12 June, 2018
So you just bought your first home. You are excited and you cannot wait for handover of vacant possession to obtain the keys and start planning for renovation. Your Sales and Purchase Agreement (“SPA”) stipulates clearly the exact date that the developer will be delivery of vacant possession.
However, three months prior to handing over date, you receive a letter from the developer indicating that the date of delivery of vacant possession would be delayed and they have applied for an extension of time from the Ministry of Land and Housing Development due to unforeseen circumstances. You then refer to your SPA and the terms are clear that the time for delivery of vacant possession is 36 months from the date of the SPA. Can the developer suddenly extend the time to deliver vacant possession from the original date agreed in the SPA?
If you are agreeable for such an extension, the answer is yes.
However, if you do not agree, developers cannot delay the date of delivery of vacant possession. Aside from considering an initiation of Liquidated Ascertained Damages, the following are few key points to note why a unilateral delay or extension of the delivery of vacant possession is invalid.
First, the SPA that you have signed with the developer is no ordinary agreement. SPAs with developers are a statutory agreements entrenched as a Form in Schedule G (land title) /H (strata title) of the Housing Development (Control and Licensing) Regulations 1989. As such, the terms of the SPA are statutory terms that must be strictly adhered to and cannot be varied or contracted out.
This position was made clear in the Court of Appeal in Encony Development Sdn. Bhd. v Robert Geoffrey Gooch & Anor [2016] 1 CLJ 893:
The SPA between the plaintiffs and the defendant was governed by a statutory form of contract as prescribed in Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (‘the Regulations’). As such, the provisions in the SPA were not merely contractual, but were in effect statutory provisions..The SPA, which had statutory force, could not be effectively amended or varied by inferring the existence of a collateral contract subsisting alongside it…
Therefore, a developer cannot delay or extend the date for delivery of vacant possession as it is an attempt in varying the agreed terms of the SPA, thereby contravening the provisions in Schedule H.
Secondly, a saving clause of force majeure is ultra vires the provisions of the Regulations.
Developers would usually cite reasons of force majeure or an occurrence outside the control of the developer which had caused the delay. Such a saving clause that in the event an occurrence of force majeure would free the developer of any liability is invalid.
This is because a developer would then be able to take advantage of such a clause to delay the delivery of the vacant possession at their own discretion. This was made clear by the Federal Court in S.E.A Housing Corp Sdn. Bhd. v Lee Poh Choo [1982] 2 MLJ 31 FC where the Court did not agree on the reliance of a force majeure saving clause to free the developers of any liabilities as such a clause is open to a developer to take advantage of this provision after as well as before such a contract has been finalized.
It is also important to note that even if such a clause of force majeure is not included in the SPA, it cannot implied as the terms of a SPA is a statutory in nature and it is no ordinary contract where parties are able to negotiate before the terms and conditions are drawn up. The SPA is a contract where the terms and conditions are fixed by law and hence, no terms to my mind can be implied (Choot Ewe Hin & Anor v Saujana Triangle Sdn. Bhd. & anor suit [2017] MLJU 333 HC).
Further, in some instances, a developer would cite that the delay in delivering vacant possession is allowed as the developer had successfully applied for an extension of time from the Ministry of Housing and Local Government (the “Housing Ministry”).
In this regard, it is crucial to note that such an approval of an extension of time by the Housing Ministry is invalid and ultra vires the Regulations. This was decided in a recent case in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandaraya, Perumahan dan Kerajaan Tempatan & Ors. [2017] MLJU 1366 HC where it was held that the Housing Controller or the Ministry does not have the power to grant such extensions to waive or modify any of the terms of the contract of sale in the statutory form. It was also pronounced that such an application for an extension of time is null and void because such an application would empower the Controller to waive or modify the statutory form, which would exceeded the powers of the Controller under the Act.
Upon appeal, the Court of Appeal upheld the decision of the High Court and decided that house purchasers should be notified of the developers’ application for any extension of time to complete the projects and given reasonable time to state their views before any decision is made.
In conclusion, a developer of a development cannot be allowed to delay or extension of time in delivering the vacant possession to house purchasers. This is because the terms of the SPA must be interpreted and adhered strictly without variation. The developer must deliver the vacant possession within the agreed timeline in the SPA.
The interest of house buyers is always protected pursuant to the preamble of the Housing Development (Control and Licensing) Act 1966 and that developers are not allowed to get round the Act and rules so as to remove the protection of home buyers.
For further information, please contact:
Donovan Cheah, Partner, Donovan & Ho
donovan@dnh.com.my
