HOUSING DEVELOPERS (CONTROL AND LICENSING) BILL

Order for Second Reading read.

3.16 p.m.

The Minister for National Development (Mr Lim Kim San): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

This Bill is the direct outcome of complaints from many sources about the sharp practices of certain unscrupulous housing developers in their dealings with house purchasers. Such complaints have been ventilated in the Press from time to time, the architects' profession have openly clamoured for some form of regulation of building construction so that the relationship between the developer and house purchaser is properly set out, and even certain members of the legal profession have been alarmed at the very one-sided contracts which house purchasers have to enter into with the developer.

One may well ask why, in a system such as we have in Singapore, any government interference with the laws of demand and supply is necessary. The answer is simple. While the Government tries to satisfy the housing necessity of the lower and lower-middle income groups by providing public housing for sale or for rent, it has always been assumed that the private sector will provide for those who would wish to live in better types of accommodation than those provided at public expense. Hence, while we are aware that 14,000 to 16,000 units of housing may be required each year, our efforts have been directed to supplying only 10,000 to 12,000 units annually, leaving the remaining one-third or so to be supplied by private enterprise. This is healthy in so far as the State should not have the monopoly of providing housing, private enterprise should participate in the development of our city areas, and better type of housing should be built at the same time as low cost housing.

Unfortunately, because of shortage of land, varying building conditions and the upward trend of prices of building materials, there are many uncertainties in the housing development business. While certain well established development organisations with proper financial backing and managerial experience are able to cope with the changing situation and to deliver the goods in accordance with the terms of agreement entered into with the purchaser, the existence of such uncertainties has given birth to a spate of mushroom housing developers who use every opportunity to make quick profits at the expense of the house purchaser. In a situation where the purchaser is acutely aware that the limited amount of money he has to purchase a house might soon be insufficient due to rising land prices and building costs, it is not surprising that he will be prepared to enter into agreements which are so patently one-sided and most disadvantageous to him. Many of these agreements provide for refunds of deposit to the purchaser without any special reason; increase in the price of the property to be purchased; no time limit for the completion of the house; a free hand in varying the materials to be used and in the alterations to the detailed plans; and various additional items of expenditure.

As a result of such unscrupulous practices by certain developers, many house purchasers have been properly swindled. In the eyes of the law, there is little they can do about it because the agreement they have entered into is perfectly legal. Such purchasers have, therefore, little redress; they can, of course, withdraw and have their money back, often many years after paying the initial deposit, but by that time land prices and prices of properties would have gone up to such an extent that he would feel properly cheated.

On the part of the speculative developer, it is clear that he has no intention of delivering the goods early; what he wants is to make use of the purchaser's money for as long as possible. He enters into a series of land speculations, promising flats or homes for one set of purchasers after another, while in the meantime either acquiring, mortgaging and re-mortgaging whatever land he has got in the hope of cashing in on rising land values, or if land values do not rise fast enough, using the money collected as deposits for other types of business. All this is most unhealthy for the economy of the State.

The main purpose of this legislation now before the House is to give a certain amount of protection to the innocent house purchaser by preventing the excesses of the building developers and by bringing all housing developers under the proper control of Government.

In the long term, the other more important purpose of this Bill is to ensure that we encourage the establishment of proper housing developers who will contribute their share to the re-development of the City of Singapore. As you know, Mr Speaker, Sir, we are now going in a big way into the problems of the large scale re-development of our City. The Government does not intend to do, and cannot do, all the re-development but will welcome private participation. In fact, it is the considered view of the Government that every effort should be made to ensure that the greater part, if not all of the re-development of our City, should be done by private enterprise. The State will only ensure that the conditions of urban renewal are congenial for private participation. It will acquire the land, do away with fragmented ownership, provide for the resettlement of existing tenants, rehousing them in new housing estates, replan the area on a comprehensive basis and make available sizeable plots to private enterprises to develop in accordance with a pre-planned pattern.

In order that this can come about, there must exist in the State sufficient development organisation and institutions with the proper financial backing and managerial experience to make serious large-scale capital investments. There will not be any place for unscrupulous speculators and opportunists. Hence the need now to weed out such opportunists in order to foster the healthy growth of sound development organisations. The experience gained in developing houses for sale will go a long way towards training these developers in the techniques of development for long term investment.

The Bill now before the House will seek to enforce control over the operations of building developers. It lays down that developers, whether a company or individual or partnership, can only operate with sufficient capital under a licence. In the case of a company, it must have a paid up capital of not less than $500,000, and in the case of a partnership or individual, a deposit of $100,000 will have to be made with the Controller.

The Controller to be appointed under the Bill will be vested with wide powers. He may, at any time after the grant of a licence, vary or revoke any conditions of the licence or impose conditions or additional conditions on the licence. There is, however, a provision for appeal to the Minister in any case where the developer is dissatisfied by the action of the Controller. The use of the words "Housing Developers" will now be regulated, and no one can now carry on the business of housing development without a licence. Stringent control will be applied on housing developers and every licensee will be required to exhibit in his office a copy of his last audited balance sheet and the full names and particulars of all persons who are in control and management' of the business.

The housing developer will be required to appoint an auditor to make a report upon his annual balance sheet and accounts, and the Controller is furthermore empowered to investigate the books, accounts and transactions of the developer, or the Minister may order the Controller or an Inspector to investigate into the affairs of a licensed housing developer. Where purchasers are dissatisfied, the Minister can order an investigation into the affairs of a licensed housing developer if an application is made by not less than five purchasers.

In certain circumstances, such as a housing developer being unable to meet his obligations, or if he conducts his business in a manner detrimental to the purchasers or the public, or if he informs the Controller that he is unable to meet his obligations, the Minister may direct a company or board to assume control.

The Bill will empower the Minister to make rules for the purposes of the Ordinance in such matters as regulating the advertisements of the housing developer, the use of names of housing estates, the payments and deposits to be made by purchasers at various stages of construction of the house, the forms of contracts to be used by the housing developer, and the conditions in the contract which, if used, will be void.

There is a prohibition in the Bill to prevent a person, who becomes bankrupt, or suspends his payments or compounds with his creditors, or if he is convicted of an offence involving dishonesty or fraud, from being a director, manager or secretary of a licensed housing developer company.

The Minister will be empowered to exempt any person, group of persons, society, company or statutory board from the provisions of the Ordinance. There are also transitional provisions for the licensing of housing developers who were in business before 1st November, 1964, and who may not be in a position to comply fully with the requirements of the Bill. In such circumstances, when the Bill becomes law, they may be granted provisional licence with or without conditions, for a period which may extend up to five years, and which may be revoked at any time.

In drafting this legislation, careful consideration has been given to all the complaints that have been received in the Ministry as well as those made in the Press. I would also wish to thank the Bar Committee for making suggestions for the formulation of the principles of this Bill. They submitted written views and suggestions to the State Advocate-General and to my Ministry, and the State Advocate-General's Office in pre paring this Bill have given careful consideration to their views and suggestions.

Sir, I beg to move.

3.30 p.m.

Question proposed.

The Minister for Labour (Mr Jek Yeun Thong): Mr Speaker, Sir, I rise to speak in support of the Bill.

Purchasers of houses have for a long time been at the mercy of unscrupulous men whose sole aim has been to make quick money at the expense of would-be purchasers. There are, of course, many decent business men who develop housing estates, and their service to society is acknowledged as an effective corollary to the Government's policy of providing decent living standards for the people. Over the past few years, the Government has concentrated on building flats for the people in the lower income group because this is the group that really needs Government assistance. This has left people in the middle and upper income groups to look to private housing developers for houses. Once a man's combined family income is up to a maximum of $800 per month, it is left to himself to find a house. But this does not mean that he must be left to the wolves. Many of these people, especially in the middle income group, are ordinary working people who dream of purchasing a house. They sweat and toil to save enough money at least for the initial deposit for a house, foregoing many of the ordinary pleasures of life. When they are exploited by unscrupulous developers, their dream of a house of their own is shattered and the attendant hardships are of some magnitude.

We must not allow racketeers disguised in the name of housing developers to rob the fruits of prosperity of our society. Prosperity must be shared. So is the wealth of our country. The common man has every right to expect a decent house of his own and to lead a decent life. We must not allow racketeers to frustrate his hopes. And if racketeers make false plans and promises to rob them of their hard-earned savings, it is the duty of the Government to suppress these racketeers.

The few racketeers in the housing business are nothing more than harmful parasites who live on the sufferings of innocent people. They have probably no land, no concrete plans, and even no business capital. Newspaper advertisements and flamboyant brochures and pamphlets are published to lure deposits from innocent buyers. The deposits so made constitute their working capital with which they purchase land, not with the intention of building houses thereon immediately, but with an eye to speculative profit. They wait for some time until the price of land increases and then notify the people who have booked houses that in the light of the increased price of land, an increased price over that originally agreed must be paid for the house, and in some cases they even return the deposit, after having made money out of the accumulated deposits, with the trite excuse that the booking has been cancelled. In some cases, a transfer fee in addition to the deposit is demanded and when the frustrated buyer finally demands back the deposit, he gets it, but not the transfer fee. If the buyer, on the other hand, had deposited the money in a bank he would have earned interest, but when caught in the web of these racketeers he not only loses his transfer fee but the interest that he would have earned. The racketeer has always the upper hand - he tosses the coin and confidently expects to call always "Heads, I win, tails you lose."

Some of the shrewder ones, however, give an appearance of legitimacy. They make the price attractively low to lure buyers, but what the unsuspecting buyer does not know is that the developer has deliberately excluded from the price he quotes very important items such as septic tank, electrical cables, etc. When the house nears completion, and the buyer is already firmly committed, the developer confronts the buyer for a few thousand dollars more for the laying of cables or installation of a septic tank, and so on. What can the buyer do but pay the additional amount demanded, for he cannot live in a house without basic necessities like lighting and modern sanitation? It is sad to say that today there are already some house buyers who are in a very ridiculous and pitiful position; living in a modern house without modern sanitation.

We also know of developers who, in the final stages of building, suddenly tell the buyers that they have to pay more than the agreed price on the pretext that prices have generally increased. In a few instances, resolute buyers have joined to resist such developers with some measure of success.

I will now cite cases of housing companies which have caused hardship to house-buyers.

The first case I would like to cite is that involving the Jurong Park Limited at No. 38 Jurong Road, 8¼ milestone. In 1962, this company published advertisements in the newspapers announcing its proposed housing estate. These advertisements attracted many school headmasters and teachers in Chinese schools in the Jurong area because it presented them with an excellent opportunity to obtain adequate housing accommodation close to their place of work. Many of them booked houses, but more than 2½ years have elapsed since then, and the estate is not even in its first phase of building programme. I also know of one particular person, a friend of mine, who had dealings with this same company. He was so eager to get a house in this estate that he paid $2,500 to the company as a transfer fee to book one and, in addition, he paid $1,000 as initial deposit. His hopes, however, were doomed to despair for, when 6 months later he visited the site, he found to his consternation that the site remained nothing more than the original wasteland that it was. There was no sign of building, not even a bulldozer or a building contractor's temporary office. He, therefore, wrote to the company asking when the house would be complete. The company returned him the deposit of $1,000 he had paid, informing him that his booking had been cancelled and that he would have to look for a house elsewhere. The same letter also threatened to take legal action against him for sending copies of his letter to the Government. There was no mention of the $2,500 he had paid as a transfer fee to book the house; it would appear that this amount had vanished, not into thin air as would commonly be said, but, I am sure, into the pockets of someone in the company and permanently lost to the person who paid it.

The second case involves the Singapore Trading Company, Limited, of Nos. 4 and 4-1 Collyer Quay, which has several building projects in Singapore. I am mentioning only one housing estate in particular, namely the Hillview Estate which is also in the Jurong area. About the middle of 1961, the Singapore Trading Company, Limited, advertised in the Press about this estate. They also printed a pamphlet giving details of their scheme and inviting applications. They called it a "Save $5 to own a house" scheme. In my view, this is highly suspect. However, this is a small point and I do not propose to go further into it. The pamphlet asked people who were interested in the scheme to apply to the Singapore Trading Company, Limited. But when they did apply and, after several discussions, decided to buy such a house, surprisingly enough they were asked to sign the usual agreement not with the Singapore Trading Company, Limited, but with an entirely different company called the Popular Estates Limited. Though I am not familiar with this sort of thing, it appears odd to me that one firm should offer houses for sale and another firm should be a party to the agreement. It would seem to me that this is a ruse to outwit the purchasers because the company that offered the houses for sale cannot be held responsible if the houses were not built according to the original specifications printed in the pamphlet. This would give the second company, the actual party to the transaction, an opening to sell houses very different from the original specifications, and the buyer would have no legal right of remedy against either company. The Singapore Trading Company, Limited, and the Popular Estates Limited are, however, in the same premises and the Managing Director of both these firms is one called Seah Boon Heng. Mr Seah very recently made a generous donation to the building fund of the St. John's Ambulance Brigade and thereby obtained some publicity in the Press as a philanthropist. If the harvest reaped by racketeering is transformed into a donation and makes the donor a philanthropist, may we be spared in future from such a travesty!

Let us come back to the Hillview Estate in Jurong. Three years have passed but the Hillview Estate is hardly in the first phase of building activity. The worried and indignant purchasers have joined forces and formed an association to protect themselves against the unscrupulous developers. I commend them for the action that they have taken. Accordingly, the Hillview Estate House Owners and Residents Association was registered on 15th July, 1964, as a society. On 1st of June, 1964, three years after the purchase agreement was signed and when the Association was still in its pro-tem stage, the pro-tem Secretary issued a circular to its members, the contents of which will clearly signify their plight. I quote below a few significant paragraphs. It says:

'The Vendor [that means the Company] in his last letter dated 26th February, 1964, assured us that the whole project was expected to the completed within the next five months.

Since then three good months have passed and there seems to be no sign of completion even after the lapse of five months. Work seems to be in progress, but only at a very slow unsteady pace, which could mean that the target date could be dragged on for another year or so.'

This was three years after the purchase agreement was signed. It went on to say:

'We also note from our inspection of the site that the Car Porch is not in accordance with the requirements. The drive way to the Porch is at a very bad angle in practically all the houses. We have, therefore, insisted to the vendor that at all costs the drive way must be flat or parallel to the ground. You could undoubtedly expect a further delay over this representation. Nevertheless, we expect to attain our aim patiently.

A letter dated 28th May, 1964, has been received by all house-owners from the vendor recommending that house-owners consider to build on their own retaining walls in front, back and side of our land, which we are aware will cost well over a thousand dollars. This extra unnecessary expenditure could have been avoided had the developer taken greater care while planning the site. We have no intention of suffering over-errors committed by the developer. Moreover, there is nothing specific in our agreement to the effect that such expenditure must be borne by house-owners. Therefore, the Committee has decided to seek further legal advice to put such shortcomings right.'

This is the common plight faced by the house purchasers who fell into the merciless grip of these sharks in the building trade. Strange to say, however, the law is used to tie up the purchasers in what is almost always a one-side agreement in which, unfortunately enough, lawyers play the vital role, and the purchasers are at the receiving end. The law, of course, is an honourable profession and it is most unfortunate that in the name of the law dishonourable documents are drawn up to fix the innocent buyers. Because the legal requirements are met in these documents, it is almost impossible to bring unscrupulous developers to court if they failed to fulfil their obligations. The documents are framed in such a way that the developer is completely free to change specifications, raise the price and use any material he likes, and it is more than likely that these would be inferior ones. There are possibly other ramifications in this type of racketeering but, because I have not got sufficient information on them, I do not propose to go into them now.

In the absence of legislation to curb and control housing developers and to protect home buyers, a fertile field will exist for avaricious developers. Like vicious man-eating sharks, they always hunt for their prey. The Government has, therefore, a duty to protect society from them. A firm line has to be drawn between legitimate business and bubble. The bubble must not be allowed to form and if already formed we must take steps to ensure that the public is protected before the bubble bursts. Legitimate business serves a useful purpose in that it contributes to economic and social development but the bubble, on the other hand, lives on the sufferings of the people and is therefore absolutely anti-social.

There are many other instances and I hope members of the public, especially the purchasers, who are victims of these building sharks, will come forward to give information to the Government and the Controller to be appointed under this Ordinance, so that remedial action can be taken against these sharks in the building trade.

Sir, it is these sharks that have spoilt the good name of the building trade, and it is these sharks that the Government seeks to control and suppress.

Sir, I personally have no special love or hatred for these housing developers. I never had any occasion to buy a house myself. However, as a representative of the common people, it is my duty to voice their protest and indignation against such an evil force in our society and if I cannot do this safely ---

Mr Speaker: Order. I hear disturbances in the House which must distract the attention of Members. Will Members, when they leave their seats, please see that their earphones are turned off? Mr Minister.

Mr Jek Yeun Thong: As a representative of the common people, it is my duty to voice their protest and indignation against such an evil force in our society, and if I cannot do this safely outside the House without being involved in expensive law suits, then I must do it in this House under its privilege which is meant for such purpose.

The Government is also interested in seeing that genuine developers will not be seriously affected by this law. We have, therefore, decided to commit this Bill to a Select Committee after its Second Reading in order to hear views from various quarters. We hope that this Bill, after introduction, will help to regularise and strengthen the building trade in Singapore.

Mr Speaker indicated Mr Lim Kim San.

Mr Lim Kim San: Mr Speaker, Sir, I beg to move, "That the Bill be committed to a Select Committee consisting of Mr Speaker as Chairman and seven other Members to be nominated by the Committee of Selection."

Mr Speaker: No, I have not put the Question yet. I was wondering whether the Minister wanted to reply. If the Minister does not want to reply, I shall now put the Question.

Mr Lim Kim San: No, I do not wish to reply.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Select Committee consisting of Mr Speaker as Chairman and seven other Members to be nominated by the Committee of Selection. -[Mr Lim Kim San].