Under Schedule G and H of the Housing Development Act (“HDA”), the completion period for a house and an apartment is 24 months and 36 months respectively. Vacant possession has to be delivered once the time is up. But what happens if vacant possession is delivered late? Failure or late delivery of vacant possession after the completion period entitles the purchaser to liquidated ascertained damages (“LAD”).
What is LAD?
Liquidated Ascertained Damages is a contractually ascertained or pre-determined amount of damages that are claimable by either party in the event of a breach of contract. This clause can be found in the SPA. The LAD is designed to cover any predicted losses which might occur as a result of a project overrunning or being delayed.
When does the time for delivery of vacant possession start running?
To determine the expiry of the period for delivery of vacant possession, we must first determine when does time for delivery of vacant possession starts running. Clause 24(1) of Schedule G and clause 25(1) of Schedule H of the HDA provides that the time for delivery of vacant possession starts from the date of the SPA.
However, if a booking fee is involved, the case of Faber Union S/B v Chew Nyat Shong & Anor has held that in a claim for damages for late delivery the starts running from the date of payment of the booking fee. This is supported by the case of Sri Damansara Sdn Bhd v Voon Kuan Chien & Anor whereby the court held that the courts would have no problem calculating the late delivery claim from the expiry of the period of completion from the date the booking fee was paid, and not from the date of the SPA. To take the SPA date would be to allow the perpetuation of a practice that the Regulations prohibited (i.e. collection of booking fees).
Besides, in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor & Other Appeals, it was held that the judgement made in the Faber Union case was correct. The date for calculation of liquidated ascertained damages (“LAD”) begins from the date of payment of deposit/booking fee/initial fee/expression by the purchaser of his written intention to purchase and not from the date of the sale and purchase agreement literally.
How is LAD calculated?
Clause 24 (2) of Schedule G and Clause 25 (2) of Schedule H provides that a purchaser has the right to claim for LAD for any delay in the delivery of vacant possession at the daily rate of 10% per annum of the property purchase price.
The formula is thus as follows:
(Purchase price x 10% interest x number of days delayed)/365 days = LAD
What happens if the purchaser is silent regarding the LAD they are entitled to?
In Araprop Development S/B v Leong Chee Kong & Anor, it was held that silence does not amount to a waiver unless there was an additional factor with the silence that could be interpreted as a waiver and/or an estoppel. There was no act on the part of the purchasers that could be constituted as a waiver or an estoppel, thus they were still entitled to the LAD.
