The developer late in handing over the keys? You can initiate a claim against the developer!

The developer late in handing over the keys? You can initiate a claim against the developer!

Generally speaking, if the house purchased from the developer is for residential use, both the developer and the purchaser must sign an agreement stipulated by the government; and the provisions of the contract are all based on the Housing Development (Regulations) And License) Act 1966 (HDA) and cannot be changed.

According to HDA, if it is a landed residential property, the developer must hand over the property to the purchaser within 24 months after the agreement signed; and if it is a high rise building, it must be completed within 36 months after the agreement is signed (unless the developer has obtained an extension period from the Minister of Housing before signing the contract). The deadline for the delivery of the property will be clearly stated in the agreement.

Delivery of Vacant Possession is a very important legal concept in the process of buying and selling a property. Basically, in addition to determining whether the developer needs to pay compensation for the property within the time limit of the agreement, the property’s two-year defect liability period is also calculated from this time.

“If the developer is unable to hand over the property to the purchaser within the time limit of the agreement, the purchaser has the right to claim compensation from the developer.”

Some people think that developers may rush to hand over vacant possessions to purchasers in order to avoid paying fines. But you don’t need to worry, because in the latest standard agreement, it has been clearly stated that the developer can only be deemed as delivery of legal vacant possession if all of the following conditions are met:

1.       The Certificate of Completion and Compliance is issued by the local government which basically means that the unit is suitable and safe to live in;

2.       The land title has been issued by the State Land Office and the purchaser can execute the transfer documents with the developer at any time when house key is obtained;

3.       Public facilities such as water and electricity have been connected to individual  units

The date of handing over a vacant house is generally the day when the purchasers receive the key from the developer. If the developer issues a notice informing the purchasers to collect the keys, and the purchasers do not collect the keys immediately, then according to the agreement, the developer will automatically be deemed as delivering the vacant possession after 30 days of the notice.

Some developers who are late in completing the project will require the purchaser to sign a similar settlement letter when they hand over the keys. If the purchaser reads carefully, most of the content inside is asking the purchaser to give up the amount that can be claimed or to compensate the purchaser with a lower amount. At this time, the purchaser must make his own choice because if he does not accept the settlement, he must seek the compensation he deserves from the developer through legal process.

Of course, according to the sale and purchase agreement, the purchaser is entitled to full compensation without negotiating with the developer. Whether the purchaser choose to come forward and fight for their own rights really depends on the purchaser themselves. Because some people are standing by him with valid and good case, but because of lawsuits, they get panic, so he will probably choose to compromise.

Generally, purchasers can sue the developer in two ways. The first is through the Tribunal for Homebuyer Claims, and the second is through the general civil courts. Both have their advantages and disadvantages. If via the housing arbitration tribunal, the purchaser must personally follow up his case. Because in the arbitration tribunal, purchasers cannot appoint lawyers. Of course, the fees and procedures are relatively simple and convenient.

If the case is submitted to the court through a lawyer, the purchaser may be able to obtain an order from the court to order the developer to pay compensation without having to handle the case personally. Of course, the price is that lawyers must be hired to carry out litigation process. I have dealt with a similar case before. When the developer did not comply with the court order and was unwilling to pay the full amount; we issued a lawyer’s letter of warning informing that the developer would be liquidated, and the developer had to pay the full amount to the purchaser afterwards.

Moreover, if it is a high rise building, and the developer cannot deliver the common facilities within the deadline, the developer must also compensate the 20% of purchase price at 10% of the annual interest rate based on the number of days of late completion.

At the end of the article, the author will attach an example of how to calculate late liquidated claims so that readers can know how to calculate:

10% x property purchase price x number of days late for the developer to deliver the vacant possession / 365 days:

Property purchase price: RM300,000

Date of signing the sale and purchase agreement: 01-01-2014

Expected delivery date (within 36 months): 31-12-2016

Date of receiving the keys: 01-07-2017

Number of days late for house delivery: 182

10% x RM300,000 x 182 days / 365 days = RM14,958.90


Note: This article is for reference only and does not constitute legal advice. Therefore, if readers have any legal questions or needs, they should seek professional legal advice. If the reader suffers any loss by relying on this article, the author will not be held responsible.

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