What happens if you do not receive vacant possession of a property you have bought and invested money in on time from the developer?
The recent Court of Appeal decision of Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor v Ang Ming Lee & Ors and Other Appeals states that a developer must deliver vacant possession of a property to the purchaser within the stipulated timeline in the Sales and Purchase Agreement (‘SPA’). They are also not allowed to delay or seek for extension of time without first notifying the purchasers and giving the purchasers reasonable time to express their views in regard to the matter at hand.
In the event, a developer does not deliver vacant possession of a property to you, the buyer, within the stipulated time in the SPA, what rights as a purchaser do you have?
In Xaview Kang Yoon Mook v Insun Development Sdn Bhd, the court held that a purchaser has two options: either treat the SPA as repudiated i.e. terminated and sue for damages or continuing with the SPA and claim for damages as well. We will explore both options briefly below.
Option 1: Terminate and claim for damages
The most fundamental right that you have as a purchaser is to terminate the agreement and claim damages. When you purchase a property, you would expect the property to be handed over to you within the time stipulated in the SPA. Failure to do so allows you to terminate the agreement and claim damages.
Can a developer justify their late delivery? In Chua Eng Hong & Anor v Palm Springs Development Sdn Bhd, the court held that even if the developer can justify their late delivery, it does not provide them a way out of their contractual obligation to fulfill the SPA. The court went on and state that the developer should have applied for an extension of time with the Controller or 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 damages.
Is there a timeframe where you will need to issue the notice of termination to terminate the SPA in the event of late delivery i.e. can you actually waive your rights to terminate if you did not issue your notice of termination immediately? While cases do suggest that this might be the case, there are instances where the courts held otherwise. For example, in Chung May Yen v Puncakdana Development Sdn Bhd, the court found in favor 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: Continue with the SPA and claim for damages
In the event of late delivery and you still want to hold on to the property, you can also claim liquidated damages (‘LAD’) from the developer of the property. In this context, LAD are damages or claims that a developer has to pay to you as a purchaser for every subsequent day from the completion date that the developer fails to deliver to you the property until the day you receive vacant possession of the property.
How do you calculate or compute the number of damages you will receive? 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 the vacant possession date? The courts in a 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.
Can you claim damages for the negative feelings i.e. anxiety, distress, humiliation, or even pain that you have suffered because of late delivery? The answer is no as 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.