Vacant Possession

Grab Deliveries of Vacant Possession

Selling a piece of property that is already built and standing would make the job of delivering vacant possession a lot easier for the Vendor. The same cannot always be said for housing developers who have to juggle completion of the building in addition to meeting the demands of the Sale and Purchase Agreements (SPA) signed.

Property Handover: Delivery of Vacant Possession (VP)

Delivery of Vacant Possession (VP) refers to the property handover process where the bare house and any other fittings and furnishings listed in the SPA are given to the Purchaser upon completion of the conveyancing process.

What is the Time of delivery of Vacant Possession (VP)?

Under the Housing Development (Control and Licensing) Regulations 1989 (“HDR”), Regulation 11 provides that the time of delivery of vacant possession is 24 months for Schedule G (landed) property, and 36 months for Schedule H (high-rise) property. Until one actually enters into a Sale and Purchase Agreement, it is difficult to imagine how significant the timeline for delivery of vacant possession is. More than one may think, every month is crucial to the Developer in ensuring that vacant possession is delivered on time.

When does the Time of Delivery of Vacant Possession begin to run?

Two major cases have been the benchmark for determining the time when calculation begins. These cases are Faber Union Sdn Bhd v Chew Nyat Shong & Anor (hereinafter “Faber Union”) and GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah, Kementerian Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Ors (hereinafter “GJH Avenue”).

What compensation are Purchasers entitled to for late delivery of Vacant Possession?

To begin, it should be noted that the calculation of time has its significance in the contractual nature of the SPA. If the Developer does not deliver vacant possession within the time stipulated, the Purchaser will be entitled to claim Liquidated Ascertained Damages (LAD). Through an LAD clause in the SPA, the buyer will be able to claim for predicted losses according to how long the building project overruns past the vacant possession due date. The amount to be claimed will depend on how much was agreed to in the SPA. In short, a sum of money is agreed which will be recovered by the Purchaser for every day of delay beyond the agreed upon completion date.

Purchaser Rights: How do I claim for damages for late delivery of Vacant Possession from the Vendor/Developer?

A Letter of Demand can be issued to the Developer for payment of LAD. If the Developer fails to respond, LAD can be claimed by the following methods:

1. Civil action in court
   You will have to file a Writ of Summons and a Statement of Claim. A writ is a court document that requires a defendant to appear in court to defend against the claim. A Statement of Claim is a formal endorsement of remedies sought.
2. File a Claim at the Tribunal for Homebuyer Claims
   Alternatively, you can file your claim against the Developer at the Tribunal for Homebuyer Claims.

If the Developer still fails to respond to your claim, you may proceed to terminate the SPA and obtain a full refund.

The recent case law development that has decided when the calculation of LAD commences

In handling seven appeals from this case, it was finally decided by the Federal Court in Faber Union that the date of calculation of the LAD commences from the date of payment of the booking fee and not from the signing of the SPA.
En route to this landmark decision, one must understand that there had been great dispute between Faber Union and GJH Avenue. In GJH Avenue, the Court of Appeal decided that the date of delivery of vacant possession should be calculated from the date of the SPA instead of the date when the booking fee was paid.

This decision by the Court of Appeal was a clear departure from the decision in Faber Union. The rationale in GJH Avenue was based on the ground that the 24 calendar months for vacant possession to be delivered was to be calculated “from the date of this agreement”. Moreover, Regulation 11(2) HDR 1989 provides that such date refers to the actual date the SPA was entered into.

Rationale for the decision in Faber Union

Thankfully, the landmark decision made on 19 January 2021 by the Federal Court clears the air on this confusion by holding that the decision in Faber Union stands. It was held that the Housing Development (Control and Licensing) Act 1966 (“HDA”) and its subsidiary legislations are social legislation and therefore, interpretation of it should be aligned with the intentions of Parliament.
Social legislation must always favour the class in which Parliament intends to protect. Housing developers can be unscrupulous. Therefore, the class of Purchasers are sought to be protected when they are entitled to claim LAD from the date of the booking fee. A valid and binding contract is deemed to have been made on the day the Purchaser paid the booking fee to the Developer. Consideration was already transmitted from the Purchaser at this point in time.

This can be seen as a way to punish unscrupulous Developers who ask for the payment of the booking fee before the legal time to actually pay it, that is, on the date of the SPA. By this means of teaching such Developers a lesson, Parliament has decided that instead of “You get what you pay for”, “You will pay what you made them wait for”.

In this way, there are two things the Developers are retributed for: For one, they have demanded the booking fee before any SPA has been signed, that is, before any agreement as to the purchase has been set in stone. Secondly, with the booking fee already been paid prematurely, they have breached the SPA by not delivering vacant possession on time.

By calculating LAD from the date the booking fee is paid, Developers are now more aware that they cannot frivolously take their time with delivering vacant possession or, for that matter, any of the terms agreed to when they signed the SPA. Even if they do demand the booking fee before the signing of the SPA, the Developers are nevertheless bound to deliver vacant possession on time and satisfy the Purchaser of their rights and promises made in the SPA.

As such, even if Developers want to play around, they are now bound by the good law of Faber Union that all the terms of the SPA, as well as the HDA and HDR must be met, and met in good time. Otherwise, the Developers will have to pay retrospective damages for their wanting payment well before the date they should receive it. Purchasers must be protected, and the Federal Court has now made sure of this.