AT the stroke of a pen, monies payable to a group of aggrieved house buyers are taken away by the Controller of Housing.
We are talking about a group of house buyers who had suffered losses due to a delay in completion of their homes by their developer and the very ministry that is supposed to protect them “signed away” their rights and remedies. We are talking about such rights and remedies being taken away from them for the benefit of the very culprit developer who caused them the loss and suffering.
What is happening to the Housing Ministry? The ministry many an aggrieved house buyer turns to in times of developer defiance of the law, the ministry house buyers rely on for protection and for all the desperately needed interventions and assistance when a housing project is delayed or abandoned? Does the Housing Controller know the ramification and repercussion of his action and inaction?
Under the terms of the sale and purchase agreement (SPA) between a housing developer and the house buyer, the developer has to complete and hand over the house within 24 months (for landed properties) or 36 months (for stratified properties). If the developer fails to deliver within this period, it has to compensate the house buyer by paying liquidated damages (LAD) of 10% per annum on the purchase price for late delivery.
Extension of time (EOT)
What does it mean when an “extension of time” (EOT) for delivery of vacant possession is given by the Housing Controller?
Effectively it means breaking the developer’s contract and delay in completing construction is excused and the house buyers cannot claim compensation for late delivery. Rights and protection given by Parliament are extinguished by the Housing Controller with a stroke of his pen: that is what it means. The developer who committed the breach stands to benefit hundreds of thousands or even millions of ringgit at the pain and suffering of the purchasers, that is what it means.
I had, on numerous occasions, highlighted the issues to the Housing Ministry and have even in 2015 published articles in the media about such unjust unilateral granting of EOTs to developers at the detriment of house buyers but it seems to have fallen on deaf ears.
Housing Development Regulation 11(3) has to be quashed
What is the section of the law that was invoked against house buyers? Regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989 (HDReg) reads:
“Where the Controller is satisfied that owing to special circumstances or hardship or necessity, compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing waive or modify such provisions: Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller.”
Hence, only the Housing Controller has the power to waive or modify the provisions of the SPA. So what is wrong with the Housing Controller giving an extension of time? Is he not entitled to exercise his power under this HDReg 11(3)? Has “granting of extension” been exercised in a just manner? Were the affected buyers accorded the “rights to be heard” since it affected them?
No reasonable minded person, let alone the Housing Minister and those under his charge, can possibly imagine that the powers given under HDReg 11(3) are meant to be used against house buyers let alone blatantly and unilaterally take away rights which are expressly given to them by Parliament, rights which are expressly stated to be for their protection and created to serve and protect public interest.
If discretionary powers are not exercised with prudence, perhaps it is time for these powers to be removed or the minister replaced.
Seeking legal remedies
Alas, the National House Buyers Association (HBA) had to embark on a journey to attempt to nullify the EOT through the Court of Law. Our volunteer lawyers, working on a pro bono (free legal fees) basis took up the challenge on a public interest litigation. The class action was commenced by 71 aggrieved buyers in challenging the grant of the EOT by the Controller of Housing which has denied, against unit owners, the rights for entitlement of compensation in lieu of the one-year delay in delivery of vacant possession of the buyers units. Another group of 36 owners, represented by another of HBA’s friendly law firm, also had their case heard on the same date. The common target was on the issue of EOTs.
Below is the sequence of events leading to the Federal Court’s landmark decision:
Kuala Lumpur High Court, 9.8.2016: HBA volunteer lawyers have successfully obtained leave from the Appellate & Special Powers Division of the High Court to pursue with the application for Judicial Review against the decision of the Minister of Urban Wellbeing, Housing & Local Government and the Controller of Housing in a condominium project developed by BHL Construction Sdn Bhd.
Kuala Lumpur High Court, 27.2.2017: The High Court case was heard and written submissions made before Justice Datuk Hanipah Farikullah and decision ruled that the Minister acted ultra vires his power under HDA and HDR 11(3). She granted the applicants (104 affected house buyers) an Order of Certiorari to quash the decision of the Minister of Urban Wellbeing and Housing pertaining to its letter dated 17.11.2015 to amend the time period for vacant possession from 36 to 48 months in respect of the Sale & Purchase Agreement between BHL Construction Sdn Bhd in the Sri Istana condo, Jalan Kuchai Lama, Kuala Lumpur. The granting of the EOT to the defaulting developer makes a mockery and defeats the intent and object of the Housing Act which is “for the protection of house buyers”. It was a landmark decision.
Putrajaya Court of Appeal, 31.3.2018: The Court of Appeal case was heard and the appeal was allowed in part held as follows:
a) That Regulation 11(3) is not ultra vires the Act:
b) That the letter dated 17.11.2015 purportedly allowing the EOT was null and void;
c) That the decision made by the minister is null and void as the purchasers were denied their rights to be heard.
Putrajaya Federal Court, 10.10.2018: The Federal Court granted leave (to appeal) to the purchasers and the developer on the following questions of law:
Purchasers’ Questions of Law
Whether the Housing Controller has the power to waive or modify any provision in the Schedule H Contract of Sale as prescribed by the minister under the Housing Development (Control & Licensing) Act, 1966 (HDA)?
Whether Section 24 of the HDA confers power on the minister to make regulations for the purpose of delegating the power to waive or modify the Schedule H Contract of Sale to the Housing Controller?
Whether regulations 11(3) of the HDReg is ultra vires the HDA?
Developer’s Questions of Law
Whether the minister could delegate his duties (signing of the letter granting the extension of time) to an officer in the then Urban Wellbeing, Housing and Local Government Ministry; and
Whether the minister is obliged to afford the purchasers with a hearing prior to the minister granting the EOT, albeit there is no such provision or requirement in the HD Act or the HD Regulations.
Putrajaya Federal Court, 14.5.2019: Having heard arguments and written submission from lawyers for the purchasers, developers and the attorney general chambers, the Apex Court reserved judgment. Chief Justice Tengku Maimum Tuan Mat, who led a 5-member panel reserved its decision to an unspecified date.
Putrajaya Federal Court, 26.11.2019: The Federal Court ruled that the Controller of Housing does not have the power to grant extension of time (EOT) to housing developers. This means that, without the EOT, developers will have to deliver vacant possession within the prescribed statutory period of 36 months failing which they will have to compensate house buyers LAD that is equivalent to 10% per annum of the purchase price.
The Federal Court’s decision was delivered by Chief Justice Tan Sri Tengku Maimum Tuan Mat leading a panel consisting of Chief Justice of Malaya Tan Sri Azhar Mohamed, and Federal Court judges Tan Sri Idrus Harun and Datuk Nalini Pathmanathan. In their conclusion, the Federal Court judges unanimously answered the questions posed as follows:
Purchasers’ Questions 1 and 2 – Negative;
Purchasers’ Question 3 – Affirmative;
Developer’s Questions 4 and 5 – no necessity to answer.
The landmark decision has been extensively reported in the news media and online portals even in FocusM issue of Nov 30-Dec 6, 2019 entitled: Federal Court verdict on EOT a welcome relief for home buyers. The written court judgment of the Federal Court is now available in all the law journals for all to understand our judges’ rationale in upholding the primacy of house buyers’ interest under the law. – Jan 7, 2020
Datuk Chang Kim Loong is secretary-general of the National House Buyers Association (HBA)