Kota Kinabalu: A project is considered abandoned if construction work has stopped for more than six months without any valid reason; the developer is wound up or declared bankrupt; and when the Ministry of Local Government and Housing officially declares the project abandoned.
Such projects often leave buyers with unpaid loans, no homes, and few updates — a legal and financial disaster, said Sr. Liaw Lam Thye, a qualified principal property manager at Taylor Hobbs with extensive experience managing numerous properties.
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In many abandoned housing projects, group legal action or a class suit can be more effective. An experienced lawyer can coordinate with other affected buyers to streamline the process, he added.
Sr. Liaw knows very well of such cases in Sabah, for he has been involved in the calculations and rescue of abandoned like 1Sulaman which has been partly restored, besides other projects.
The treatment of land and other immovable property during bankruptcy (for individuals) and insolvency (for companies) is a crucial aspect of Malaysian property and commercial law.
Bankruptcy and insolvency have direct implications on ownership, control, and dealings with land, particularly under the Insolvency Act 1967, Companies Act 2016, and the Sabah Land Ordinance.
When a debtor becomes bankrupt, or a company becomes insolvent, their assets are no longer dealt with by the original owner but instead vest in a statutory officer — namely, the Director General of Insolvency (DGI) for individuals, or the liquidator/receiver for companies.
One of the most frustrating aspects of abandoned projects is that buyers must continue paying housing loans for homes they can’t occupy.
Unfortunately, banks are within their rights — but a homebuyer lawyer can help to negotiate with the lender bank; assist in applying for a moratorium and help to prove misrepresentation by the developer.
No one wants to end up with a property that is abandoned before completion. There are a few things buyers can look out for before buying property from a developer:
- The developer must have a valid developer license from the Ministry. This license number is printed in their sales brochure.
- Check the reputation of a developer’s past housing projects and the financial standing of its directors.
- Check if the developer or any of their board of directors have been blacklisted. Bankruptcy status can be checked via the e-Insolvensi portal of the Malaysian Department of Insolvency (MDI) with a fee of RM10.
- Check for history of complaints against the developer.
- Do a search of the developer and housing project on the Ministry’s website.
- Do a check on the land title, whether the title has restrictions against ‘Transfer’ and ‘Charge’ which hampers dealings. Is the developer the registered owner of the land or is it selling pursuant to a joint venture with the land proprietor? Have separate titles been issued?
Is the land encumbered or charged to a bridging financier? If the developer has charged the title, find out the amount outstanding for redemption due to the bridging financier.
- If possible, visit the site of the proposed property development.
- Read the SPA carefully. The SPA supersedes the glossy sales brochure with its artist’s impressions.
Potential buyers should always appoint an independent lawyer to protect your interests and conduct thorough land title checks before committing to any property purchase.
