IN a landmark decision on January 19, 2021, the Federal Court delivered its grounds of judgment in respect of the case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Another & 6 Other Appeals. It finally clarified the legal position as to when time starts to run, in respect of the vacant possession (VP) of the property.
Though this issue had earlier been decided in two Supreme Court cases, namely Hoo See Sen & Anor v Public Bank Bhd & Anor and Faber Union Sdn Bhd v Chew Nyat Shong & Anor, the legal position had remained unresolved for 32 years before it was revisited by the Federal Court recently.
National House Buyers’ Association (HBA) volunteer lawyers, led by Datuk K.L. Wong and Wong Renn Xin, working on a pro bono (no legal fee) basis, had taken up this case for purchasers Wong Kien Choon and Ng Chee Kuan against developer PJD Regency Sdn Bhd on a public interest litigation, and as a matter of principle. Meanwhile, counsellors Viola DeCruz and Koh Kean Kang held a brief for HBA.
The purchasers had paid a booking fee of RM10,000 to the developer earlier, but the sale and purchase agreement (SPA) was only executed two months thereafter by the developer. The SPA stated the VP to be within 42 months of the date of the agreement.
Upon the late VP, the purchasers made a claim at the Tribunal for Homebuyers’ Claim based on the date the booking fee was paid. The tribunal awarded the sum claimed by the purchasers.
The developer then filed a judicial review application at the high court, followed by the Court of Appeal, but both applications were dismissed.
The developer then filed an appeal at the Federal Court on the following questions of law.
Question 1
For the purpose of ascertaining the date of the VP or completion of common facilities under a statutory agreement prescribed in the Housing Development (Control & Licensing) Regulations 1989 (HDReg), made pursuant to the Housing Development (Control & Licensing) Act 1966 (HDA), whether the date when time starts to run is the date of the agreement, notwithstanding the decision of the Supreme Court in Faber Union Sdn Bhd v Chew Nyat Shong & Anor (1995) 3 CLJ 797 and Hoo See Sen and Anor v Public Bank Bhd (1988) 1 CLJ (Rep) 125.
Question 2
For the purpose of ascertaining the date of completion of common facilities under a statutory agreement prescribed in Schedules H and J of the HDReg, whether the relevant date is when the prescribed architect certifies they are completed.
Decision of the Federal Court
Question 1
The Federal Court highlighted the Third Schedule (Schedule of Payment of Purchase Price) of the SPA, which clearly states that the SPA should be dated on when the first payment of 10% was made by the purchaser.
Thus, speaking in ideal terms, if the law is strictly complied with, there is no question as to whether the date of calculation of the LAD runs from the date of payment of the booking fee, or from the formal date of the agreement.
However, in order to circumvent this rule, the developer had split the payment of 10% into two parts (2% and 8%). The reason was to ensure the SPA was not dated when the developer collected the 2%, but only when the balance 8% was collected. This would reduce the amount of LAD the developer had to pay the purchaser.
The developer did so in spite of the fact that HDReg 11(2) expressly prohibits all types of collection of any form of payment from the purchaser before the SPA is signed.
HDReg 11(2): “No person, including parties acting as stakeholders, shall collect any payment by whatever name called except as prescribed by the contract of sale.”
The scope of prohibition is wide enough to include estate agents, lawyers and any third parties purportedly acting as stakeholders for the housing developer in respect of the collection of booking fees.
Nonetheless, there has been no reported prosecution in the courts of housing developers and sales agents who flout this prohibition. No one has been prosecuted for this blatant disregard of the law, to the best of our knowledge.
It is clear that developers are not allowed to collect any payment from purchasers before the SPA is signed. Yet, it does not seem to deter developers. There remains a plethora of cases involving the issue of collection of booking fees by housing developers because of the lax, and lack of, enforcement. In fact, it is a criminal offence to collect booking fees as stipulated in HDReg 13(1):
“Any person who contravenes any of the provisions of these Regulations shall be guilty of an offence and shall be liable on conviction to a fine not exceeding RM50,000, or to a term of imprisonment not exceeding five years, or to both.”
Chief Justice Tun Tengku Maimun Tuan Mat had this to say:
“If it is the developer’s attempt to secure an early bargain through the collection of booking fees, then the protective veil cast by the legislature over the purchasers should operate in a way so as to bind the developers to the booking fees. In this way, the developer would have to bear the full extent of the LAD payable to them to the purchasers, consistent with the overall intent of the written law in respect of late VP.”
Flouting the law with impunity
The main idea behind the legislative framework is that developers should be confined to a set timeline. Collecting booking fees is prohibited, yet, developers have continued to brazenly flout the law by calling it “standard practice”.
At the same time, they very boldly demand that the statute be construed in their favour by strictly limiting the commencement period to the dates printed in those contracts.
The objective of the HDA and its regulations is to protect the purchaser, who is in a more vulnerable position due to the inequality of bargaining power. If this mischief of collection of booking fees, which is legally prohibited, is not corrected, it would be a retrospective step for the protection of unsuspecting purchasers.
The rights of purchasers would be severely eroded. It would allow housing developers to continue perpetuating a practice that HDReg 11(2) expressly prohibits. This will further encourage developers to flout the law with impunity, and offer the message that developers are allowed to circumvent the legislation, acting in total disregard of housing laws.
Thus, in answering Question 1, the Federal Court held the following:
“Where there is a delay in the VP by a Developer to the Purchaser in respect of scheduled contracts, the date for calculation of the LAD begins from the date of payment of deposit or booking fee or initial fee or expression of intention to purchase, and not from the date of the SPA literally.”
Question 2: The second question is whether the developer can be deemed to have delivered common facilities to the purchaser upon the issuance of the Certificate of Practical Completion (CPC), and not the Certificate of Completion and Compliance (CCC).
Reverting to the principles of interpretation of social legislation, the court is required to construe the statutory contract in a manner most favourable to purchasers. It is clear that the SPA refers only to one type of certification, namely the CCC. The CCC issued by the architect is required for the VP to the purchasers.
Tengku Maimun held the following:
“It cannot be the intention of the legislature to refer to one standard in respect of the VP and another standard in respect of the completion of common facilities. Furthermore, the CCC is a legal requirement imposed by law, which will be issued upon the developer complying with all regulatory laws, such as the Street, Drainage and Building Act 1974. This affords protection to purchasers, who can be rest assured that the relevant authorities have approved the construction. The same cannot be said in respect of the CPC or any other such documents not amounting to a CCC.”
In answering Question 2, the Federal Court had this to say:
For the purposes of ascertaining the date of completion of common facilities under a prescribed statutory contract of sale, the relevant date is the date when the CCC is issued for purposes of the VP of the property.
Only 1 type of certification for both parcel, common facilities
The apex court made the following distinction between the CPC and CCC:
1) The CPC is a certification for building works done under a construction contract entered into between the owner and the builder or contractor. Such certification is a private legal obligation between such parties.
2) The CCC is a statutory requirement as pointed out by Her Ladyship, that “...is only issued upon the developer complying with all regulatory laws, such as the Street, Drainage and Building Act 1974”.
The chief justice also affirmed Azizah Nawawi J. held in the lower court that there could only be one CCC that is issued “to certify the property (namely the parcels), together with the common facilities, have been constructed and completed in conformity with the approved plans and requirements of the Street, Drainage and Building Act 1974 and its by-laws”.
Hence, it is abundantly clear from the decision that parcels and common facilities ought to be completed and handed over to buyers simultaneously, and not separately. Completion of the common facilities must be in tandem with the completion of the property itself, as the purposes of the common facilities are for the use and comforts of the purchasers. – The Vibes, January 22, 2021
Wong Renn Xin is an HBA legal adviser and Datuk Chang Kim Loong is HBA honorary secretary-general
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