BY Chris Prasad
In the aftermath of a landmark ruling by the High Court last week, bringing into question the validity of Extension of Time (EOT) provision given to developers by the Ministry of Urban Wellbeing, Housing and Local Government (KPKT), a political storm has erupted with rampant finger pointing and accusations of “hypocrisy” being flung from across both sides of the political aisle.
Recent events have even prompted a fiery defense from the former KPKT minister (now a minister in the Prime Minister’s department), Datuk Seri Abdul Rahman Dahlan, about the issuance of EOTs during his tenure as housing minister. This has now escalated into a Malaysian Anti-corruption Commission probe, following an official complaint by an opposition party.
Stuck at the heart of it, though not out of preference, is the National House Buyers Association (HBA), which wants to make it clear that it cares very little about the political implications or motivators that led to EOTs being issued, but it does care about how housebuyers’ rights have been unfairly brushed aside as a result of it.
HBA led the fight against the improper issuance of EOTs in the recent case that brought the issue to public light, and it is now wary about being dragged into the political fracas.
“HBA really does not wish to be dragged into politics as we are a voluntary, non-profit and non-political organisation. We [now] merely wish to disseminate information on the points raised so that the buying public are not confused,” said the association’s honorary secretary-general Chang Kim Loong.
HBA, however, was critical about the former KPKT minister’s rationale for issuing EOTs while he was at the helm of the ministry, notably calling it “irrational”.
In a statement to the press, HBA said: “The reason [stipulated by the minister] for granting EOTs in order to ensure that housing developers complete their project does not hold water, because house buyers have no right to pursue liquidated damages (LAD) until and unless the houses have been completed and handed over. The question of LAD does not even arise unless the houses are completed and vacant possession delivered. This is clearly stated in Clause 25(3) of the Schedule H statutory Sale & Purchase Agreement (Schedule G has a similar provision).”
The clause reads:
“For the avoidance of doubt, any cause of action to claim for liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser take vacant possession of the said Parcel.”
HBA said that effect of an EOT is that the developers do not have to pay compensation to the house buyers after the project is completed and vacant possession delivered. In this scenario, it seems that the only reason for granting an EOT is to save money for the developers.
“Businessman must be able to accept the risks of doing business and not seek Government’s protection to ensure they continue to make money or do not lose money. And the Government must not try to save money for the developers at the expense of the naive and innocent buyers. By issuing the EOT the minister is effectively allowing the developers to save or keep the money which should have been paid to the house buyers. The minister is effectively taking away money belonging to the housebuyers,” argued HBA.
“Has our country now reached a state of economic crisis that the minister must dish out EOTs to developers who are already in distress (due to bad management) and threatened to abandon their projects?” it asked.
HBA also questioned why, in many of these cases, were EOTs being given without consultation with, or consent from, the buyers of the affected projects.
It said buyers are largely sensible and not unreasonable people and it should be left to them to negotiate with their developers to come to a fair compromise instead of the minister making a unilateral decision and force an outcome down their throats by foregoing their lawful entitlement to LAD.
“After all, they are the covenanting parties to the contract whereas the minister is not a party to the contract. There are numerous cases where both parties (developers and buyers) took a haircut and amicably settled,” HBA said.
At the very least, the association said the views of affected buyers must be considered prior to the Minister making a decision. It pointed out that buyers too face hardship and commitments, such as having to pay rent whilst continuing to service their bank loan. They too bear the burden of additional costs and expenses for the delay.
The EOT is now being widely viewed as an unfair element, especially in cases where buyers have not been aware of it and when it has not been stipulated in the Sale & Purchase Agreement and agreed upon by both parties.
This includes the perspective of many developers, which was recently made clear by a statement from the Real Estate and Housing Developers Association (Rehda).
“Developers should honour agreements to deliver project on time. Any delay is not the fault of the buyer. The law is the law. Developers will have to accept and follow the law even if it means a six months delay will lead to a payout of 5 per cent of the gross selling price of the property,” Rehda said.
In response, HBA said that Rehda’s reaction to the issue augers well for the development industry because it has voiced support for the court’s fair and just findings, and it shows that it believes consumer rights are an important component to the health of the industry.
HBA also believes that Rehda’s statement shows that it is discouraging its members from indulging in seeking EOTs as an easy way out.
The common standpoint is a rarity for two associations that are at often at loggerheads about a range of issues. Perhaps this is a clear indication that there is no place for EOT in Malaysia’s future.
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