LAD waiver: Be wary of insidious developers undermining your rights (Part 1)

OVER the years, the National House Buyers Association (HBA) has written countless articles to educate and empower house buyers with information and on their legitimate rights.

This article, though intended primarily for the benefit of house buyers, may appear a little technical to the ordinary house buyers. This cannot be avoided completely as it involves an analysis of the housing legislations and case laws.

Every effort has been made to ensure that it is easy to understand even for lay house buyers. So, do not be discouraged.

Read on, know your rights and be empowered.

Ever so often, developers try in whatever devious ways and means they can to avoid paying compensation for late delivery (of property) or liquidated damages, more commonly referred to as ‘LAD’ (Liquidated Ascertained Damages), to house buyers who have suffered immensely through no fault of theirs when a housing project is delayed in completion.

Many developers will try misleading house buyers into granting extension of time (EOT); others will seek extension from the Controller of Housing; failing which the housing minister and put forth all kinds of defence to delay or defect the house buyers’ legitimate claims for LAD.

Anything to avoid paying what is rightfully due to the house buyers including getting the house buyers to sign “Waiver Letters” whereby the house buyers purportedly agree to waive their claims for LAD.

Simpleton argument

Can developers rely on such waiver letters to avoid payment of LAD? Can house buyers waive their right to LAD? Why not, one school of thoughts may say: “If the right belongs to the house buyer surely it is his/ her to waive”. He/ She just signed the waiver letter and that is a binding contract. Is this the truth??

HBA’s views

HBA has differing views and would like to expound it. Why a house buyer cannot waive his right to LAD can best be understood by tracing the purpose for which the provision for LAD was created.

For decades, countless innocent house buyers have suffered at the hands of irresponsible developers who are interested in nothing but making profits at the expense of innocent house buyers, so much so that Parliament had to intervene with housing legislations to protect the house buyers.

And it began with the passing of the Housing Developers (Control and Licensing) Act in 1966 (Act 118). This Act and the regulations made thereunder had to undergo several amendments over the years to keep up not just with development but with shrewd developers who would stop at nothing to avoid their legal obligations.

Despite a line of authorities whereby the courts have decided that developers cannot contract out of the provisions of the housing legislations, they continue relentless with their attempts to take away the rights, benefits and entitlement given to house buyers by the Parliament and continue to hoodwink them into conceding.

In 2002, the title to this Act was amended to Housing Development (Control and Licensing) Act when several quarters accused the Government of pandering to developers and that the Act was drafted by the developers to regulate themselves.

Thus, the change of the word “Developers” to ‘Development’. And in 2007, the housing law was further amended to make it crystal clear that the Act was for the protection of house buyers.

Unfortunately, there appears to be a general principal in common law that a person may waive rights granted to him by statute and nowhere in the Act or the regulations made thereunder does it expressly say that a house buyer cannot waive any rights given to him under the Act or the regulations.

So, when all else fails, some unscrupulous developers resort to squeezing waivers of LAD out of innocent and unwary house buyers. The worst affected are the naïve first-time house buyers.

HD Act and its governing Regulations

Under the Housing Development (Control and Licensing) Regulations 1989 (“HDR”) [which are regulations made under the Housing Development (Control and Licensing) Act 1966 (“HDA”)] the Sale and Purchase Agreement (SPA”) for any housing accommodation sold by a housing developer must be in the format prescribed under the HDR.

This SPA, unlike any other contract of sale, contains provisions which cannot be changed at all unless such changes have been sanctioned by the Controller of Housing at the Housing & Local Government Ministry.

In other words, this SPA is a statutory contract and all the provisions in this SPA are statutory requirements which must be strictly complied with.

One of the provisions of the SPA gives the house buyer a right to be paid LAD immediately by the developer in the event of delay in the completion of the housing accommodation. It is found in Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H – Sale & Purchase Agreement.

Can this statutory right be waived by the house buyer? According to the Federal Court the answer lies in the overall purpose of the legislations and whether this purpose would be defeated by permitting waiver and contracting out.

There is no shortage of cases whereby the court had decided that the housing legislations are a social legislation, the main purpose of which is to protect the interest of house buyers.

And according to the Federal Court, the protection given to house buyers under the HDA and HDR is not just a private right but a matter of public interest.

Such court decisions have even received affirmation and endorsement by Parliament in 2007 when it amended the long title to the HDA to read as “An Act to provide for ……. the protection of the interest of purchasers …. “.

If statutory rights given to house buyers could be waived by them individually, surely the good and commendable intention of the Parliament to provide much-needed protection for house buyers and indeed the whole purpose of the housing legislations would be defeated and eroded.

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are printed on. They cannot be held against the house buyers and must be declared null and void.

Developers must be made to stop trying to wriggle their way out of paying LAD. – May 3, 2022


Datuk Chang Kim Loong is the honorary secretary general of the National House Buyers Association (HBA).

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.


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