THE FIGHT FOR BUYERS’ RIGHTS JUST WENT UP A GEAR, THE OUTCOME AFFECTS ALL OF US
BY Chris Prasad
“Extension of Time”, or EOT, is fast becoming a profane term in the property industry, especially from the perspective of buyers who feel they have been robbed of their basic consumer rights.
Why? Because the EOT, which is granted by the Housing Controller to a developer, essentially protects the developer against any compensation claims in the form of liquid ascertained damages (LAD) when there is a delay in delivering the property.
Already a class action suit is brewing over this issue involving 71 aggrieved buyers and the developer of the Palace Court high-rise project in the Jalan Kuchai Lama vicinity of Kuala Lumpur. Representing the buyers is the National House Buyers Association (HBA), which said that another group of 36 owners represented by another law firm will have their case heard on the same date of Feb 27.
HBA points out that the claim for late delivery is a well-recognised provision, and an essential component of the Sale and Purchase Agreement (SPA), clearly spelling out the rights of a purchaser.
Under the terms of the SPA, the developer is obligated to complete construction of a property within a stipulated period (24 month for landed, 36 month for stratified) and deliver vacant possession to buyers. If the developer fails to deliver this obligation, it will have to compensate buyers in the form of LAD for the period of delay.
By the same token, if house buyers are delayed in making instalment payments of the purchase price, they will have to compensate the developer for the delay at 10 per cent per annum.
“It’s not rocket science; the delay by one party leads to losses to the other party, hence the compensation. So how is it that by the stroke of a pen, the Housing Controller can deny the rights and protections given to buyers by Parliament?” asked HBA honorary sec-gen Chang Kim Loong, highlighting the contradictory nature of the EOT.
Alarmingly, more of such cases have now come to the fore. At a recent press conference HBA said that it will be representing two other groups of buyers whose rights have similarly been brushed aside by the granting of an EOT to respective developers.
One involves a project called The Mark in Cheras and another involves a residential project within City Park in I-City, Shah Alam.
A commonality between all these cases has been the lack of communication between the developers and their customers regarding delays as well as the delayed notice of the EOT. Such circumstances raise questions about the sincerity of the developer’s intentions and its commitment to buyers, said many of the aggrieved buyers who were present at HBA press conference.
Given this, the outcome of the first case involving Palace Court buyers now looms large, as the court’s decision there – positive or negative – will determine the legal precedent for such cases in the future.
As such, HBA is not pulling back on punches. Senior counsel for the case Datuk Andy Wong said HBA will not just be challenging the various ambiguities surrounding the EOT but the validity of its very existence, which is viewed as damaging to consumer rights.
He said the first defendant in the upcoming case would be the Ministry of Urban Wellbeing, Housing and Local Government itself (under which the Housing Controller operates). The second defendant will be the Housing Controller, while the third defendant will be the developer.
“It is also important to note that the EOT, in the first place, was not intended to be a shield for developers to protect themselves with, and it was only meant to be granted in ‘special circumstances’. However, there seems to be a great deal of ambiguity about what these special circumstances are and no uniformity behind how and when EOTs can be granted,” Wong said.
He said there are various circumstances where EOTs have been granted on frivolous grounds, and other circumstances – involving prominent developers – where EOTs have been stringently denied and developers have had to the pay LAD due. This situation that is considered to be unfair even in the development fraternity.
“We are contesting the validity of the EOT on numerous grounds. Firstly, the nature of its objective, which is contradictory to laws that have been put in place to protect buyers. We will argue that a provision like the EOT should only come into play when there are extraordinary factors that have caused the delay of a development, such as an Act of God situation. Finally, we will argue that before an EOT is granted, buyers should be properly consulted,” Wong said.
Asked if the current slow economic climate might be used as a defence for developers that have been granted EOT, he pointed out that the economy affects all parties, and buyers are equally – if not more so – impacted, especially if they have to pay for current lodgings as well as service expenses for an undelivered home.
“I’ve easily had to pay more than RM50,000 or RM60,000 in expenses for a home that was supposed to be delivered to me in May 2015. I see this as a breach of contract. If we breach the contract, we have to pay a penalty, so how come they are not compelled to do the same?” said a buyer of The Mark in Cheras.
A spokesperson representing buyers of the project in I-City said: “The EOT is a very saddening thing. Many buyers don’t know of its existence and we rely on the security that the SPA provides. This destroys the sanctity of the SPA.”
Sadly, the long wait will likely continue for many of these buyers as the issue is not expected to find a quick resolution. HBA fully anticipates that this will be a matter that will ultimately reach the Federal Court.