Thursday, January 10, 2008

Refund illegal consent fees letter

Tuesday, 14 August 2007

©The Sun (Used by permission)Local Counsel by Goh Ban Lee

“Since April 12, ‘consent fees’ have been made illegal. … Unfortunately, many who sold properties after that date were asked to pay consent fees.… Responsible developers should return the illegal fees to their clients even without being asked.”

ON April 12 this year, Prime Minister Datuk Seri Abdullah Ahmad Badawi launched a series of new measures to improve the delivery system in the housing industry.These include the Certificate of Compliance and Completion (CCC) and the One Stop Centre (OSC). Housing developers are delighted.

As part of the new measures, the government also amended the Housing Development (Control and Licensing) Act of 1966 so that “the concurrence of the housing developer shall not be required” for assignment of properties without separate titles. Sadly, while housing developers expect government officers to implement the letter and spirit of the new measures, some of them are not doing the same regarding the abolition of “consent fees”.

Prior to April 12, owners of properties without separate land titles had to “seek consent” from their developers to resell their properties. The developers were allowed to charge administrative fees of RM500 or 0.5% of the purchase price, whichever was lower.

Consent fees have their origin in the early 1970s when property prices rose steeply. Those who made bookings for properties were making speculative gains by reselling them. There were even stories that some were making more profit per house than developers!

Housing developers began to charge “administrative fees” ranging from a few hundred to thousands of ringgit. As a result complaints of excessive fees, the government put a cap on the amount.

Since April 12, “consent fees” have been made illegal. Charging fees by housing developers in an assignment can result in a fine of between RM50,000 and RM100,000 and an imprisonment of not more than three years.

Unfortunately, many who sold properties after April 12 have been asked to pay consent fees. It is possible that the errant developers did not know of the new ruling and many lawyers involved in property transactions were also in the dark.

Whatever the reasons, it is only right that consent fees collected after April 12 be returned. Consumers associations, especially the Federation of Malaysian Consumers Associations (Fomca), should help those who were illegally charged consent fees to recover their monies. Indeed, responsible developers should return the illegal fees to their clients even without being asked.

It is understood that some developers have refused to facilitate their clients who want to resell their properties. Some ask for fees for documents needed by the banks. Although the charges are questionable, if not illegal, those who want to have a smooth transaction have no choice but pay.

The amendment does provide for RM50 fee for enquiries on the status of property owners. If developers think that this is too small a sum, they should fight for a higher amount. But they must not create new charges and destroy the spirit of the amendment.

Indeed, they should assist their clients to sell their properties without extracting fees that are not provided for. After all, many property owners are stuck with their developers simply because the latter fail to deliver separate titles for their properties.

Some housing projects completed in the early 1990s still do not have separate titles even though the law requires that housing developers apply for separate titles within six months after the completion of the projects.

The business of housing developers is building and selling houses and not earning income from resale of houses by their clients. The new measures announced on April 12 were the government’s response to their complaints of too many obstacles in the process of building houses.

While they are enjoying or hope to enjoy the benefits of the new procedures, they should not frustrate the government’s intention of abolishing “consent fees” by finding ways and means to collect monies from their clients when the latter resell their properties. It is unethical, if not illegal.

It was unethical practices that prompted the government to pass the Housing Development (Control and Licensing) Act in 1966 in the first place, with more and more rules added to plug loopholes. As a result, the housing industry is probably the most regulated and this makes life very difficult for all developers, including those who are ethical and fair.

As there will be wrinkles in the implementation of the CCC and OSC in the coming days, developers need the sympathetic ears of politicians and consumer leaders to help them push for a robust and efficient housing industry.

They must not sour the atmosphere by retaining the illegally collected consent fees or continuing to collect fees by other names.

Dr Goh Ban Lee is a retired academic interested in urban governance, housing and urban planning.

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