HOUSING DEVELOPERS (CONTROL AND LICENSING) (AMENDMENT) BILL

[Mr Deputy Speaker in the Chair]

Order for Second Reading read. 5.10 pm

The Minister for National Development (Mr Teh Cheang Wan): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The existing Housing Developers (Control and Licensing) Act protects purchasers of residential properties by empowering the Controller of Housing to license only developers with a minimum paid-up capital of $100,000 and who are not undischarged bankrupts and to investigate the affairs of a licensed developer. There is no provision, however, to protect the interest of a purchaser in a housing project should the developer go bankrupt or face liquidation.

To offer greater protection to purchasers, my Ministry has introduced a Project Account Scheme since August 1981. Under the Scheme, a developer has to open a Project Account with a bank or a finance company for each housing project undertaken by him. All the progress payments by purchasers up to the issue of a Temporary Occupation Licence are paid into the account. The bank or finance company will allow withdrawals from the account only for the servicing or redemption of mortgage loans, and for payment of the project's construction cost upon certification by the quantity surveyor or the architect of the project. After the issue of the Temporary Occupation Licence, all surplus money not required to complete the project will be released back to the developer. If the property is mortgaged, partial discharge will be executed for individual purchasers upon issue of the Temporary Occupation Licence. The Scheme makes sure that progress payments made by purchasers are used only for the construction of the project and safeguards against purchasers' funds being unscrupulously channelled elsewhere for other uses.

The Bill will give the Project Account Scheme legal status. It seeks to prevent money in a Project Account from becoming the property of the developer in the event of bankruptcy or liquidation. The money in the Project Account will vest in the official receiver, trustee in bankruptcy or liquidator, to be applied for the completion of the project. Any money left after discharging the developer's obligations and liabilities under the sale and purchase agreement in respect of the project will be money belonging to the developer to be applied in accordance with the law relating to bankruptcy or liquidation. Any developer who contravenes or fails to comply with the requirements of the Project Account Scheme is liable on convic- tion to a fine not exceeding $10,000 or imprisonment for a term not exceeding one year or to both.

The Project Account Scheme will not apply to:

(i) any building project where the units are not for sale before the completion of the project;

(ii) any URA building project which is governed by a similar scheme imposed by URA in its sales agreements; or

(iii) any building project for which the developer has furnished to the Controller of Housing a banker's guarantee of an amount not less than 140% of the total cost of construction as certified by the architect in charge of the project.

The Bill also empowers the Minister to appoint an auditor to investigate the books, accounts and transactions of a Project Account and to make rules relating to the Project Account Scheme.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Teh Cheang Wan]

Bill considered in Committee; reported without amendment; read a Third time and passed.