Penang Watch

When house buyers are late in making payment the penalty kicks in automatically. But developers want to make it out as though if they are late to deliver the houses they need to be `notified' or in reality-brought to court, before they will consider making any penalty payment. Yet the S&P contracts say precisely that in both cases the penalty kicks in automatically. Now a judge also say/judge so. Hurrays to house buyers!   

April 30, 2008 22:38 PM       

Developers Liable To Pay Damages Immediately To Housebuyers, Rules Court Of Appeal

PUTRAJAYA, April 30 (Bernama) -- Housing developers are liable to pay liquidated damages immediately to housebuyers if they fail to deliver the property on time, the Court of Appeal ruled Wednesday.

A three-member panel led by Justice Datuk Gopal Sri Ram said housing developers entering a sale-and-purchase agreement with housebuyers did not enjoy freedom to make provisions between themselves because it was a special contract prescribed under the Housing Developers (Control and Licensing) Act 1966.

He said housebuyers were therefore not required to notify the developers of their intention to claim liquidated damages before making such a claim, unlike in normal contracts which were governed by the Contracts Act 1950.

Sri Ram made the ruling after dismissing an appeal brought by developer Sentul Raya Sdn Bhd in the attempt to reverse the decisions of 10 High Courts holding it liable to pay liquidated damages to 82 buyers of the Sang Suria condominiums for failing to hand over the units within the time frame of 36 months.

Sentul Raya was ordered by the High Court to pay liquidated damages to the housebuyers immediately, to be calculated from day to day at the rate of 10 per cent per annum of the purchase price.

The court also allowed the cross-appeals by 27 housebuyers against four High Court decisions refusing to award them liquidated damages for the period in which each of them had taken actual physical possession of their respective condominium units.

Sri Ram, who presided with Justice Datuk Heliliah Mohd Yusof and Datuk Ahmad Maarof, said the requirement to give notice under Section 56 (3) of the Contracts Act was an additional obligation to the detriment of the purchaser, and cannot be imposed in view of the statutory scheme under the Housing Developers (Control and Licensing) Act.

"Clause 22 (2) of the sale-and-purchase agreement, making a housing developer immediately liable to a purchaser in liquidated damages once the date for completion passes, excludes the application of Section 56 (3) of the Contracts Act (requiring housebuyers to notify the developer of their intention to claim liquidated damages).

On Sentul Raya's defence that the 1997 financial crisis had made it impossible to complete the construction of the condominium units within the stipulated time, thereby absolving it of discharging the contract, Sri Ram said the court did not accept the defence.

Sri Ram said the defence that the contract entered between the company and the housebuyers was frustrated because of the 1997 crisis, which rendered the performance of the contract radically different from that which was undertaken by the contract, was not available to Sentul Raya.

"The 1997 financial crisis merely made it more onerous or perhaps more expensive for Sentul Raya to perform its obligations. It did not render the contract radically different," he added.

-- BERNAMA