The Federal Court case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals (grounds of judgment dated 19.1.2021) dealt with the law concerning the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) and its subsidiary legislation, particularly on calculation of LAD for late delivery of vacant possession. We set out below 3 key takeaways from the case.
1. Liquidated Ascertained Damages (“LAD”) to be calculated from the date of payment of booking fees (and not the date of the SPA).
- Although developers are prohibited from collecting any booking fees pursuant to Regulation 11(2) of the Housing Developers (Control and Licensing) Regulations 1982 (“HDR 1982”), it remains a common industry practice for developers to request for payment of a booking fee.
- It is not unusual for the SPA to be executed by the parties several months after payment of such booking fees.
- Pursuant to Schedule G and H of the Housing Development (Control and Licensing) Regulations 1989 (“HDR 1989”), the developer is obligated to deliver vacant possession of the property to the purchaser within 24 months or 36 months from “the date of this agreement”.
- It is now settled that “where a developer fails to deliver vacant possession according to the time stipulated in the statutory sale and purchase agreement, the calculation of the LAD begins from the date of payment of the booking fee and not from the date of that statutory agreement.” (paragraph 25 of the grounds of judgment)
- The reasoning is, inter alia, if the Court takes the “date of this Agreement” to mean the date of SPA, “this Court would be condoning the developers’ attempt in this case to bypass the statutory protections afforded to the purchaser by the legislative scheme put in place.” (paragraph 49 of the grounds of judgment)
- The Federal Court made a strong concluding remark on the standard commercial practice of collecting booking fees at paragraph 131 of the judgment that “ While the developers might think that it is a standard commercial practice to accept booking fees, the development of the law clearly suggests to the contrary. The Courts will not condone such a practice until and unless the law says otherwise.”
2. Calculation of LAD shall be based on the actual purchase price as stipulated in the sale and purchase agreement (“SPA”).
- The issue before the Court is whether the calculation of LAD should be based on the actual purchase price stipulated in the SPA or the rebated purchase price, i.e. purchase price less rebate given by the developer.
- The Federal Court agreed with the Court of Appeal and held that LAD shall be calculated based on the agreed purchase price as stipulated in the SPA.
3. Date of completion of common facilities shall be based on the date of the Certificate of Completion and Compliance.
- Pursuant to terms of Schedule H, the developer is obligated to complete the common facilities serving the housing development within 36 months from the date of the SPA.
- In the event of a delay in the completion of the common facilities, LAD is calculated from the date on which the developer ought to have completed the common facilities up to the date of completion where the developer’s architect “shall certify the date of completion of the common facilities.”
- Hence, the LAD calculation is based on the date of the developer’s architect’s certification.
- The issue is whether the date of completion shall be based on the date of Certificate of Completion and Compliance (“CCC”) or the Certificate of Practical Completion (“CPC”).
- CCC is issued to certify that the Property, together with the common facilities, has been constructed and completed in conformity with the approved plans and requirements of the Street, Drainage and Building Act 1974 and its by-law.
- On the other hand, CPC is commonly issued upon practical completion of the housing development by the contractor under the construction contract entered into between the developer and the main contractor.
- The Federal Court held that to calculate the LAD payable by the developer to the purchaser for the delay in completion of the common facilities, the date of completion shall be based on the date of CCC, not CPC.
For frequently asked questions on LAD for late delivery of vacant possession, please refer to our previous article here.
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Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.