BY Chris Prasad Feb 27, 2017
A decision made in the Appellate Court on Monday may have just involved one developer and 104 buyers, but the outcome was a far-reaching one that will set the tone for many other cases where an Extension of Time (EOT) has been irregularly granted to the detriment of buyers’ rights under the Sale and Purchase Agreement (SPA).
During a judicial review hearing presided by judge Datuk Hanipah Farikullah, the 104 house buyers who took up a case against developer BHL Construction Sdn Bhd were granted Order of Certiorari, quashing the Urban Wellbeing, Housing and Local Government (KPKT) Minister’s decision to amend the time period for vacant possession of Sri Istana condominium in Kuala Lumpur.
In the big picture, it means housing developers are now compelled to honour liquidated and ascertained damages (LAD) or late delivery compensation to house buyers, explained the National House Buyers Association (HBA).
The decision was also a major win for the HBA, which has long contested the purpose of the EOT, the ambiguities surrounding it and the fact that its existence undermines protection offered to buyers under the SPA as well as the Housing Development (Control & Licensing) Act, 1966 amended 2015 (Act).
In addition to offering legal representation for 71 aggrieved buyers in this case, HBA is also taking the lead in a number of similar cases where the EOT provision has been seemingly abused. Upcoming cases include buyers of The Mark in Cheras and City Park in Shah Alam.
Of important significance to these upcoming cases is the fact that the Appellate Court also ruled today that Regulation 11(3) is “ultra vires” the HDA, which means that the extension of time (EOT) granted by the Controller of Housing to developers is irregular.
Regulations 11 (3) states:
“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing waive or modify such provisions: Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller.”
“However, today’s ruling literally means that the Controller does not have the power to grant EOT or waive or modify the standard terms and conditions in the statutory sale and purchase agreement (SPA) under the law,” said HBA honorary secretary-general Chang Kim Loong.
“The rights and entitlement to late delivery compensation cannot be taken away by the Controller, or the housing ministry for that matter, with a stroke of a pen. The general principles of contract still apply. The parties are bound by the terms of the contract which they have signed and any modification or variation of any of the terms of the agreement would require the consent of the other contracting parties,” he explained further.
Earlier, Chang told Property360 that the terms under the SPA are “not rocket science”. The delay by one party leads to losses to another party – hence the provision for compensation. He said that it was exceedingly unfair that the Housing Controller, which operates under the purview of the Housing Ministry, can deny the rights and protections given to buyers by Parliament with the stroke of a pen.
Under the SPA, developers must complete construction and hand over the housing project within 24 months for landed properties and 36 months for stratified homes, failing which it must pay LAD charges of 10% per annum times purchase price.
Similarly, house buyers who are late in instalment payments of the purchase price must compensate the developer for the delay at 10% per annum.
“The granting of the EOT to defaulting developers makes a mockery and defeats the intent and object of the HDA which is to protect house buyers,” he said.
With this decision, Chang said the EOTs issued by the Controller is now void and affected house buyers are entitled to claim for LAD from the developers who had sought EOT.
While the defendants (which in this case are KPKT, the Housing Controller and the developer) can file for an appeal at a higher court within 30 days, Chang said that HBA would meet that challenge head on, as it would make this case a “stronger precedent” for other courts to follow.
In an earlier article, HBA said it fully expected this case to go as far as the Federal Court.
In line with its ardent aim to defend house buyers’ interest and rights, HBA has brought together a team of “legal eagles” to challenge the unilateral granting of EOTs by the Housing Controller in court. Many of these lawyers are volunteers working on a “pro bono” basis in the interest of buyers and HBA has applauded their dedication to the cause.
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