More than a 100 purchasers of lakeside apartments in Bukit Merah Lake Town are living a nightmare repaying their loans after their three-year Guaranteed Rental returns contract with a developer's subsidiary expired a few years ago.

The 172 buyers of the Lake Town Serviced Apartments (LTSA) thought they had a good deal with developer Segi Objective (M) Sdn Bhd (SOSSB), a subsidiary of MK Land Holdings Bhd until it refused to renew their contract citing poor business.

Under the original guaranteed rental returns(GRR) agreement, the apartments were leased to LTSA with the buyers guaranteed a return of 8% per month on the purchase price of their property for a period of three years.

Those who bought either studio, one bedroom or two bedroom units were happy with the deal as their bank loan payments were made that much easier with this extra income. The units had been purchased between 2001 and 2005.

However, the deal turned sour when the developer refused to renew the agreement, forcing the owners to form a committee.

When both parties met, the developer agreed to only to a 2.5% payment instead of the original 8% .

According to one of the owners, G Thanaraj, the GRR payment then started to come two to three months late after the expiry of the individual agreements.

This led to banks going after the owners for the monthly settlement of their loans at a time when the one-third drop in the developer's payment made it difficult for them to meet their obligations.

Allegations of fraud

The situation grew so bad that many banks auctioned off the properties, sending some owners into bankruptcy and others, struggling to settle their monthly installments.

These were among the problems discussed at today's three-hour meeting co-chaired by the committee's chairman Md Nordin Surat and the residents' counsel A Saravanan.

Saravanan also briefed the owners on the law suit that they filed against the developer at the Ipoh High Court recently.

The buyers had taken the court action alleging fraud and misinterpretation of facts in the sale of the properties on the part of the developer.

In their suit, the buyers claim that in October 1994, SOSB had obtained a 99-year lease on the land with two restrictions which was that the construction of apartments and the land could be transferred or leased only with the Mentri Besar's (MB) consent.

The developer SOSB had allegedly failed to comply with the law - they had constructed the Bukit Merah LTSSA without the MB's consent.

Saravanan said "The financing of the project was through a letter dated 25 October 1993 from the land office which allowed a waiver of the transfer and lease clause. This is wrong as the consent of the MB has not been obtained."

SOSB has mortgaged the whole land title to Ambank Bhd in order for it become the bridging financier for the project.

Land reverts to gov't

However, he added that this status was cancelled in November 2000 and the land reverted to the Perak Land and Mines Office. As of now, the land office has yet to convert the site for development.

He alleged that SOSB was neither the developer of the project nor has the license to do so. The actual developer was Vibrant Leisure Sdn Bhd.

"Thus SOSB has committed wrong doing in selling the properties when they are not the owner of the land and did not have a developer's licence," he said.

The buyers filed the suit at the Ipoh High Court in April, to nullify their sales and purchase agreements with SOSB and declare that they are not legally binding; and to nullify other related agreements, as well as to order the defendants to bear costs incurred by them with financial institutions.

The buyers are also seeking special damages to cover the purchase as stated in the agreements, as well as the general and exemplary damages and other costs as the court may deem fit.

According to Saravanan, the High Court has fixed Sept 29 for the hearing.