KUALA LUMPUR – Members of the legal fraternity are celebrating the Federal Court's decision on late delivery penalties paid by housing developers, saying that the judiciary is giving recognition to the true meaning of the Housing Development Act 1966.
Describing the apex court judgement as excellent, lawyer Derek Fernandez said that the Federal Court gave credence to Parliament's intention when it enacted the Housing Development (Control and Licensing) Act (HDA).
"Such a law is a piece of social legislation intended to protect the purchaser. The Federal Court was quite clear it will not condone actions by developers that try to devise ingenious schemes to circumvent the law," Derek said.
He said this judgment will result in the judiciary intervening in situations where developers take advantage of purchasers – interpreting the law under the HDA to protect such persons.
"This decision has a lot of effects on other issues that purchasers may face. One such issue is a matter before the Federal Court, which is not yet decided but concerns the power of the comptroller of housing to give developers exemption on paying LAD (liquidated ascertained damages) depending on pertinent facts," Derek added.
Now, he said, those who have already paid booking fees will be entitled to have the "clock start" from the date they paid the booking fee to the time the property is delivered to them.
Recently, the Federal Court heard six appeals simultaneously from homebuyers and developers on the issue of penalties for late delivery of properties.
The developers argued that late penalties should be calculated from the time of the sales agreement, not when the booking fees are paid.
However, the apex court disagreed, saying that the penalties are to be calculated from the date the booking fee was paid.
Derek, however, also expressed disappointment that some developers still partake in the collection of booking fees, despite prohibition under the law.
"When a person pays the booking fee, what is he paying for? He's paying to purchase the property, so it is clear that the time starts when developers collect the monies," he said.
He urged the Housing and Local Government Ministry to take the issue more seriously and penalise developers that collect booking fees.
Such actions by the ministry, Derek said, will result in purchasers not having to go through cumbersome processes to safeguard their rights.
He recommended that the ministry issue directives to developers stating they must pay penalties for late deliveries from the time booking fees are paid – if not, their licences will be revoked or other enforcement actions taken.
"Not all developers do that. There are a lot of responsible developers that do not collect booking fees and abide by the law. The minority are doing this, but it is the duty of the ministry to stop them," Derek added.
Enforcement needed
Meanwhile, House Buyer Association secretary-general Datuk Chang Kim Loong said that that under HDA and its relevant subsidiary legislation, there is no requirement stating when a sale and purchase agreement (SPA) for housing should be dated.
"If the developer is allowed to collect a booking fee and pick any day as the SPA date, it will do injustice to the purchaser.
"That being the case, the developer could willy-nilly pick any date it favours to execute the SPA, which could certainly prejudice the interest of the purchaser," Chang said in a statement.
He said if developers are allowed to continue such practices, it would be detrimental to homebuyers when it comes to penalty payments for late delivery.
With regard to the collection of booking fees by developers, Chang questioned why the ministry has failed to prosecute such errant operators.
Referring to Regulation 13(1) of the Housing Development (Control & Licensing) Regulations 1989, Chang said those who violate housing development laws can face up to a RM50,000 fine or five years' imprisonment, or both.
"No one has been prosecuted for this blatant disregard for the law, to the best of my 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," Chang added.
He also pointed to a section of the Federal Court's judgement with regard to the certificate of completion and compliance (CCC).
The CCC is a legal requirement certifying that the developer has complied with regulations in the Street, Drainage and Building Act 1974, among others.
However, the certificate of practical completion (CPC) must also certify building works done by a contractor to a developer.
"Such certification is a private legal obligation between the developer and contractor," Chang said.
He said the Federal Court affirmed that the law only recognises the CCC.
He added that, in the case of condominiums and apartments, the CCC must be issued once the unit, along with the building's common facilities, are completed.
Skirting the law
Lawyer K. Teeruvarasu, meanwhile, also acknowledged the Federal Court's decision as extra protection for home purchasers, adding that developers have been known to skirt the law and take advantage of buyers.
"I think this decision will protect homebuyers, as developers may do things without considering the legal requirements under the HDA.
"In fact, when it comes to the time of delivery for properties, the HDA states that it must be completed within 24 months (for landed properties) or 36 months (for strata properties). But a lot of the time, developers will insert longer time periods, flouting the HDA," Teeruvarasu said.
As for booking fees, he said that such collections are illegal, and purchasers who change their minds can request a refund from developers.
In other words, if a purchaser pays the booking fee and later refuses to sign the purchase agreement, the buyer can request a refund.
"I feel that this Federal Court judgement solidifies the HDA as a piece of social legislation and makes enforcement easier.
"Right now, this will give more clarity to developers on how they should continue operating." – The Vibes, January 23, 2021
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