New apartment owners extorted by developers’ agents/contractors!

renovation-racketThe Consumers’ Association of Penang (CAP) has received countless complaints since 2008 via anonymous letters, telephone calls, letters of complaint and even read in our mainstream media, letters written by hapless flat and condominium owners, highlighting the tactics used by developers’ agents/contractors to force new owners to renovate their units at exorbitant charges.

Such complaints are from owners from Sri Saujana, Asia Heights, Serina Bay, Puncak Erskine and other condo units in Bayan Baru, Penang.

These in-house contractors will target new blocks which have just been granted certificate of fitness (OC). The developers are working in cahoots with their agents/contractors in forcing these new owners to engage their exorbitant services to carry out renovation before moving in. Prices quoted by these contractors are excessive and are above 50% to 100% more than that quoted by outside contractors. The developers will demand a non-refundable deposit of RM1,000–2,000 should the new owners appoint their own contractors to carry out the renovation. All building material such as sand, cement, bricks, etc have to be purchased from these agents/contractors at 70-100% above market price. Service charges are also imposed for carrying floor tiles to the relevant units and charges for clearing rubbish and other building debris range from RM900-1,400.

At the Sri Saujana flats at Gat Lebuh Macallum, Penang all air wells are forcefully closed and charges for laying the concrete and sealing them are imposed on the adjacent unit owners. The developer, PLB-Wonder Bay Bhd has contravened the building by-laws and made these blocks of flats into heat-entrapped buildings while the general trend of all construction is veered towards green eco-friendly development and airy, well ventilated units. Moreover they are collecting parking fees of RM0.30 per half hour at these blocks of flat right under the nose of the management company.

Upon collecting the keys to their units at Sri Saujana, these new owners were informed by the management company that the developer had appointed a contractor to carry out all the renovation work. The developer, PLB-Wonder Bay Bhd, had instructed that all renovation work had to be undertaken by that contractor’s company and charges for the covering up of the air-well, installing iron grills for the main door and air-well opening be charged to the unit owners.

This tradition of forcing new owners to employ in-house contractors to carry out renovation work is very deeply entrenched in Penang and practically every newly developed block of flats are controlled by agents in that area. The developers are working in cahoots with these agents/contractors by allowing them to set up tables near the entrance of the lifts to monitor the movement of new owners. They will block owner appointed contractors from carrying out their work and force them to purchase all building material from them at exorbitant rates.

The purchase, sale and rental of these units are also controlled by the developers. Owners who do not abide by these unwritten rules have had their properties and cars or motorcycles damaged. As such many new owners, fearing further reprisal, had given in to the demands of these in-house contractors and ended up paying exorbitant charges for shoddy work done.

We urge the Ministry of Housing and Local Government to investigate the rampant abuse of power of these developers in Penang especially in notorious areas. Stringent laws and guidelines should be implemented to ensure that contractors are licensed and have the expertise to undertake such projects. Should these developers and contractors flout the laws their licences should be withdrawn and they should be blacklisted. Such developers or their directors should not be allowed to form new companies and not be granted developers’ licences or permits to build new housing estates and perpetuate this problem.

Guidelines regarding permissible renovation should be given to the individual owners so as not to temper with the main structure of the building and they should be free to choose their own contractors. Developers should also set up a refundable contingency fund to be contributed by developers and new owners, somewhat similar to sinking fund, which should be utilized solely for damages caused by renovation.

We urge the Ministry to come up with more stringent enforcement such as prosecution of errant developers and blacklisting their directors so that these developers and their agents/contractors are not allowed to abuse their power and continue to extort and fleece more money out of new owners.

We hope the Ministry will investigate this rampant and deeply entrenched tradition of all high rise property developers, which is endemic in Penang, so as not to perpetuate this problem and cause further hardship to the urban poor. This group of people is in dire straits and need urgent assistance not only from the Ministry of Housing and Local Government but also from the Ministry of Internal Security and Polis DiRaja Malaysia.

Letter to the Editor, 27 May 2010