Rehabilitation of abandoned housing projects in peninsular Malaysia: reaching out to rescue mechanisms in the companies act 2016
| DOI | https://doi.org/10.1108/JPPEL-05-2021-0031 |
| Published date | 12 August 2022 |
| Date | 12 August 2022 |
| Pages | 61-84 |
| Subject Matter | Property management & built environment,Building & construction,Building & construction law,Real estate & property,Property law |
| Author | Thim Wai Chen,Ruzita Azmi,Rohana Abdul Rahman |
Rehabilitation of abandoned
housing projects in peninsular
Malaysia: reaching out to rescue
mechanisms in the companies
act 2016
Thim Wai Chen,Ruzita Azmi and Rohana Abdul Rahman
School of Law, Universiti Utara Malaysia, Sintok, Malaysia
Abstract
Purpose –In response to the housing needsof its people, Malaysia has allowed private housing developer
companies to build houses on a sell-then-build basis. Despite having legislation designed to protect the
interests of purchasers, insolvent housing developers have left behind many uncompleted housing
projects with their landcharged to financial institutions. Consequently, theaffected purchasers will lose their
houses when those financial institutions foreclose on the land in the housing projects. In addition, those
purchasers remain legally obligated to repay loans taken to finance their house purchase. The housing
development lawslack provisions to rehabilitate abandoned housingprojects. The purpose of this paper is to
explore the viability of rescue mechanisms in the Companies Act 2016, being corporate voluntary
arrangement(CVA), judicial management (JM) and schemes of arrangement (SOA),to aid in the rehabilitation
of abandonedhousing projects in Peninsular Malaysia.
Design/methodology/approach –Doctrinalresearch is adopted in this paper.
Findings –This research highlights the flexibilityof the SOA as a tool to rehabilitate abandoned housing
projects. This research also reveals the potential of CVA and in particular, JM with its “public interest”
feature,as useful rehabilitation mechanisms oncethe proposed reforms are adopted.
Originality/value –The authors arehopeful that the suggested reforms will enhancethe value of all three
rescue mechanismsas rehabilitation tools for abandoned housingprojects so as to alleviate the plight of house
purchasers.
Keywords Rehabilitation, Public interest, Abandoned housing projects,
Corporate voluntary arrangement, Judicial management, Schemes of arrangement
Paper type Research paper
1. Introduction
It has been noted that the housing industry in Peninsular Malaysia is governed by over 30
pieces of legislation (Chan, 1997, p. 438). Peninsular Malaysia is made up of all the states in
Malaysia exceptSabah and Sarawak. Under articles95D and 95E of the Federal Constitution
of Malaysia, Sabah and Sarawak were granted autonomy to legislate on matters relating to
land and local government (Faruqi, 2008, p. 175). The main legislation governing the
business of housing development in Peninsular Malaysia, is the Housing Development
(Control and Licensing) Act 1966 (HDA 1966). TheFederal Court in Ang Ming Lee vMenteri
Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan (2020) 1 CLJ 162, p. 182, has
The authors would like to thank the anonymous referees for their helpful comments.
Abandoned
housing
projects
61
Received2 May 2021
Revised10 October 2021
6April 2022
19July 2022
22July 2022
Accepted22 July 2022
Journalof Property, Planning and
EnvironmentalLaw
Vol.14 No. 2/3, 2022
pp. 61-84
© Emerald Publishing Limited
2514-9407
DOI 10.1108/JPPEL-05-2021-0031
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/2514-9407.htm
described the HDA 1966as social legislation designed to protectpurchasers against housing
developers. Notwithstanding the overwhelming legislative protection afforded to house
purchasers,data extracted from a National Housing Departmentreport (Jabatan Perumahan
Negara, June 2018) revealed that there were a total of 254 abandoned housing projects in
Peninsular Malaysia (Tan, 2018). The samereport showed that 64,640 houses were involved
in the 254 abandoned housing projects which had affected 43,686 purchasers. This data
indicated that on average, 250 houses were to be built in each housing project. It was
observed in 2011 that the HDA 1966, lacked any provisions to rehabilitate abandoned
housing projects or otherwise rehabilitate financially distressed housing development
companies (Md. Dahlan, 2011a, p. 148). The lacuna in the housin g laws on the aforesaid
rehabilitationremains. Accordingto Chang of the National HouseBuyers Association (HBA),
the statistics from the Malaysian Housing Ministry showed that for the COVID-19 period
covering 2020–2022, the rate of housingprojects becoming problematic has risen despite an
overalldecrease in the number of new housing projects(Chang, 2022).
Social problems arise because of abandoned housing projects with the purchasers being
the ultimate victims. In the absence of any rehabilitation plan, the land in the housing
project will most probably be foreclosed by the housing developer’sfinancier, leaving each
purchaser without delivery of his house. During the foreclosure proceedings initiated
against the land, the housing developer’sfinancier will obtain an order of the court to
auction the land to recover the outstanding loan. Despitethis, the purchaser still has to pay
off his housing loan, which was obtained to finance his purchase (Md. Dahlan, 2011a,
pp. 149-150; Rahman et al., 2013,p. 68; Khalid, 2010, pp. 52-53). In this regard, the purchasers
will certainly lose their houses unless there is a rehabilitation programme for the housing
project. But even with such a rehabilitation programme, the purchasers may have to
contribute additional amounts of money on top of the purchase price because of increased
costs for rehabilitation (Md. Dahlan, 2011a, p. 149). Evidently, the house purchasers have
been let down by the legislation governing housing development. The HBA in representing
the interests of house buyers, is equally frustrated with the lack of action taken by
the Malaysian government in addressing the problem (Ujang, 2022). Nevertheless, the
predicament faced by these house purchasers may be alleviated by reaching out to other
legislation, the Companies Act 2016 (CA 2016) because of the reason that the business
structure adopted by the housing developers is that of limited liability companies
incorporated underthe CA 2016.
On 1st March, 2018, two novel rescue mechanisms embedded in the CA 2016 came into
force, which are the corporate voluntaryarrangement (CVA) and judicial management (JM).
These mechanisms were introduced based on recommendations by the Corporate Law
Reform Committee (CLRC) that was set up by the Companies Commission of Malaysia
(CCM) on 17 December, 2003. The CLRC had produced several reports for company law
reforms, which included a Consultative Document on Reviewing the Corporate Insolvency
Regime –The Proposal for a Corporate Rehabilitation Framework [No. 10] (CD No. 10),
published in 2007.
In recommending the said rescue mechanisms, the CLRC had emphasised the lack of a
framework in the laws on companies to rehabilitate financially distressed companies (CD
No. pp.10, 13). The recommendations were made despite the availability of the traditional
rescue mechanism, schemes of arrangement (SOA). Interestingly, the CLRC also showedits
concern for the plight of purchasers by alluding to a ‘public interest’feature in JM, that may
be availed of for the rehabilitation of abandoned housing projects (CD No. 10, p. 20). This
paper adopts a doctrinalresearch method to argue that the rescue mechanisms, in particular,
the JM or perhaps the SOA, at the present juncture may be viable tools to assist in the
JPPEL
14,2/3
62
To continue reading
Request your trial