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Contracts that allow banks to oppress apartment buyers

 | November 15, 2017

PSM says Bank Negara must step in to correct the situation.

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PETALING JAYA: Parti Sosialis Malaysia (PSM) has urged Bank Negara to review the wording of loan contracts between commercial banks and apartment buyers to prevent oppression.

Speaking to FMT, PSM secretary-general A Sivarajan referred in particular to the deed of assignment and the power of attorney agreement.

He alleged that all “major banks” in the country had had occasion to oppress borrowers through the two contracts. He did not name the banks.

The deed of assignment states that it is the bank’s absolute discretion “to be entitled, without notice, to enter and take possession of the property, to let, to lease, sell, transfer or assign the property”.

“This means that if a banks even senses a whiff of trouble, it can auction the property without informing you even though you have been paying your 30-year housing loan for the past 20 years, but because of some financial crisis, you are late by two or three months with your payments,” Sivarajan said.

He claimed that PSM had dealt with more than 50 such cases nationwide in the past four years.

“We’ve been able to help with some of the cases, but not all,” he said. “There are some cases where the owner only finds out that the property has been auctioned off when the new owner comes knocking on the door.”

Under the power of attorney agreement, the property owner has to appoint the bank or any of its officers to act “in any manner whatsoever” to enforce all rights and remedies under the sales and purchase agreement.

“The rights accorded to the buyer under the sales and purchase agreement include rights to public space as well as the apartment’s facilities,” Sivarajan noted.

“So with these two agreements, you are in effect signing off all of your rights to the bank just so you can get a housing loan to pay for 80% to 90% of the price of your property. The fact is that you’ve already forked out your own money to pay for the down payment.”

He said most property buyers would not have read every line in every page of these two contracts before signing them.

“Even if they do, it’s written in very confusing legal language and there’s a lot of fine print. The agreements shouldn’t be so lopsided in the first place and Bank Negara needs to step in.”

He said Bank Negara should treat the issue seriously, especially now that more and more people were opting to buy apartments because they could not afford landed property even if they could find them.

“These two agreements don’t affect those who own landed property because when you own landed property, your name is on the land grant.

“The National Land Code protects those who own landed property and even if the bank wants to kick you out for not being able to pay for the loan, it has to take you to court. There’s a process.

“For apartments, because of this deed of assignment, the bank doesn’t even have to tell you before it kicks you out.”

He also said there was a “complete disconnect” between the deed of assignment and the mortgage reducing term loan (MRTL) contract, which is supposed to act like an insurance that pays off the loan if the house buyer dies or becomes handicapped.

“If you die, your family has to go and see the bank and bring relevant documents showing that you’ve died. Similarly, if you’re handicapped, you still have to bring those relevant documents to prove that you’ve become handicapped.

“This takes time. Meanwhile, your loan is going on and if you are unable to pay it, the bank can auction off your property without informing you.”

Sivarajan said two cases involving handicapped property owners were brought to PSM’s attention but it could help with only one of them.

“In the one case we managed to help, we showed the bank that he was handicapped and brought all the relevant documents. The bank admitted its mistake and stopped the auction.

“In the other case, the new owner had already moved in and the bank said it couldn’t do anything because the new owner had bought the property legally.”

Sivarajan also claimed that the MRTL contract had become optional instead of being made compulsory.


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