The cheeky answer to this is that of course it can happen. And the same can also happen in Singapore and anywhere else. As some of you are probably aware, more recently we have instances of construction firms going bust in Singapore. Pacific Mall in the picture above is a stark reminder of a not-so-happy past, a commercial project in Johor that was sold but abandoned halfway.
For those who are invited and participated, this building is always mentioned regularly in Q&A sessions whenever IRDA(Iskandar Development Region Authority) holds their industry engagement event.
But let me put it this way, no government in the world wants their property market to boom one day and go bust the next, this creates a lot of uncertainties, definitely not good for political points. Therefore, they have put in place safeguards to protect the buyers of residential units in Malaysia, the Housing Development Act (HDA).
Developers regulated by HDA would first have to get an APDL (Advertising Permit & Development License) before they start the sale process. Also for transactions regulated by HDA, there are standard statutory contracts (most commonly we will encounter Schedule H- strata titled houses & Schedule G – landed). This means that the contract of sale (please note that this only applies only for purchases direct from developers) must be in the prescribed form with standard clauses and covers things like the payment schedules(progressive payment). For more details, please seek your malaysian lawyer’s advice.
But in the event that a project is abandoned, there are 3 scenarios that can take place:
1. New developer takes over. A white knight developer will come in and complete the project, buyers will get their property at same price but will not receive any late delivery compensation. This process will take time as the new developer would have to contact all the individual strata-title owners , negotiate and come to an agreement.
2. The government takes over and appoints a developer to take over, quite similar to 1. However, there will be extra conditions such as state consent needed for resale subsequently.
3. Worst case scenario, project remains abandoned but buyers would still have to serve the mortgage loan.
I hope this is useful for you.
