Late delivery penalty could bring housing industry to standstill, says lawyer

PETALING JAYA (Nov 28): Following Tuesday’s Federal Court ruling that the controller of housing cannot give developers extensions of time to complete their projects, a lawyer said that the housing industry could be crippled by late delivery penalties.

Johan Mohan Abdullah was quoted by Free Malaysia Today as saying that if high-rise condominiums were not completed within 36 months, developers risk paying damages to buyers for late delivery.

He suggested that the Housing Development (Control and Licensing) Regulations 1989 be amended, to allow for a more flexible time-frame for developers to complete their projects.

Currently, the government-regulated sale and purchase agreement (SPA) stipulates that housing projects on landed properties must be completed within 24 months and high-rise structures within 36 months.

“Developers want to complete their projects on time but the work could be held up due to worker problems, construction material shortages or due to prolonged bad weather,” Mohan said, suggesting that the time-frames should be adjusted so that 15 stories and below should be completed within 36 months, 16 to 30 stories at least 48 months and 31 to 50 stories within 60 months.

Chief Justice Tengku Maimun Tuan Mat delivered the judgment on Tuesday, saying that extensions or modifications to the terms and conditions in the SPA would deny buyers the right to claim for liquidated damages.

“These modifications and the granting of extensions of time to the developer do not appear to protect the purchasers, which militates the intention of Parliament,” she was quoted as saying, in allowing the appeal of 104 buyers.

She also said there was no provision enabling the controller to exercise the Minister of Urban Wellbeing, Housing and Local Government's powers, and modify the SPA.

According to Mohan, the court’s ruling indicated that developers must complete building prior to selling the units in order to avoid violating the SPA.

“Under such circumstances, only the big players, who are cash-rich, could survive,” he said.

The news portal reports that Property and Real Estate Lawyers’ Association president Pritam Singh said pending any amendments to the housing legislation, the minister could use Section 2 of the Housing Development (Control and Licensing) Act to give exemption to developers so that the housing industry would not be in limbo.

“The SPA is a construction contract and there must be provision for extension of time,” he said.