THE issue of ‘fair and reasonable fee’ was deliberated at the Special Task Force to Facilitate Business (Pemudah) on September 26 where then economic affairs minister Datuk Seri Mustapa Mohamed announced that fees imposed by agents appointed by the Malaysian Insolvency Department (MDI) are fixed at RM500 for transfer of property for strata/grant titles.
The agents are, however, allowed to charge for additional costs and other expenses incurred by the agents in situations of lost strata/grant titles.
Introduction
When a property developer is wound up before the completion of its duties and contractual obligations, a liquidator fills the void and takes on the duties of the former, such as completing the construction of the buildings or facilities left by the defunct developer, delivering vacant possession, applying for individual or strata titles and subsequently to distribute the title deeds to the purchasers, so as not to leave the purchasers in a lurch.
This is applicable to both housing and commercial properties.
Problem Statement
The MDI has received numerous complaints against errant private liquidators who were appointed to manage the affairs of a defunct property developer, especially in a situation of applying, distributing, transferring, and ‘signing off’ of individual and strata titles to their rightful purchasers (referred to as ‘the last mile’) for the purchasers’ ownership papers by exorbitantly charging, “administration” or “vetting” fees of between 1% to 3% of the original purchase price. This also extends to the sale price in a sub-sale for performing these functions of a developer.
In some cases, there are also additional charges tagged as “vetting fees” for the liquidator’s appointed solicitors to vet the forms and documents.
The liquidators will even make the purchasers or owners pay for the former’s lawyers’ professional fees. This issue has been exploited by private liquidators making a fortune from homebuyers’ misfortune when the victims are already facing a double whammy with their defunct property developers.
The unhealthy practice of liquidators imposing such exorbitant administrative fees for executing the transfer of individual titles to purchasers has now become a norm.
The fee is purportedly used to cover the liquidator’s costs in retrieving the related documents, which have been purportedly destroyed or misplaced by the developer and verifying the same with the purchase proofs provided by purchasers.
Consequently, a straightforward perfection of the transfer becomes a costly affair.
Unilateral impositions of such fees by liquidators are devoid of any legal basis. Furthermore, the sum imposed is ridiculously high and is far more than enough to cover the reasonable administrative costs involved.
This casts doubt on the motive of collecting such fees and raises the question of whether the liquidators are unjustly enriching themselves at the expense of bona fide purchasers who are already in precarious positions without their individual titles.
Liquidators are “officers of the court” and appointed to carry out their duties judiciously, especially those appointed by MDI as agents under Section 433 of the Companies Act 2016 to perform the function of the last mile.
Decision
Hence the National House Buyers Association (HBA) would like to thank Pemudah helmed by Mustapa and co-chaired by Datuk Andy Seo for the excellent decision to rein in the private liquidators, especially agents appointed by MDI, which from henceforth, the fees shall be pegged at RM500.
This covers functions that relate to undertaking the last mile. The appointed agents are, however, allowed to charge additional charges and expenses for costs incurred such as in situations where the master title has been lost, lodgement of a police report, making of statutory declaration for replacement of title and application for its new issuance and whatever related thereto.
Such additional charges must be reasonable and transparent. This is in line with MDI’s current fee and expenses of RM500 being “liquidator’s wages”.
Hence, we hope all agents and liquidators comply with the decisions of MDI, working in collaboration with Pemudah.
It all boils down to strict compliance now. Agents or liquidators who are unable to apprehend and embrace the task at the agreed price should gracefully decline the appointment.
Regulate liquidators not appointed as agents by MDI
HBA has time and again reminded the housing minister and those under the ministry’s charge of the need to rein in; the conduct of those so-called court-appointed officers, namely liquidators.
This is legally possible as the definition of a housing developer and a licensed housing developer under the Housing Development (Control & Licensing), 1966 (referred to as ‘Act 118’) does include a liquidator. Therefore a liquidator is already a “de facto developer” under Act 118 since the amendment of the definition years ago. With this, the housing ministry should not use “lack of mechanism” as an excuse for not regulating liquidators.
The National Housing Department under the auspices of the Housing and Local Government Ministry has also received numerous complaints against errant liquidators, receivers and managers (R&M) and judicial managers.
The Housing Department has assured HBA that a new set of regulations will be formulated to cover the scope, role and remuneration scale. The aim is to regulate the conduct of liquidators, judicial managers and R&M with an emphasis on curbing dysfunctional acts, penalties for non-compliance, investigation, inquiries and criminal prosecution, among others.
This regulation should be expeditiously formulated and enforced to prevent purchasers and owners from being affected by irresponsible liquidators.
In the context of an abandoned housing project, a liquidator should step into the shoes of a wound-up developer as a de facto developer and revive the project within the legal provisions stated in Act 118 and its regulations to protect the interests of the purchasers.
It is clear under Act 118 that the liquidator can play an important role. As we have stated, Act 118 was amended to include a liquidator in the definition of a housing developer in the event the housing developer is in liquidation. The underlying rationale is for liquidators to attempt a revival of the abandoned project.
Nonetheless, we may require further legislation to clarify the duties and powers of the liquidator under Act 118. – The Vibes, October 14, 2022
Datuk Chang Kim Loong is the honorary secretary-general of the National House Buyers Association
Queries and complaints can be addressed at the National House Buyers Association website
