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Courts of Appeal: Home buyer rights to be heard in an EOT situation

Source: rf123

“House buyers must be given an opportunity to be heard prior to granting an Extension of Time (EOT) to developers who delay the completion of a housing development project,” rules Court of Appeal.

On 30th March 2018, a bench of 3 judges consisting of His Lordship Justice Datuk David Wong, His Lordship Justice Datuk Harmindar Singh Dhaliwal and Her Ladyship Justice Datuk Hasnah Datuk Mohammed Hashim, unanimously ruled that the rights of home buyers must be heard before EOT applies.

This landmark decision is the latest development in the 3-year legal battle brought by 104 homebuyers against the Minister of Urban Wellbeing, Housing and Local Government, Controller of Housing and developer, BHL Construction Sdn Bhd over the issuance of an EOT for the Palace Court (Sri Istana) condominium in Jalan Kuchai Lama, Kuala Lumpur. As stated in the Sales & Purchase Agreements (SPA) signed, one of the conditions required the developer to hand over vacant possession within 36 months or be liable to a penalty for late delivery.

It was reported that between 2013 until April 2017,  304 EOTs have been issued and are possibly affecting more than 100,000 house buyers. It is indeed shocking that the Urban Wellbeing, Housing & Local Government Minister and those under his charge have issued such. The only word to describe this happening is “OMG” Chang Kim Loong,  Secretary-General of HBA

This rampant proliferation of EOT’s have been highlighted and explained before in HBA’s previous articles, titled ‘Extension of Time: Ruled Irregular by Court of Law’ and ‘Shocking 304 EOTs issued by the Controller of Housing’.

The new ruling follows the first victory at the High Court on 27th February 2017, where the aggrieved parties were represented by a team of legal eagles from the National House Buyers Association (HBA). Led by Datuk Andy Wong Kok Leong, the 12 lawyers who acted on a pro bono basis also comprised of Albert Soo Kim Yan, Viola De Cruz, Andrew Chan Kah Jun, Koh Kean Kang and a group of backroom researchers.  Source: Chang Kim Loong (pictured fourth from left, front row).

EOT curtailing the rights of house buyers

The Sri Istana issue, now adopted as a test case, challenged the legality of the EOT’s granted by the Ministry in favour of the developer, BHL Construction Sdn Bhd to extend the completion period of the project from the originally agreed 36 months stated in the respective SPAs to 48 months.

developer delayed project
Source: Getty Images

In essence, the EOT takes away the house buyers’ entitlement over Liquidated Ascertained Damages (LAD) with a stroke of the pen without the knowledge of the house buyers at the time of approval. The EOT is a unilateral decision of the Ministry and the house buyers were not notified let alone consulted prior to granting of the EOT.

The aggrieved buyers were only notified about this EOT at a later stage after it was approved leaving them helpless. The Ministry seems to have taken away the money due to said buyers for the late delivery of their property (vacant possession of purchased units).

The EOT was granted purportedly pursuant to regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989 (HDR) which is a subsidiary legislation enacted by the Minister pursuant to the powers granted by the principal act, the Housing Development (Control & Licensing) Act 1965 (HDA).

Under the standard terms of a SPA, the LAD for the late delivery of houses is 10% of the property’s purchase price per annum. Imagine if homebuyers are not able to claim damages – they will have to continue paying for a rental accommodation while the house is being built on top of servicing their home loans.

The right to be heard is a fundamental right

Source: rf123

This recent ruling is important as the HDA and HDR are silent on the buyers’ right to be heard – it is wholly important that the affected buyers be given an opportunity to be heard prior to any decision being made as it could negatively affect the interest of these buyers.

The bench rightly observed that right to be heard is a fundamental right and more so the HDA is a piece of social legislation intended to protect the rights and interest of house buyers in Malaysia.

The buyers comprise of a group of people which can easily be ascertained, the buyers should at least be notified of the developer’s application (from the onset) for EOT and given a reasonable period of time to state their views before any decision is made. – Justice Harmindar Singh

As this is not done in the present case, the Court of Appeal ruled that the EOT is null and void partly for this ground.

What’s next?

This decision is certainly a breath of fresh air and a welcomed development in this area of law. This decision sets the minimum standard that the Ministry/Controller of Housing should comply when considering the merit of an application for EOT and sent a strong message to all the stakeholders that the terms set out in the SPA should not be taken lightly and must be guarded zealously.

Any attempts to unilaterally change the terms in the SPAs must be carefully scrutinized. The Minister & Controller of Housing should not change the goal posts after a game of football has started.

*Article is contributed by the National House Buyers Association (HBA) & edited by Reena Kaur Bhatt.

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