On 19/01/2021, our Federal Court issued a Landmark Decision, PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and Other Appeals.
This verdict handwritten by our Chief Justice of Malaysia has finally settled on some disputes in regards to liquidated damages between housing developers and buyers. The following three decisions laid down essential guideline as follows:
1. When the housing developers is unable to deliver the vacant possession to the buyer within the specified time, when calculating the compensation for liquidated damages, should it be calculated from the date of the contract or the date the buyer pays the deposit?
To be honest, although there has been a court ruling that this issue is to be calculated from the date of payment of the deposit; however, this issue has been challenged by developers since before. The reason of the developer’s challenge is simple: the contract has clearly stated that during calculating the period, it starts from the contract date. Moreover, the deposit date may be several months earlier than the contract date. When calculating the compensation, the developer must compensate the buyer for extra several months, and this loss can be huge!
Court decision: the date is to be calculated from the date the buyer pays the deposit
The sale and purchase between housing developers and buyers has been regulated by the Housing Development (Control and Licensing) Act 1966. The law has stated that the developer or anyone cannot collect any payment from the buyer before signing the agreement with the buyer. Regardless of the payment you call as deposit / booking fee / initial fee, etc.
Although it is illegal for developers to collect deposits, this does not invalidate Sale and Purchase Agreement.
Hence, if the developer chooses to ask the buyer to make a deposit, the developer must accept that his contract responsibility will begin immediately, rather than the date of the Sale and Purchase Agreement. The court strongly condemned the developer for taking the deposit from the buyer, but has never set the date of the contract (delayed for several months). This is to protect relatively weak party between relatively powerful developers and buyers. Many developers started development several months later and delayed the contract date after receiving the buyer’s deposit. This would be very unfair to buyers. In interpreting this, the court will follow the original intention of the law in interpreting the agreement instead of blindly following every word in the agreement.
2. When confirming the completion of common facilities, should it follow the Certificate of Completion and Compliance (CCC) date or the Certificate of Practical Completion (CPC) date issued by the architect?
Court decision: CCC date
Some people call CCC the occupation certificate, which is the confirmation letter issued by the city hall to confirm that the building is suitable for living and use. The CPC is the unilateral certificate of the architect stating that the construction has been completed, but it has not been recognized and inspected by the government. This would take time to get the CCC.
When asking for compensation from developers, many people don’t know that they can also claim late delivery of compensation for common facilities.
3. If the developer previously gave the buyer a discount (discount / rebate), when calculating the compensation, should it be calculated using the discounted price? Otherwise, the buyer will have unjust enrichment.
Court decision: Use the sale price as usual
If the law is established to maintain social order or protect the weaker groups, then if some of the regulations for the weaker groups are not written in the agreement, it is also considered effective.
In other words, if the developer wants to give the buyer a benefit, the buyer can accept it. But if the developer wants to compromise the interests of the buyer, the court will not accept it.
BY WINSON TAN
Note: This judgment is only for disputes between housing developers and buyers. The contract must be regulated by the Housing Development (Control and License) Act