Extension Of Time Ruled Irregular by Court of Law

Extension Of Time Ruled Irregular by Court of Law

The Presiding Judge, Her Ladyship Justice Datuk Hanipah Farikullah (Appellate & Special Power Division) in her landmark decision on 27th February granted the Applicants (104 affected house buyers) an Order of Certiorari to quash the decision of the Minister of Urban Wellbeing and Housing pertaining to their (Ministry) letter dated 17th November 2015 to amend the time period for of vacant possession from 36 months to 48 months in respect of the Sale & Purchase Agreement between BHL Construction Sdn Bhd in the Sri Istana condo, Jalan Kuchai Lama, Kuala Lumpur.

The Appellate Court has also ruled that Regulation 11(3) is ultra vires the Housing Development (Control & Licensing) Act, 1966 amended 2015 (Act).

Regulations 11 (3) is reproduced below:

“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing waive or modify such provisions: Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller.”

It literally means that the Controller does not have the power to grant Extension of Time (EOT) or ‘waive’ or ‘modify’ the standard terms and conditions in the statutory Sale & Purchase Agreement under the law. The Minister has no power under Section 24 of the Act to make Regulations that allegedly empowers the Controller to waive or change any of the terms and conditions of the prescribed statutory Agreement. In short, Parliament does not empower the Minister to do so.

With the decision in favour of the house buyers, it means that EOT issued by the Controller is void and house buyers are entitled to claim for late delivery compensation (LAD) from those developers who sought the EOT (now ruled void). Compensation for LAD is thus payable for late deliveries. The rights and entitlement to LAD cannot be taken away by the Controller or Minister with a stroke of a pen. The general principles of contract still apply. The parties are bound by the terms of the contract which they have signed and any modification or variation of any of the terms of the agreement would require the consent of the other contracting parties ie purchasers.

The granting of the EOT to defaulting developers makes a mockery and defeats the intent and object of the Housing Act which is “for the protection of house buyers”.

EOT a tool against abandoned projects – Fact or fallacy?

In an immediate response, the then Minister of Urban Wellbeing, Housing & Local Government, YBhg Datuk Seri Abdul Rahman Dahlan’s purported rationale for the granting of EOTs in one of his press statement is irrational.

His reason for granting of EOTs was to ensure that housing developers complete their project does not hold water because house buyers have no right to pursue LAD until and unless the houses have been completed and handed over. The question of LAD does not even arise unless the houses are completed and vacant possession delivered. This is clearly stated in Clause 25(3) of the Schedule H statutory Sale & Purchase Agreement (Schedule G has a similar provision). It reads inter alia:

For the avoidance of doubt, any cause of action to claim for liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser take vacant possession of the said Parcel.”

“The effect of an EOT is that the developers do not have to pay compensation or LAD to the house buyers AFTER the project is completed and vacant possession delivered. Clearly, the only reason for granting an EOT is to save money for the developers. Business people must be able to accept the risks of doing business and not seek Government’s protection to ensure they continue to make money or do not lose money. And the Government must not try to save money for the developers at the expense of the naive and innocent buyers. The Housing legislation did not say that it was for housing developers’ protection: – it was intended to ‘regulate’ developers.

Helping developers save money?

By issuing the EOT, the Minister is effectively allowing the developers to save or keep the money which should have been paid to the house buyers. The Minister is effectively taking away money belonging to the house buyers.

Has our country now reached a state of economic crisis that the Minister must dish out EOTs to developers who are already in distress (due to bad management) and threatened to abandon their projects? Does it mean the Minister will grant an extension to every high-end project that asks for an extension so that high-end buyers do not lose big money?

Buyers are sensible and not unreasonable people and it should be left to them to negotiate with their developers to come to a fair compromise instead of the Minister making a unilateral decision and forcing down their throat by foregoing their lawful entitlement to LAD. After all, they are the covenanting parties to the Contract whereas the Minister is not a party (to the Contract).

There are numerous cases where both parties (developers and buyers) took a haircut and amicably settled. At the very least the views of affected buyers must be considered prior to the Minister making a decision – the Right to be Heard is of utmost important. Do they not know that buyers too face hardship and commitments (ie: having to pay rent whilst continuing to service their bank loans). They too bear the burden of additional costs and expenses for the delay. One cannot confine to hear the views of just one party vis-a-vis housing developer and shun the buyers.

No valid reason

The Minister has not even offered any reason as to why the buyers must forgo their rights and entitlement to LAD claims when granting the EOTs.

The following is an excerpt of the Minister’s press statement:

…if a developer faces delays due to circumstances beyond his control (unexpected weather such as flooding, new regulations by authorities such as stop orders or policies pertaining to supply of construction materials and workers), the developer can apply for EOT from the government.”

“Even the banks and construction materials suppliers will face serious trouble if housing projects are abandoned. Other businesses catering for household items such as electronics, electrical and furniture will also be affected which could lead to potential loss of jobs in those businesses” – Rahman

 

These are not ‘special circumstances’ to warrant an EOT. The reasons are self-inflicted and not “Act of God”. If EOTs are granted for the benefit of developers at the detriment of house buyers, perhaps, the Minister should have the effects and costs cascade downwards to all the contractors, sub-contractors, suppliers, vendors, etc. Even Banks should waive all interest to make it fair across the board. And perhaps landlords should offer waiver of rental to those tenants affected by the delay. Why must innocent buyers be made to suffer for pains inflicted on them by their developers?

Developers should honour agreements

Following the Courts’ decision, the immediate reaction from Real Estate & Housing Developers Assoc, Malaysia (REHDA) and REHDA Institute was timely and augers well for the housing industry when REHDA comes out to voice support for the Court’s fair and right findings.

REHDA’s stand was reported as follows:

REHDA: “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 went further to state “the law is the law” and that developers should plan ahead to ensure homes 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 payout of 5% of the gross selling price of the property…”

This would translate to REHDA discouraging its member developers from indulging in seeking EOTs as an easy way out.

These EOTs issue has been happening these last 3 years. By giving EOTs, has abandoned projects been reduced? We have not heard of EOTs been issued under the previous Housing Ministers and his predecessors.

Article is contributed by the National House Buyers Association (HBA).

 

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