurpose room for the elected representative group.

Good communication

The line of communication should always be open between buyers and their developers:
• Keeping buyers informed of the ongoing projects and their products;
• Developers not to appear having shun away from their responsibility;
• Treating the buyers with respect as buyers can serve as their marketing tool. Show respect and you will gain respect;
• Transparency and accountability on monies collected;
• Providing regular accounting reports and budgets;
• Voicing of any grievances rather than through the media, which will bring adverse effect to the detriment of both parties.

Build first then sell

There is no step that can be more pronounced than for housing developers to adopt the absolute ‘built first then sell’ so that potential buyers can see for themselves the finished product before buying. We believe that in this way, most of the present day ailments afflicting the housing industry can be avoided and the housing industry will be a lot more orderly.

In the interim period, responsible developers have embarked on the Built then Sell (BTS) 10:90 concept where the buyers pays 10% and the balance of 90% to be paid upon completion of the house. They are already big names among developers that find the BTS 10:90 concept workable and feasible and are targeting to achieve the Government aspiration of making BTS 10:90

There are responsible developers whose names are synonymous with quality and trust. They are able to win over buyer’s confidence. Today, they have created their own brand names. No wonder some developers do not advertise, yet all their units are sold out even before the official launch.



By Chang Kim Loong AMN who is the secretary-general of the National House Buyers Association.


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House buyers, learn your rights
House buyers, learn your rights. I RECENTLY moved into our new house in Sungai Ramal Dalam. I bought the property back in 2012 and we received t



I REFER to the article “Local govt polls may cause racial polarisation” ( Sunday Star, Jan 25) and would like to share my views on matters. ...

Tuesday, November 25, 2014

House buyers, learn your rights


I RECENTLY moved into our new house in Sungai Ramal Dalam. I bought the property back in 2012 and we received the vacant possession in January this year.

The journey towards moving into this property has not been a smooth one and I thought I should share some of the lessons.

When I first visited the site in 2012, only the show house was available for viewing. All the other units were blocked off because they were still under construction.

So the purchase was under the “sell-then-build” scheme. The developer sells a property that is not yet built, and the buyer pays for something depicted by the show unit, but in reality you don’t really know what you will get. The developer advertised it as a gated and guarded community of just 26 houses, and the show unit was quite decent.

We liked the concept and decided to go ahead anyway, despite a friend expressing doubts about the reliability of the developer because they are just a small company.

Skip forward to January this year: a letter arrived saying that the time had come for me to take the keys, or in jargon-speak, to take over the vacant possession. When I went to the developer’s office in Hulu Kelang, I was told to sign a letter confirming that I agreed to accept the property.

They also told me that the Certificate of Completion and Compliance (formerly called the CF) should be ready within two weeks and I should not do any renovation or move in before receiving it.

It was soon after this that problems started to occur. When I inspected the property more thoroughly, I discovered that the property was not yet satisfactorily completed.

Taps and doorknobs were missing. Some tiles were not properly fitted. The window frames were of different shades. Electrical sockets were not installed. The back garden slopes with a gradient that renders the area more or less unusable.

And the developer has not even applied for permission to build a gated and guarded community, despite advertising it in their sales brochure.

To make matters worse, the CCC did not arrive within the promised two weeks. I only received it last June. Throughout all this, I sent notice after notice to the developer asking them to rectify the defects.

They were extremely slow to respond. It was only then that I realised I should not have accepted the vacant possession without the CCC.

I then found the National House Buyers Association, and met with their secretary-general Chang Kim Loong who happens to be a fellow columnist in this newspaper. I learnt a tremendous amount from him and let me share some of the lessons here. If you are planning to buy a property and you don’t want to face the problems that I am having now, I suggest you read on.

Firstly when you buy a property, you should get the Sale and Purchase Agreement (S&P) checked by someone with proper knowledge, or appoint your own lawyer.

The two lawyers you deal with at the early stages represent your bank and the developer. They don’t represent you and they don’t have your interest at heart. You need your own lawyer.

Secondly, read the S&P yourself, carefully. With the benefit of hindsight, I am amazed at how I simply signed on the dotted line without reading the papers carefully first.

The document contains important information about your rights. And you should read it in greater detail if the developer says to you that the S&P is “just a formality”.

Thirdly, learn your rights as well as the procedures in the purchase.

If only I had taken some time to learn the ropes, I would have known that I should be extremely worried if a developer hands over vacant possession without a CCC (and promises you he will get it done within two weeks). Even more so when they start saying things like “we are all Malays and we should help each other”. Fourth, the sell-then-build scheme benefits mainly the developers and not necessarily the consumers. You are being asked to pay for something that is not even built yet and you never really know what you will eventually get. If the developer is rogue, then what you pay for is not necessarily what you will get.

In my case, the show unit has a concrete wall in the backyard, but my unit has just wire fencing. When I asked the developer, he responded that the S&P does not compel him to build a unit that is exactly the same as the show unit. Since it was a sell-then-build scheme, there is not much that I can do.

Recently Urban Wellbeing, Hou­sing and Local Government Minister Datuk Abdul Rahman Dahlan an­­­nounced that he wants to allow developers to choose between sell-then-build and build-then-sell. He is effectively doing a U-turn because the previous minister wanted to make build-then-sell compulsory.

Of course, developers love the sell-then-build scheme because they get the cash in advance. Risks are transferred to buyers.

Fifth, despite the U-turn policy, the Housing Ministry is actually quite effective in dealing with consumer complaints. I have had a very good experience in dealing with the National Housing Department and the Tribunal for Homebuyer’s Claims (TTPR). The processes to submit a claim through the TTPR are simple enough to understand even for a layperson like me. The TTPR is also very transparent.

My case hearing was conducted in public and if you go to the tribunal’s website, you can find information about the claim that I filed. This transparency allows everyone to learn from the experience of others.

Let me end by saying that buying a house is probably the most expensive purchase you will ever make. You really should learn your rights.

If you find yourself dealing with a situation like I am in now, then you must not let the developer off the hook. Get advice from the brilliant team at the National House Buyers’ Association. Take the developer to the TTPR. And report them to the National Housing Department.

You should not despair because there are mechanisms to help protect you, including those instituted by the Government, as long as you are willing to take the initiative.

Think Liberally by Wan Saiful Wan Jan

Wan Saiful Wan Jan is chief executive of the Institute for Democracy and Economic Affairs (www.ideas.org.my). The views expressed here are entirely the writer’s own.

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Sunday, January 27, 2013

Banks need to be transparent on housing loan

STANDARDISING and simplifying housing loan documents is a step forward. Kudos to Pemudah (Special Taskforce to facilitate business), Bank Negara and the Association of Banks in Malaysia (ABM). It will be an excellent move to reign in the rogue banks, financial institutions (FIs) and development financial institutions (DFIs).

The National House Buyers Association (HBA) views the recent standardisation of loan agreements for housing loans below RM500,000 positively. For many years, HBA has been calling for greater protection for house buyers when they buy from developers and for borrowers when taking a housing loan.

As a typical housing loan ranges between 20 and 30 years, borrowers are stuck with the terms and conditions (T&Cs) of the housing loan for a long time. Unfortunately, most borrowers do not really understand the T&Cs of housing loan, as:

(i) The loan agreements are lengthy, running between 20 and 30 pages;

(ii) They are filled with legal terms and jargon that even borrowers with a law degree will still need their legal dictionary for reference.

Even for borrowers who are law-savvy, the loan agreement is a one-way traffic; the borrower must accept all the T&Cs or find another bank, as the banks will not vary any T&Cs. However, the scenario is the same for all banks and borrowers are at their mercy. (banks in this context includeFIs and DFIs).

Another grave injustice is that the cost of legal fees for the said housing loan is borne by the borrower although the lawyer is in fact, representing the banks and on its panel, and is in no position to advise the borrower. The borrower will be required to appoint his own lawyer should he require any legal advice. But this will be futile as banks will not agree to vary any T&Cs of the loan agreements.

Standardised Loan Agreement

HBA has been urging banks in Malaysia to be fair and transparent in their dealing with borrowers. Hence, credit must be given to “participating banks” for finally agreeing to adopt a standardised template for housing loans with simplified language which is easy for the layman to understand.

Based on our quick analysis of the Standardised Loan Agreement which can be downloaded from the website of the Association of Banks in Malaysia (www.abm.org.my), the agreement does appear to contain less legal jargon and is written in a manner which is easier for the borrower to understand.

The agreement also does away with unnecessary and ridiculous restrictions that certain bank previously impose on borrowers taking housing loans, such as:

● Borrowers cannot rent out the property without the consent of the banks;
● Borrowers cannot undertake any renovations without the consent of the banks; and
● Hidden clauses which impose various hidden charges and penalties such as late payment charges on borrowers

Based on our preliminary assessment, HBA views the agreement positively and we urge the banks and Bank Negara to further improve on the following areas:

Remove the RM500,000 cap

HBA calls for the RM500,000 limit for the Standardised Loan Agreement to be removed. This agreement should be applicable for all housing loans regardless of the amount, as the nature of the housing loan is the same. Already, most landed properties in areas such as Puchong and Kota Damansara are in excess of RM500,000. Even strata-properties in locations such as Bandar Utama, Ara Damansara are already in excess of RM500,000. Why not extend the coverage to all housing loans per se?

All industry players must adopt the standardised loan agreement

It would appear that the standardised loan agreement is being used by certain participating banks on a voluntarily basis and not all commercial banks which give out housing loans are adopting this agreement. Why is this the case? Bank Negara should compel all commercial banks to adopt this standardised agreement. In addition, non-banking Institutions that give out housing loans, such as DFIs, insurance companies must also be compelled to adopt the agreement. Why shouldn't the house buyers offered similar protection here?

Non-members of ABM such as DFIs include Bank Islam, Bank Muamalat, Bank Rakyat, Agro Bank, Bank Industri, Bank Simpanan Nasional and EXIM Bank which are formulated under their respective legislations.

Remove unnecessary fees and charges imposed on borrowers 

Certain banks currently impose unnecessary fees and charges on borrowers when they request for bank statements which are needed when sthey want to settle/refinance their housing loans, or when making EPF withdrawals to reduce their housing loans. While the fees of up to RM50 may not seem much to some people, it still is an exorbitant amount as it cost banks next to nothing to produce such statements. Moreover, it is the borrowers' right to settle/refinance the loan and/or to make EPF withdrawals to reduce their loans. A bank statement showing the principal sum outstanding is required to facilitate such transactions.

By imposing fees of up to RM50 to prepare such simple statements, banks are blatantly taking advantage of their customers as they have no choice but to pay the charges just to ensure that the transaction goes through.

HBA is calling for banks to be prohibited from charging fees for these statement to facilitate repayment, refinancing or to make EPF withdrawals to reduce their loans. Some Banks are already charging RM10 for “reprint” of a bank statement on current accounts. Can you imagine a situation where the customer has not received his monthly bank statement for whatever reason and has to pay RM10 for a “reprint” of his own bank statement?

Banks can unilaterally vary theinterest rate

However, upon closer inspection of the standardised template, HBA noticed that a clause currently found in most housing loans has been carried forward. .

Even if the borrower had faithfully paid all his dues and installments' on time, the bank is entitled to vary the interest rate unilaterally at any time during the loan tenure. There is no such thing as sanctity of a binding contract between the borrower and the banks.

As we know, the current interest rates for housing loans are competitive, with some banks willing to go as low as BLR less 2.50%. So, what this can mean is that a few years down the road, when the banks realise that such low interest rates are no longer feasible, they can vary the interest rate from say BLR less 2.50% to BLR PLUS 2.50% and the borrower is obliged to pay the new interest rate. Furthermore, if the previous installment was only RM1,500 a month and the new installment due to the revised interest rate is RM2,500, the borrower must pay the new rate or risk the bank repossessing his house.

HBA urgently calls for Bank Negara to repeal this clause to prevent banks from having the upper hand to victimise unsuspecting borrowers. Banks must not be able to unilaterally vary the interest rate if the borrower had not defaulted on his obligations' under the loan agreement. Banks may say that they will not normally invoke/exercise the said clause. But, covenanted terms and conditions are binding upon both parties.

Lawyers have to purchase standard forms from banks

Nowadays, law firms undertaking banks' work have to purchase standardised pre-printed forms from banks. The price ranges from RM150-RM350. Would printing cost be so expensive or are banks making a profit or “mark-up” from such sales to law firms?

Such “expenses” are nevertheless passed down to customers/ borrowers as disbursements. Couldn't a “soft copy” be made available to law firms to adopt and print at their own cost and expense? Printing charges are only limited to RM50 as approved by the Bar Council.

Apportionment of payment to interest and principal shrouded in secrecy

Another grave injustice to borrowers is the allocation of monthly installments towards the settlement of principal and interest as this is not disclosed anywhere in the Loan Agreements' or even in the Standardised Template.

To illustrate a real life example, we had a complainant who took a 20-year housing loan about six years ago. After diligently paying his loan for five years, the complainant assumed that the principal amount outstanding should only be about 75% of the original amount. Unfortunately, the complainant had personally experienced, the amount was closer to 83%.

There need to be greater transparency on how the allocation of monthly repayments for interest and principal is done and this must be disclosed in the loan agreement. Moreover, the allocation must be done on a “straight line basis” so, after paying five out of a 20-year housing loan, the principal outstanding must be 75% of the original amount.

Conclusion

HBA calls for banks to continue to take cognisant of their borrowers' hardship and protect the interest of their borrowers instead of just focusing on profitability. Without the borrowers and customers, banks will not have any profits to show.

HBA also calls on Bank Negara to continue the close monitoring of banks to ensure that they do not take advantage of borrowers. The battle of borrowers against banks is akin to David vs Goliath. Timely intervention from Bank Negara is needed to balance the scale of power.

BUYERS BEWARE
By CHANG KIM LOONG

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association, a non-profit, non-governmental organisation purely manned by volunteers. You can log in to www.hba.org.my

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