Federal Court rules developers must pay for late delivery of properties

The housing industry, which is already in a pickle with large numbers of unsaleable upmarket property and a glut in commercial property, has taken another hit that could collectively run into more than RM1 billion.

Yesterday, the Federal Court held that the ad hoc and generous extension of time (EoT) which developers enjoyed, courtesy of the Housing Ministry, is illegal. Any extension accorded, even in the past, is ultra vires the laws related to the housing industry.

Chief Justice Tengku Maimun Tuan Mat said that granting extensions or modifications to the prescribed terms and conditions would deny buyers the right to claim for liquidated damages.

“These modifications and the granting of extensions of time to the developer do not appear to protect the purchasers, which militates the intention of Parliament,” she said in allowing the appeal of 104 buyers.

(These housebuyers won their case in the High Court in 2017, but the decision was subsequently reversed by the Court of Appeal after the ministry challenged the decision.)

This prophetic victory will put an end to developers using their influence to desist from paying late delivery penalties when their projects are delayed.

The House Buyers Association (HBA) and 104 disgruntled housebuyers challenged the (housing) minister’s decision to rely on a regulation to allow the extension. They argued that it went against the basic grain of clauses in the Housing Development (Control & Licensing) Act.

Some background: In the days of yore when ministers and senior civil servants arbitrarily interpreted laws to suit themselves or interested parties, the then housing minister, Abdul Rahman Dahlan (above) granted a 12-month extension to BHL Construction Sdn Bhd to complete its project.

BHL Construction was involved in the construction of a condominium block on Jalan Kuchai Lama in Kuala Lumpur, in which the 104 buyers each entered into separate sale and purchase agreements (S&P).

One of the conditions of the agreement required that the developer hands over vacant possession of the units within 36 months or be liable to a penalty for late delivery to the buyers.

The developer failed to complete and hand over the units to the purchasers and wrote to the controller of housing for an extension of time. The appeal was rejected.

The developer then appealed to the minister who, on Nov 17, 2015, allowed an extension of 12 months.

But that is not the complete picture as the subsequent turn of events took a different turn.

The developer’s letter to the minister was signed by Faridah Begum K A Abdul Kader, as director of the company. She is the wife of the then attorney-general Mohd Apandi Ali (below).

But searches with the Companies Commission of Malaysia showed otherwise. She was in no way connected to the company and was accused by then opposition politicians of “peddling influence”.

After the issue became public, Malaysiakini contacted both Apandi and Faridah, both of whom declined to respond to queries.

Reports on abuse of power were reported to the Malaysian Anti-Corruption Commission (MACC), but at that time, many officials, including some ministers, enjoyed immunity and a certain amount of invincibility when they were caught at the wrong end of the law.

According to statistics provided by the Housing Ministry to a parliamentary question three weeks ago, the ministry had approved 93 applications each for EoT in 2017 and 2018. Until July this year, 46 applications were approved.

What happens now? Buyers of private property whose properties were delayed beyond the time stipulated can claim for damages in accordance with the late delivery clause in their S&P.

HBA secretary-general K L Chang said that in the past, with a stroke of a pen, the ministry extinguished the rights of housebuyers to claim liquidated ascertained damages (LAD).

Chang argued that the power vested with the ministry had been misused against the buyers for the sake of developers. Since that discretionary power has been established as illegal, the ruling can be applied retrospectively.

He is hopeful that developers will abide by the decision because the Real Estate and Housing Developers Association of Malaysia (Rehda) and Rehda Institute supported the initial decision of the High Court.

In a media statement, both organisations described the decision as “fair and right” and said: “Developers should honour agreements to deliver the project on time. Any delay is not the fault of the buyers. It’s our own fault or that of other people.”

Rehda’s statement went further to state “the law is the law” and that developers should plan ahead to ensure houses are delivered on time.

“Developers will have to accept and follow the law even if it means a 6-months delay will lead to a pay-out of 5 percent of the gross selling price of the property.”

As the Federal Court is the final arbiter, affected housebuyers can start filing for their claims. Hopefully, developers will abide by the ruling and not cause unnecessary delay in paying LAD, which lawfully is the right of every aggrieved buyer.

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R NADESWARAN, a veteran journalist. Comments: citizen.nades22@gmail.com - Mkini