Home Buying Nightmare: Malaysia Law Protection

Projects Are Delayed or Abandoned

Buying houses can be a nightmare especially when the developer delays in delivering vacant possession to the purchasers.

This happens more often than not when unwary purchasers fell into the trap of rapacious and unscrupulous developers by paying a substantial amount to their developers as deposits or booking fees or some even started serving their housing loans, only to find to their dismay that no houses were being built, or there was an undue delay on the part of the developers in completing the projects, or even projects were being abandoned.

Law Protection – Claim Damages

Realising this, the law thus provides protection to the fellow homebuyers to enable them to claim damages against their respective developers for their failure to deliver vacant possession within the time prescribed under the Housing Control and Licensing) Regulations 1989 i.e. within 24 months from the date of the sale for landed properties with an individual title and within 36 months from the date of the sale for strata-titled properties.

Such right to be paid damages is automatic and mandatory in nature and it shall be paid at once, without further ado, once there is a delay by the developer to hand over vacant possession to the purchasers. The cause of the delay is immaterial.

Issues: Calcucalculation of liquidated agreed damages (“LAD”)

The issue then arises on whether the date for calculation of liquidated agreed damages (“LAD”) runs from the date of payment of deposit/booking fee/ initial fee OR from the date of the sale and purchase agreement, which is usually much later.

Having said so, it must be noted that collection of booking fees howsoever they are called or described is prohibited, as governed under Regulation 11(2) of the Housing Development (Control and Licensing) Regulations 1989 and any person who contravenes such provision shall be liable on conviction to a fine not exceeding fifty thousand ringgit or to a term of imprisonment not exceeding five years or to both, under Regulation 13 of the said Regulations.

Notwithstanding the absolute prohibition against the collection of booking fees, or whatsoever term it was used, such illegal practice of booking fee is afoot and rampant.

It was unfortunate that little or none prosecution had been made for this blatant defiance of law as it had become or claimed to be the “standard practice”.

On that, the Federal Court had recently in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and another appeal emphasized that the Courts would not condone such “standard practice” and countenance the bypassing of statutory safeguards meant to protect the purchasers. The date of calculation of LAD had then been decided to begin from the date when the purchasers paid the booking fee.

Following the landmark ruling above, the issue on the calculation of LAD had therefore been put to rest once and for all. For developers who act in contravention of the law, can be said to have done so at their own peril.

Prior to this decision, it had long been argued that the calculation should begins from the date of the sale and purchase agreement, on the basis that Clause 24(1) of Schedule G of the said Regulations and Clause 25 of Schedule H of the said Regulations stipulate that the calculation is to begin from the date of the sale and purchase agreement and hence, literal rule applies.

This article is written by

Gwen Yeap Siew Fen
Partner, Low & Partners

Jareen Lee Hoay Yin
Senior Associate, Low & Partners