Federal Court Rules That Late Delivery Payments Are Calculated From Booking Fee Collection
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The calculation of the late delivery payment or Liquidated Ascertained Damages (LAD) to begin from the date the booking fees is paid to the developer, instead of the signing of the sales and purchase agreement (SPA), reported Edgeprop.my.
The Federal Court made this ruling after a case for Wong Kien Choon (the purchaser) against his developers, PJD Regency Sdn Bhd. Chief Justice Tengku Maimun Tuan Mat said the Housing Development (Control & Licensing) 1966 and its subsidiary laws were social legislation and has now settled the law.
In the case, the purchaser made a booking fee of RM10,000, as requested by the developer on Jan 16, 2013 but only signed the SPA on March 21, 2013. In the SPA, it stated the vacant possession of the house must be delivered to the purchaser within 42 months or by September 2016.
However, Wong was informed about the handover on Jan 23, 2017, which was around four months’ from the SPA date. The purchaser requested for a LAD payment of RM33,000 but the developer disputed the amount.
The LAD is designed to cover any predicted losses occurred in case of a project overrun or being delayed. In residential property transactions, the LAD is payable by developers to purchasers for late delivery of vacant possession in a housing project.
According to the Housing Development (Control and Licensing) Act 1966 (HDA 1966), developers need to deliver the landed property development within 24 months or 36 months for strata properties.
National House Buyers Association (HBA) honorary secretary general Datuk Chang Kim Loong (pictured) told EdgeProp.my that housing developers will start marketing their projects even before they obtained the Advertising Permit and Developer's License (APDL).
The developers will also be collecting booking fees from purchasers who are interested to secure a unit in the development. This means the signing of SPA could come later, maybe two months or even longer, he added.
In all cases, the purchaser will sign the SPA first and after signing, the SPA will be forwarded to the developer for signing. The SPA will invariably be dated by the developer after signing. However, there is no express mention in the HDA or Housing Development (Control and Licensing) Regulation 1989 (HDR) as to when the SPA should be dated.
“If the developer is allowed to collect booking fees and pick any date for the SPA date, it will cause injustice to the purchaser," said Chang, adding that the decision made by the Federal Court will provide a clearer dateline for the calculation of LAD, hence protect purchasers’ rights in the transaction.