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Can developers compel homebuyers to waive the LAD?


Some unscrupulous property developers are making a mockery out of the system by forcing homebuyers to waive their legitimate rights when it comes to claiming Liquidated Ascertained Damages (LAD) for delayed housing developments.

© Alex Postovski/ 123RF

Over the years HBA has written countless articles to educate, empower and enrich homebuyers with the necessary knowledge on their legitimate rights. This article may appear a little technical to the ordinary consumer but it cannot be avoided completely as it involves an analysis of the housing legislation and case law. Every effort has been made to ensure that it is easy to understand – Read on to discover your homebuyer rights.

Now and then, a few developers try in whatever devious ways they can to avoid paying compensation for the late delivery of property, more commonly referred to as liquidated ascertained damages (LAD). It should be kept in mind that these homebuyers have suffered immensely through no fault of theirs when the completion of a housing project they buy into is delayed. These developers will try misleading house buyers into granting an extension of time (EOT) – others will seek an extension from the Controller of Housing; failing which they will approach the Housing Minister. They will put forth all kinds of defence to delay or defect the homebuyers’ legitimate claims for LAD – including getting the buyers to sign ‘Waiver Letters’ whereby the buyers purportedly agree to waive their claims for LAD.

Can developers rely on waiver letters to avoid the payment of LAD?

liquidated ascertained damages lad
© Nuttawan Jayawan | 123rf

Can homebuyers waive their right to LAD? Why not, some may ask, ‘If the right belongs to the homebuyer surely it is his right to waive? Those who signed the waiver letter will make it a binding contract. Is this the truth?

HBA has differing views on this. Why a homebuyer cannot waive his right to LAD can best be understood by tracing the purpose for which the provision for LAD was created.

For decades, countless innocent house buyers have suffered at the hands of irresponsible developers who are interested in nothing but making profits – so much so that Parliament had to intervene with housing legislation to protect said house buyers. It began with the passing of the Housing Developers (Control and Licensing) Act (HDA) in the year 1966 known as Act 118. The HDA and the regulations made thereunder had to undergo several amendments over the years to keep up not just with development but with shrewd developers who would stop at nothing to avoid their legal obligations.

Despite a line of authorities whereby the Courts of Law have decided that developers cannot contract out of the provisions of the housing legislation, some continue with their attempts to take away the rights, benefits and entitlement given to house buyers by the Malaysian Parliament and continue to hoodwink buyers into conceding.

In 2002, the title of Act 118 was amended to Housing Development (Control and Licensing) Act or HDA when several quarters accused the Government of peddling to the developers and that the Act was drafted by the developers to regulate themselves. Thus, the change of the word ‘Developers’ to ‘Development’. And in 2007, the housing law was further amended to make it crystal clear that the Act was for the protection of house buyers.

Unfortunately, there appears to be a general principle in common law that a person may waive rights granted to him by statute and nowhere in the HDA or the regulations made thereunder does it expressly say that a homebuyer cannot waive any rights given to him under the Act or the regulations. So, when all else fails, some unscrupulous developers resort to squeezing waivers of LAD out of innocent and unwary house buyers. The worst affected are naïve first-time homebuyers.

READ: How can home buyers claim Liquidated Ascertained Damages (LAD) for late delivery of property?

HDA and its governing regulations

© Rapeepong Puttakumwong | Getty Images

Under the Housing Development (Control and Licensing) Regulations 1989 (HDR) [which are regulations made under the Housing Development (Control and Licensing) Act 1966 (HDA)], the Sales and Purchase Agreement (SPA) for any housing accommodation sold by a developer must be in the format prescribed under the HDR. The SPA, unlike any other contract of sale, contains provisions which cannot be changed at all unless such changes have been sanctioned by the Controller of Housing at the Ministry of Housing & Local Government (MOH). In other words, the SPA is a statutory contract and all the provisions in this SPA are statutory requirements which must be strictly complied with.

One of the provisions of the SPA gives the house buyer a right to be paid LAD immediately by the developer in the event of a delay in the completion of a housing development. It is found in Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H – Sales and Purchase Agreement.

Can this statutory right be waived by the house buyer? According to the Federal Court, the answer lies in the overall purpose of the legislation and whether this purpose would be defeated by permitting waiver and contracting out.

There is no shortage of cases whereby the Courts of Law have decided that the housing legislations are a social legislation, the main purpose of which is to protect the interest of house buyers. And, according to the Federal Court, the protection given to homebuyers under the HDA and HDR is not just a private right but a matter of public interest. Such court decisions have even received affirmation and endorsement by Parliament in 2007 when it amended the long title to the HDA to read as “An Act to provide for ……. the protection of the interest of purchasers …. “.

If statutory rights given to house buyers could be waived by them individually, surely the good and commendable intention of Parliament to provide the much-needed protection for house buyers and indeed the whole purpose of the housing legislation would be defeated and eroded.

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are written on. They cannot be held against the house buyers and must be declared null and void. Developers must be made to stop trying to wriggle their way out of paying LAD.

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What can homebuyers do if the developer insists on waiving LAD?

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Having said the above, however, buyers are nevertheless strongly advised not to sign waiver letters to avoid possible undesired delay or outcome in their claims and unnecessary legal battles with unscrupulous developers who will raise whatever issues possible to avoid or simply delay the legitimate claims from the house buyers.

But what can I do if the letter contains a waiver? I don’t have a choice. I want my keys and the developer says I must sign then only can give me the keys.”

Sign ‘UNDER PROTEST’ is one way. The house buyer can write a note on the letter that he does not agree to waive LAD or that he does not agree to waive his rights or that it is ‘WITHOUT PREJUDICE’ to his/ her rights under the SPA. Alternatively, he can delete the offending words or sentences and initial his/her signature at the deletion.

If the developer refuses to give the keys unless the house buyer signs without adding or deleting anything from the letter, the homebuyer can still sign and collect the keys but should immediately write to the developer to state that he was not given a choice/ but was ‘arm-wristed’ and that he does not agree to waive LAD or other rights. A complaint should be lodged with the Enforcement Division of the Housing Ministry (KPKT) and a claim can be filed at the Housing Tribunal, both of which should be done expeditiously.

Even if the purchaser signs away his rights because the developer is withholding the keys to the house the purchaser has paid for, it is not a valid waiver of his rights because it was done under duress. The purchaser needs only to produce his claim to the developer made before the purported waiver and the document prepared by the developer as evidence of the so-called waiver to restore his rights to his claim.

There is an English case which held that a person who gives up his rights under duress is still entitled to his claims whether the language of the written law allows waiver or not. The law is concerned only with a waiver in honourable, voluntary circumstances not involving arm-twisting tactics, lies or misleading, self-serving advice from the party who stands to benefit from the waiver.

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Related case laws

Readers who want a more in-depth understanding of this area of the law will profit from reading the following cases: –

(1)  City Investment Sdn Bhd V Koperasi Serbaguna Cuepacs Tanggungan Bhd [1985] 1 MLJ 285 wherein the Federal Court said that: –

“Having regard to the policy and objective of Housing Developers Act 1966 and the 1970 Rules made thereunder the protection afforded by this legislation to homebuyers is not merely a private right but a matter of public interest which Parliament has intended to protect from being bargained away or renounced in advance by an individual purchaser”

(2)  Kimlin Housing Development Sdn Bhd (Appointed Receiver and Manager) (In Liquidation) V Bank Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805. The principle in relation to a waiver of a statutory right was summarized by the Federal Court as follows: –

“The question of whether a person entitled to the performance of statutory duty can effectively waive performance of the duty by the person bound and the latter can effectively contract out of performing the duty, depends on the language of the statute and if this is not clear, on the overall purpose of the statute and whether this purpose would be defeated by permitting waiver and contracting out.

Trietel on the Law of Contract (at p 782) has correctly pointed out:

Difficult questions can arise when a person attempts by contract to waive a right conferred on him by statute. Although there is a general principle that a person may waive any right conferred on him by statute (quilibet potest renunciare juri pro se introducto), difficulties arise in determining whether the right is exclusively personal or is designed to serve other more broad public purposes. In the latter situation, public policy would require that the right be treated as mandatory and not be waivable by the party for whose benefit it operates. Whether a statutory right is waivable depends on the overall purpose of the statute and whether this purpose would be frustrated by permitting waiver.”

This article is written by Datuk Chang Kim Loong, Hon Sec-Gen of the National House Buyers Association (HBA) Email: [email protected]

Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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