Purchaser’s Right In A Late Delivery Scenario

Introduction

The recent Federal Court decision of Ang Ming Lee & Ors and Other v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor And Other Appeals [2020] 1 MLJ 281 states that, amongst others ('TLDR'):

  1. A developer must deliver vacant possession of a property to the purchaser within the stipulated timeline as prescribed in schedule H, namely, 36 months from the signing of the SPA; and

  2. A developer cannot apply for an extension of time with the Controller of Housing to extend the completion time to 54 months.

In the event a developer fails to deliver vacant possession of a property within the stipulated time, what are the consequences for the developer/ what can the buyer do?


In Xaview Kang Yoon Mook v Insun Development Sdn Bhd [1995] 1 AMR 667, the court noted that:

  1. A purchaser can terminate the SPA and sue the developer for damages; or

  2. A purchaser can opt to continue with the SPA and claims for damages in the form of liquidated ascertained damages ('LAD') from the developer.

We will explore both the options briefly below.


Option 1: Terminate and claim for damages

The most fundamental right a purchaser has is to terminate the agreement and claim for damages.


Q: Can a developer justify their late delivery?

The answer is no. In Chua Eng Hong & Anor v Palm Springs Development Sdn Bhd [2001] 6 CLJ 29, it was held that even if the developer can justify their late delivery, it does not provide them a way out from their contractual obligation to fulfil the SPA. The court went on to say that the developer should have applied for an extension of time with the Controller of Housing to avoid the SPA being terminated by the purchaser (bearing in mind that this was before the court decided on the case of Ang Ming Lee). The purchaser therefore had every right to terminate the SPA and claim for damages.


Q: Is there a time frame where a purchaser has to issue a notice of termination? Must it be done immediately?

While cases do suggest that this might be the case [See: Hock Huat Iron Foundry (Suing as a Firm) v Naga Tembaga Sdn Bhd [1999] 1 MLJ 65], there are instances where the courts held otherwise. For example, in Chung May Yen v Puncakdana Development Sdn Bhd [2002] 7 MLJ 216, the court found in favour of the purchaser and held that he did not waive his right to terminate even though the purchaser only issue a notice of termination after 7 months for the late delivery of vacant possession date (and a further year before the matter was brought to the court).


The High Court further held that the purchaser had done so to allow the developer a chance to rectify the issue and it would be unfair to the purchaser to wait indefinitely for the developer to rectify the matter.


Option 2: Continues with the SPA and claim for damages

In the event of a late delivery, a purchaser can also claim for liquidated damages (‘LAD’) from the developer of the property [See: Clause 20(2) of Schedule G and clause 26(1) of Schedule H, Housing Development (Control and Licensing) Regulations 1989] whilst holding onto the property. In this context, LAD are damages or claims that a developer has to pay to purchaser for every subsequent day after the delivery of vacant possession day until the purchaser receives vacant possession of the property.


Q: How does the court compute the damages that a purchaser receives (in the context of LAD)?

Generally, there will be a computation method in the SPA. The rate is usually 10% per annum of the purchase price of the house.


Also, for calculation purposes, when does the time start to run in order to ascertain the completion and delivery of vacant possession date? The courts in string of cases have held that the time starts to run when you paid the booking fees/ deposit for the property to the developer and not when you sign the Agreement.


Q: Can a purchaser claim damages for the negative feelings i.e. anxiety, distress, humiliation or even pain that he/she have suffered because of late delivery?

The answer is no. Such damage is not quantifiable and it is not included in the Agreement. This was confirmed by the courts in Limmewah Development Sdn Bhd v Dr Jasbir Singh s/o Harbhajan Singh [1993] 2 AMLR 1263.


Q: If a developer has paid a sum (as a settlement fee for late delivery), can a purchaser still claim for LAD?

Yes, a developer cannot claim that they have struck an out-of-court settlement with a purchaser or claim that the purchaser is taking a second bite off the cherry to avoid paying LAD. In Leong Keng Chiang v Prema Bonanza Sdn Bhd [2021] MLJU 714, the court noted that the legislation enacted (in relation to LAD, namely the Housing Development (Control and Licensing) Act 1966 and the Housing Development (Control and Licensing) Regulations 1989) was created to protect a house buyer. It is a statutory right created to ensure that in such circumstances, the rights of a purchaser, who is arguably the weaker party in such a transaction, be protected by the law.


TLDR, nothing can defeat a statutory right of a person (in this case, a purchaser of a property).