Introduction
In our article written on 26.05.2020, we explore the issue that persistently crop up when dealing with homebuyers and housing developers. On 19.01.2021, through the decision of PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor [Cases No(s): 01(f)-29-10/2019(W), 01(f)-30-10/2019(W), 01(i)-40-12/2019(M), 01(f)-42-12-2019(M), 01(f)-4-02/2020(W) and 01(f)-31-10/2020(W) all heard together], the Federal Court has pronounced the law in answering the following question:-
Where there is a delay in the delivery of vacant possession by a developer to the purchaser in respect of Schedule G and/or H type contracts under Regulation 11 (1) of the Housing Development (Control and Licensing) Regulations 1989 (Regulation 1989) enacted pursuant to Section 24 of the Housing Development (Control and Licensing) Act 1966, whether the date for calculation of liquidated agreed damages (‘LAD’) begins from:
(i) the date of payment of deposit/booking fee/initial fee/expression by purchase of his written intention to purchase; or
(ii) from the date of the sale and purchase agreement,
having regard to the decisions of the Supreme Court in Hoo See Sen & Anor v Public Bank Berhad [1988] 2 MLJ 170 and Faber Union Sdn Bhd v Chew Nyat Shong & Anor [1995] 2 MLJ 597
What was the Federal Court’s Decision?
The Federal Court decided that the calculation of liquidated agreed damages is to be taken from the date of payment of the deposit / booking fee / initial fee (or to any other terms that housing developers may word it), instead from the date stated in the sale and purchase agreement (the “SPA”).
Court’s Reasoning
The Federal Court clarified the law by stating that:-
(i) the Housing Developers (Control and Licensing) Act 1996 [the “HDA”] and the Housing Development (Control and Licensing) Regulations 1989 [the “Regulations”] are social legislations;
(ii) being social legislations, such laws must receive a liberal, and not a restricted or rigid, interpretation;
(iii) the practice of housing developers collecting from or imposing on ‘booking fee’ (or to whatever term it may be worded) on purchasers are prevalent despite it being prohibited under regulation 11 (2) of the Regulations which states-
(2) No housing developer shall collect any payment by whatever name except as prescribed by the contract of sale.
(iv) where the stronger side, in other words the housing developers, commits such acts that is contrary to the terms of the contracts specified under the HDA or the Regulations, then the existence of penal sanctions for such illegal acts do not invalidate the contract;
(v) on the contrary, it will cause the illegality in question to be construed against the housing developers; and
(vi) in such scenarios, where housing developers provide that purchase of such housing properties is made firstly through a booking pro-forma and with the payment of a ‘booking fee’, it is sufficient under the law to constitute a valid contract for the said property.
Also, on another issue…
The Federal Court also took the opportunity to address the issue of whether the date for LAD calculation for common properties started from the date of the certificate of practical completion (“CPC”) or the date of the certificate of completion and compliance (“CCC”).
This issue arose because in the contracts:-
(i) the date for the delivery of vacant possession of the building is to be taken from the CCC. Briefly, the CCC is obtained once all the relevant approvals or permits or by-laws have been complied with or obtained from the local authorities;
(ii) for the common properties, while the housing developer is to complete the same within 42 calendar months from the date of the SPA, the housing developer’s architect shall certify the completion of the common properties.
This meant that a different date would apply to the completion of the common properties and the housing developer’s architect would technically have the final say on the date of the completion of the common properties.
The Federal Court reasoned that under the SPA, vacant possession is to be delivered to the purchaser upon the CCC, thus:-
(i) it would be inconsistent to adopt a different standard or time for common properties; and
(ii) the proper interpretation to be applied here is to follow the date of the CCC even for the common properties.
Conclusion / Comments:
1. The Federal Court’s decision is indeed a welcome to resolve this longstanding issue affecting purchasers of housing properties.
2. While some of the issues raised by the Supreme Court’s decision of Hoo See Sen & Anor v Public Bank Berhad (1988) 2 MLJ 170 (“Hoo See Sen”) as described in our article published on 26.05.2020 were not fully addressed, the Federal Court has affirmed that Hoo See Sen and Faber Union Sdn Bhd v Chew Nyat Shong & Anor (1995) 3 CLJ 979 are good law.
3. The Federal Court’s decision here does change the way housing developers will have to operate from now on in terms of securing purchases of their housing properties.
