Calculation of LAD for Late Delivery

Overview

In a recent ruling, the Federal Court clarified the calculation of time in cases of late delivery of vacant possession for residential properties. This issue is governed by the Housing Development (Control and Licensing) Act 1966 ("the Act") and the Housing Development (Control and Licensing) Regulations 1989 ("the Regulations").

Understanding the Act

The Act aims to regulate and license housing development businesses in Peninsular Malaysia, with a focus on protecting the interests of purchasers. It is a social legislation designed to address housing development concerns.

Conflicting Court Decisions

Prior to the Federal Court's decision, conflicting interpretations arose from different Court of Appeal rulings regarding the phrase "from the date of this Agreement" found in Clause 24(1) of Schedule G (properties with individual titles) and Clause 25 of Schedule H (properties with subdivided titles - properties under strata) of the Regulations. Schedule G stipulates a 24-month timeframe for delivery of vacant possession, while Schedule H allows for 36 months.

The confusion revolved around whether "the date of this Agreement" referred to the date of payment of the booking fee or the date of signing the Sale and Purchase Agreement (SPA) with the developer.

The Federal Court's Ruling

The Federal Court approached its decision by recognizing the Act and Regulations as social legislation. In such cases, where ambiguity exists, the prevailing literal rule of interpretation is replaced by the purposive rule. This approach helps mitigate any power imbalance and inequality that may exist between developers and purchasers.

The Court clarified that it was not rewriting the terms of the SPA but rather construing the Regulations in line with the statutory provisions. In the interpretation of social legislation, the intention of Parliament takes precedence over the intention of parties, despite the general principles of contractual interpretation.

The Court also determined that a valid contract was formed when the booking fee was paid to the developer, considering that pro forma documents are typically signed to that effect. By collecting booking fees, developers could manipulate the SPA date and extend the delivery of vacant possession, which would disadvantage the purchaser.

Based on these findings, the Federal Court unanimously ruled that the calculation of LAD for late delivery of vacant possession in residential properties begins from the date of payment of the booking fee by the purchaser.

Implications and Conclusion

This decision establishes that, upon payment of the booking fee, a developer has 36 months (or 24 months for individual titles) to deliver vacant possession. Failure to meet this deadline allows the purchaser to claim LAD. The Court's ruling aims to curb deceptive practices by developers and ensure fairness for genuine homebuyers in dealing with unscrupulous housing developers.

This article has been produced for general information purposes and further advice should be sought from a professional advisor.