In my previous Article
titled “The Malaysian Property Dilemma” I examined the financial fortunes of 3 Malaysian Families earning incomes of RM14,000
per month (High Income family), RM8,000 per month (Middle Income family)
and RM3,000 per month (Low Income
family).
Based on my study, as at July 2013, after providing for
living and related expenses, these 3 Malaysian
Families were estimated to have remaining monies available to pay their
respective Housing Loan Repayments computed as follows:-
High Income Family
RM
Monthly Family Income (2013) 14,000
Monthly Expenditure 11,040
---------
Income Surplus available to pay Housing Loan 2,960
=====
Middle Income Family
RM
Monthly Family Income (2013) 8,000
Monthly Expenditure
6,280
--------
Income Surplus available to pay Housing Loan 1,720
=====
Low Income Family
RM
Monthly Family Income (2013) 3,000
Monthly Expenditure 2,480
--------
Income Surplus available to pay Housing Loan 520
=====
Summary of
Surplus to pay Housing Loans as at July 2013
RM
High Income Family 2,960
Middle Income Family 1,720
Low Income Family 520
Surplus to pay
Housing Loans as at July 2014
The Malaysian Federal
Government, numerous Local Authorities and services providers recently announced
that effective 1st January 2014 there would actions taken that
effectively would result in increases in the Cost of Living of Malaysians in
2014 and beyond.
The Cost and Price increases that commenced on 1st
January 2014 include:-
1.00 Increase in electricity charges
2.00 Increase in water charges
3.00 Increase in toll rates
4.00 Increase in petrol prices due to lower fuel subsidy
5.00 Increase of Assessment
Rates
6.00 Implementation of the Goods
and Services Tax (GST)
7.00 Increase in sugar price due
to withdrawal of subsidy
8.00 Increase in transport
charges
Such drastic cost and price
increases that involve eight (8) key and basic services and commodities ALL AT ONE TIME is UNPRECEDENTED in the history of the
Malaysian Economy. There will likely be adverse effects and consequences.
Increase in
Costs of Living
With the costs and prices of
eight (8) key and basic services and commodities poised to increase commencing
1st January 2014, the overall Costs of Living of Malaysians are
poised to increase soon after and are expected to be fully felt by July 2014.
I estimate that by July
2014, when the knock-on effects of costs and prices increase of these 8 key and
basic services and commodities become fully felt, the overall Costs of Living
of Malaysian families would range between RM500 per month to RM1,000 per month.
For the purposes of this Article,
I propose to adopt a median overall Costs of Living increase of RM750 per month
for Malaysian families.
Summary of
Surplus to pay Housing Loans as at July 2014
I estimate that by July
2014, after deducting RM750 per month from their existing available surpluses due
to higher Costs of Living, the monies available to many Malaysian families to
pay their Housing Loan Repayments would be much reduced and may be computed as
follows:-
RM (July
2013) RM (July 2014)
High Income Family 2,960 2,210
Middle Income Family 1,720
970
Low Income Family 520 -230 (negative)
Inevitable
Increase in Housing Loan Defaults
I estimate that due to
higher Costs of Living, by July 2014 many Malaysian families will likely not be
able to pay their monthly Housing Loan Repayments.
Malaysian Banks are already
predicting and bracing themselves that by July 2014 the number of their borrowers
who will not able to repay their Housing Loans will dramatically increase that
will in turn cause the increase of borrowers’ houses to be foreclosed by the
Banks and to be sold via Public Auction Sales.
Commencement of
wholesale Foreclosure
Proceedings
Can Malaysian Banks be relied upon to self-regulate
and to act with caution and compassion and not to commence with wholesale
foreclosure proceedings against their defaulting borrowers that would cause not
only the economic destruction of their borrowers but also would precipitate a
crash of the Malaysian Property Market with dire consequences for ALL
Malaysians?
Can
the thousands of distressed and hapless Malaysian Borrowers defend themselves
and survive?
Provisions in the National
Land Code of 1965 (NLC)
We need to educate the thousands of distressed
Malaysian borrowers to know their Rights as provided for in the National Land
Code of 1965 (NLC) and how they can stand up for themselves and know what to
do when they are faced with Foreclosure Proceedings by Malaysian Banks
Section 253 to Section 269 of the NLC sets out the Rules
and the Rights and Obligations of Malaysian Banks and their borrowers,
vis-à-vis the Foreclosure and Public Auction Sale of the properties of
borrowers charged to Malaysian Banks for the loans granted to these borrowers. The
NLC also gives the Banks the right to foreclose and sell the foreclosed
properties through public auctions to recover the loans.
The property offered by the borrower to the Bank as
Security for the loan is “Charged to the
Bank”. The Borrower is known as “Chargor”
and the Bank is known as “Chargee”. When
the borrower fails to repay the Bank loan, the Bank can apply to the High Court
or the Land Office for an “Order for
Sale” to sell the charged property by way of a Public Auction.
Strict Statutory Rules for
Foreclosure and Public Auction Sale
There are very strict Statutory Rules that Banks are
required to comply with before they can foreclose and sell their borrowers’
properties. If they fail to comply with any one or more of these Statutory
Rules, they will fail in their attempts to foreclose and to sell their
borrowers’ properties.
The requirement for strict compliance of Statutory
Rules by Malaysian Banks (with penalties
for their failure to comply) provides distressed borrowers with plausible
defences that they can fall back on when faced with foreclosure proceedings by
Malaysian Banks.
Borrowers’ 1st
line of Defence
Before the Bank can apply to the High Court for an
“Order for Sale”, Section 254 of the National Land Code of 1965 requires that
the Bank issues to the borrower a “Default Notice” in Form 16D, a form prescribed
in the NLC. This Form 16D must be served on the borrower in person.
It is mandatory for the Bank to comply with the
requirements stated in Section 254 of the NLC.
If the Bank fails to comply with Section 254 of the NLC
and did not issue and did not personally serve on the borrower the “Default
Notice” in Form 16D, all subsequent foreclosure proceedings commenced by the
Bank, all the way to the issuance of the “Order for Sale” by the High Court
would be considered irregular and cannot be enforced on the borrower.
When a borrower is served with a Court Summons to
foreclose his property, the borrower should check his memory and his records to
make sure he has personally been served by the Bank through their lawyers with
the “Default Notice” in Form 16D”.If he did not personally receive from the
Bank’s lawyers the “Default Notice” in Form 16D” the lending Bank did not
comply with Section 254 of the National Land Code of 1965 and the consequences
for the Bank will follow.
Borrowers’ 2nd
line of Defence
After he has ascertained that he did personally
receive from the Bank’s lawyer the “Default Notice”, the borrower has now to
study the Form carefully. Is it Form 16D or Form 16E?
In essence the difference between Form 16D and Form
16E is:
Form 16D is a default notice issued when the loan
granted by the Bank to the defaulting borrower is repayable by intalments over
a period of time, like a Housing Loan repayable in monthly instalments over a
period of 30 years.
Form 16E is a default notice issued when the loan
granted by the Bank to the defaulting borrower is repayable on demand in one
payment like an Overdraft granted to businesses.
When the borrower did not receive Form 16D, even
though he received Form 16E, the Bank did not comply with Section 254 of the
National Land Code of 1965 and the consequences for the lending Bank will
follow.
Borrowers’ 3rd
line of Defence
When the Bank’s lawyer apply to the High Court for an
“Order for Sale”, the Bank’s lawyer will have to submit to the High Court a copy
of the Valuation Report on the borrower’s property prepared by the Bank’s
Valuer. The Valuation Report will state the “Market Value” of the borrower’s
property as at the date of the Valuation Report.
The Reserve Price for the Public Auction is defined in
Section 257 (1) (d) of the National Land Code of 1965 that states:
“Every order for sale made by
the Court under section 256 shall require the Registrar of the Court to fix a
reserve price for the purpose of the sale, being a price equal to the estimated
market value of the land or lease in question”
The definition of “Market Value” as adopted by the Board
of Valuers, Appraisers and Estate Agents, Malaysia is as follows:
“Market value is the estimated amount for
which an asset should exchange on the date of valuation between a willing buyer
and a willing seller in an arm’s length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently and without
compulsion”
The borrower has the right to challenge the accuracy and
correctness of the Valuation Report prepared by the Bank’s Valuer and to
challenge the Valuer’s Opinion on the “Market Value” of his property that is
the subject of the foreclosure proceedings.
In the foreclosure dispute between Overseas-Chinese
Banking Corporation Ltd (OCBC) and Kredin Sdn Bhd (Kredin) heard and decided by
the Kuala Lumpur High Court on 17th December 1995, in November 1988 OCBC
appointed a Registered Valuer to value 206,531 sq ft (4.74 acres) residential
zoned land next to KLCC off Jalan Ampang, Kuala Lumpur. OCBC’s Valuer valued
the 206,531 sq ft (4.74 acres) land in November 1988 at RM19,000,000 (RM92 per
sq ft) and on 5th April 1993 OCBC’s Valuer revalued the same
properties at RM42,000,000 (RM203 per sq ft).
In his Valuation Report dated 27th July
1993, Kredin’s Valuer valued the 206,531 sq ft (4.74 acres) land at
RM134,245,150 (RM650 per sq ft).
After
hearing evidences from OCBC’s Valuer and Kredin’s Valuer, the Kuala Lumpur High
Court ordered that the Reserve Price
for the 206,531 sq ft (4.74 acres) land be fixed at RM108,428,775 (RM525 per sq ft).
The respective Valuations of OCBC’s Valuer and
Kredin’s Valuer and the Court ordered Reserve Price are represented as
follows:-
Valuer/Court Valuation
Value Per Sq Ft Times
(RM) (RM)
OCBC’s Registered Valuer 42,000,000 203 1.00
Kredin’s Registered Valuer 134,245,150 650 3.20
Court
ordered Reserve Price 108,428,775 525 2.58
Borrowers’ 4th
line of Defence
After the borrower has been granted the Housing Loan
and after the “Legal Charge” was registered by the Land Office in the name of
the Bank, the “Original Copy” of the
title document would be returned to the Bank to keep as “Trustee and Custodian” of the borrower for the safety of his Title
Document.
What
would happen when the Bank loses and misplaces the borrower’s title document? It is a fact that in most
cases when the Bank lost the “Original Copy” of a borrower’s title
document, the Bank would instruct their lawyers to apply to the Land Office
concerned for a “Replacement Title” without
getting the borrower concerned to be involved as they consider that as the
Chargee, the Bank has the right to apply for the “Replacement Title” without the involvement of the property owner (the
proprietor).
Section
166 (1) (d) of the NLC states that the “Circumstances
in which title in continuation may be issued to land as a whole and for the
Application of Replacement Titles when the original issue document of title has
been lost or wholly or partially destroyed, or is being improperly or
wrongfully withheld”.
Section 166 (2) of the NLC states that the person or body to apply for
replacement titles are as listed below:-
a) The proprietor of the
land in question
b) Any person or body claiming
through the proprietor
Section 166 (2) of the NLC as quoted above did not provide for the “Bank” or “Chargee” to be included in the list of person or body permitted to
apply for the replacement title.
Section 168 of the NLC stipulated that
“Before issuing title in continuation in
the circumstances described in paragraph (c) or (d) of subsection (1) of
section 166, the Registrar or [Land Administration] shall:-
(a)
cause
notice of his intention to do so to be published in the Gazette in Form 10D;
and
(b) cause
copies of the notice to be served on every person or body having a registered
interest in the land, and to be published in accordance with the provisions of
Section 433”
When a borrower is served by his Bank with a Court
Summons to foreclose his property, he should immediately request from his Bank
a photo copy of his title document that he had deposited with them as his “Trustee and Custodian” for the safety
of his title document. When the borrower has received the document from his
Bank he should check to see if the document given by the Bank is a copy of his
original title.
Borrowers’ 5th
line of Defence
When after the borrower has failed to stop the Bank
and they succeed in obtaining an “Order for Sale” against his property and even
sold his property at a public auction, the borrower still has one last line of
Defence available.
The Proclamation of Sale in most case,
requires the Purchaser at the Public Auction to settle the balance of the
Purchase Price within 90 days or 120 days from the date of the Public Auction
after paying the required 10% of the Purchase Price.
If the Purchaser is unable to settle the
balance of the Purchase Price within the 90 days or 120 days stipulated in the Proclamation
of Sale, can the Purchaser apply to either the Chargor (borrower) or to the
Chargee (Bank) for an Extension-in-Time to pay the balance 90% of the Purchase Price?
Statutory Prohibition for Extension-in-Time
to pay
The
NLC in Section 257 (1) (g) {for High
Court Public Auction Sale} and Section 263 (2) (g) {for Land Office Public Auction Sale) clearly forbids (prohibits)
the granting of Extension-in-Time
for the Purchaser to pay the balance 90% of the Purchase Price.
Section
257 (1) (g) of the NLC reads “Specify
that the balance of the purchase price shall be settled on a date not later
than one hundred and twenty days from the date of the sale and that there
shall be no extension of the period so specified”
Section
263 (2) (g) of the NLC reads “Specify
that the balance of the purchase price shall be settled on any date not later
than one hundred and twenty days from the date of the sale and that there
shall be no extension of the period so specified”
In the light of the prohibitions stated in Section 257 (1) (g) and
Section 263 (2) (g) of the NLC, If the
Bank grants an extension in time for the Purchaser to pay the balance 90% of
the Purchase Price, the Bank’s action
would render the Sale of the borrower’s property at the Public Auction void (has
no legal effect and unenforceable)
Even after his property has been sold by
the Bank at a public auction the borrower need to monitor the progress of the sale. The borrower
knows the balance 90% of the Purchase Price has to be paid by the Purchaser 90
days or 120 days from the date of the Public Auction Sale.
On the 91st day or the 121st
day from the date of the Public Auction Sale, the borrower should go to the Bank to
ask if the Purchaser has paid the 90% of the Purchase Price which should have
been paid to the Bank the day before and if the Bank said the Purchaser has
paid, the
borrower should ask the Bank to provide him with the evidence of
payment.
On-Line Property Price Search Websites in Malaysia
Before you purchase your next property, you may want visit http://www.ipropertydata.com and check out for yourself latest prices of the types of properties you intend to purchase.
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