Property Chat: Can developers compel buyers to waive LAD claims?

Some developers are ‘arm-twisting’ house buyers to sign away their rights to late delivery compensations, but are such waivers legitimate? 

Ever so often, when developers fail to complete their projects on time, they devise ways and means to avoid paying compensation for late delivery or liquidated ascertained damages (LAD) to their house buyers. They try seeking extension of time either by misleading buyers into granting it, or from the Controller of Housing, failing which, from the Housing Minister. They put forth all kinds of excuses to delay or deflect the duty, including making house buyers sign letters to purportedly waive their rights to the LAD claims.

Are such letters valid? Can developers rely on such waiver letters to avoid payment of LAD? After all, the right belongs to the house buyer, so isn’t it his right to waive it? Isn’t the signed letter a binding contract? 

Parliament intervention

HBA’s reply to that is no. This can best be understood by the purpose for which the provision for LAD has been created.

For decades, countless innocent house buyers have suffered at the hands of irresponsible developers who are only interested in profiteering from the former’s loss, so much so that Parliament has to intervene, beginning with the passing of the Housing Developers (Control and Licensing) Act in 1966, known as Act 118. The regulations under Act 118 have undergone several amendments over the years to keep up not just with developments but with shrewd developers who stop at nothing to avoid their legal obligations.

In 2002, the title to this Act was amended to Housing Development (Control and Licensing) Act (HDA) when several quarters had accused the Government of peddling to the developers, saying the Act had been drafted by the developers themselves. Thus, the word “Developers” was changed to “Development”. In 2007 the housing law was further amended to make it crystal clear the Act was for the protection of house buyers.

Unfortunately, there appears to be a general principle in common law that a person may waive rights granted to him by statute. Neither do the regulations expressly state a house buyer cannot waive any rights given to him under the Act. This has given room to some unscrupulous developers to squeeze waivers of LAD out of unwary buyers.

Provision for protection

In HDA, under the Housing Development (Control and Licensing) Regulations 1989 (HDR), the sale and purchase agreement (SPA) for any housing accommodation sold by a housing developer must be in the format prescribed under the HDR. No change is allowed unless sanctioned by the Controller of Housing under the Ministry of Housing and Local Government (KPKT). In other words, this SPA is a statutory contract and all its provisions must be strictly complied with.

Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H in the SPA give the house buyer a right to be paid LAD immediately in the event of delay in completion.

Can this statutory right be waived by the buyer? According to the Federal Court, the answer lies in the overall purpose of the legislation and whether this purpose would be defeated by permitting waiver and contracting out.

There is no shortage of cases where the courts of law have decided the housing legislations are a social legislation to protect the interest of house buyers. And according to the Federal Court, the protection given to buyers under the HDA and HDR is not just a private right, but a matter of public interest. Such court decisions have even received affirmation and endorsement by Parliament in 2007, when it amended the long HDA title to read as “an Act to provide for ... the protection of the interest of purchasers …”

If statutory rights given to house buyers could be waived by them individually, surely the good intention of the Parliament to provide the much-needed protection for house buyers, and indeed the whole purpose of the housing legislations, would be defeated.

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are written on. They cannot be held against the house buyers and must be declared null and void. Developers must be made to stop wriggling their way out of paying LAD.

Signing under protest

Nevertheless, house buyers are strongly advised against signing waiver letters to avoid unwanted delay in their claims and unnecessary legal battles with the developers.

So, what if developers make buyers sign a waiver letter before handing over the keys?

One way is to sign “under protest” by writing a note on the letter stating he does not agree to waiving his right to LAD, or to state the letter is “without prejudice” to his rights under the SPA. Alternatively, he can cancel out the statement and sign on it. 

If the developer refuses to accept the amendments, the owner can still sign and collect the keys but should immediately thereafter write to the developer to state he has been given no choice and he disagrees to waiving the LAD and other rights. Then, a complaint should be lodged with the Enforcement Division of the Housing Ministry (www.kpkt.gov.my) and a claim can be filed at the Housing Tribunal, both of which should be done expeditiously.

If the purchaser signs away his rights because the developer is withholding the handover, it is not a valid waiver of his rights because it is done under duress. To restore his rights, the purchaser needs only to produce his claim documents made before the purported waiver and the waiver letter prepared by the developer.

There was a case in UK which held that a person who gave up his rights under duress was still entitled to his claims whether the language of the written law allowed waiver or not. The law allowed waivers only in honourable, voluntary circumstances not involving arm-twisting tactics, lies or misleading, self-serving advice from the party who stood to benefit from the waivers.

Precedent cases

Readers who want a deeper understanding of this law will profit from reading the following cases:-

1. City Investment Sdn Bhd V Koperasi Serbaguna Cuepacs Tanggungan Bhd [1985] 1 MLJ 285

The Federal Court ruled that:-

Having regard to the policy and objective of Housing Developers Act 1966 and the 1970 Rules made thereunder, the protection afforded by this legislation to house buyers is not merely a private right but a matter of public interest which Parliament has intended to protect from being bargained away or renounced in advance by an individual purchaser.

2. Kimlin Housing Development Sdn Bhd (Appointed Receiver and Manager) (in Liquidation) V Bank Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805

The Federal Court summarised as follows:-

The question whether a person entitled to the performance of a statutory duty can effectively waive performance of the duty by the person bound and the latter can effectively contract out of performing the duty, depends on the language of the particular statute and, if this is not clear, on the overall purpose of the statute and whether this purpose would be defeated by permitting waiver and contracting out. Trietel on Contract (at p 782) has correctly pointed out:

Difficult questions can arise where a person attempts by contract to waive a right conferred on him by statute. Although there is a general principle that a person may waive any right conferred on him by statute (quilibet potest renunciare juri pro se introducto), difficulties arise in determining whether the right is exclusively personal or is designed to serve other more broad public purposes. In the latter situation, public policy would require that the right be treated as mandatory and not be waivable by the party for whose benefit it operates. Whether a statutory right is waivable depends on the overall purpose of the statute and whether this purpose would be frustrated by permitting waiver.

This article is written by Datuk Chang Kim Loong, Hon Sec-Gen of the National House Buyers Association (HBA).

Email: [email protected]

DISCLAIMER: This article is intended to offer an insight of the case authorities and is not intended to be nor should it be relied upon as a substitute for legal or professional advice.

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