When it comes to housing development projects, the time of delivery of vacant possession (VP) is crucial as the purchasers anticipate to obtain their house keys in time. It is the developer’s duty to complete the housing development project within the stipulated timeframe. As stated previously, the period of delivery of VP for HDA property is fix in the statutory Sale and Purchase Agreement (SPA).
However, delays can occur due to various reasons and more often than not, it leads to dissatisfaction on the purchasers’ part. As a homebuyer or even a potential homebuyer, we believe that it is important for you to know that it is your right to claim Liquidated Ascertained Damages (LAD) from the developer in the event of late delivery of VP. In this article, we will briefly explain what is LAD and its current legal position.
What is LAD?
LAD for HDA property is a pre-determined damages agreed by the parties in the event of late delivery of VP upon signing the SPA. The LAD for HDA property is fix in the SPA as stated previously. This article will briefly explain on the current legal position of claiming LAD for late delivery of VP.
The question that always arise in related to LAD is; when does LAD should be calculated? The legal issue is on whether the date for calculation of LAD should begin from the date stated in the SPA or from the date the purchasers paid booking fee/deposit/initial fee to the developer?
The Current Legal Position on LAD
The current position of this issue is as decided in the Federal Court case of PJD Regency Sdn Bhd v Tribunal Pembeli Rumah Anor and other Appeals [2021] 2 MLJ 60. In this case, the purchaser had entered into a Pro Forma Sale with the developer, PJD Regency and paid the booking fee on 16/01/2013. Only on 21/03/2013, the SPA was formally executed. The SPA stated that ‘the delivery of VP must be made within 42 months from the date of this agreement’. On 23/01/2017, notice of delivery of VP was sent to the purchaser. Due to delay of delivering of VP, the purchaser claimed for LAD from the developer.
In this case, the purchaser and the developer interpreted the phrase ‘from the date of this agreement’ differently. The purchaser argued that it began from the date of booking fee payment and the developer argued that it began from the date of the SPA. The Federal Court judges having referred to several legal precedents decided that where a developer fails to deliver vacant possession according to the time stipulated in the statutory SPA, the calculation of the LAD begins from the date of payment of the booking fee and not from the date of the SPA.
Decision / Conclusion
Hence, in this case, the calculation of LAD for late delivery of VP started when the purchaser entered into the Pro Forma Sale and paid the booking fee i.e., on 16/01/2013. This most recent decision shall serve as the current legal position in calculating LAD. On the other hand, we have shared the formula on how to calculate the LAD rate in our previous article.
We hope that this brief sharing will help you in better understanding the LAD issue. Feel free to contact us if you are interested to know more on your right in claiming the LAD.
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