Extension of time is one of the provision clauses in the standard contract form – in light of unforeseen circumstances, it allows developers more time to complete the project without being penalised.
Under the terms of the Sale & 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, the developer has to compensate the house buyer by paying liquidated damages (LAD) of 10% per annum on the purchase price for late delivery.
However, there are contractors (which fail to meet the timeline) who seek opportunities to claim for an extension of time in order to avoid this additional loss or expense. When an EOT is granted (loosely) by the Housing Controller for a delayed project, it is essentially taking away the compensation or liquidated agreed damages (LAD) owed to homebuyers.
Supposedly, an extension of time can only be granted in respect of an event that is expressly included in the contract as a “relevant event”, where the claimant must produce documentation which shows that not only are they not responsible for the delays, but also demonstrate the other parties that are responsible. This can either be the employer or other third parties including “Acts of God,” etc.
What does it mean when an 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 homebuyers cannot claim compensation for late delivery. Rights and protection given by Parliament is extinguished by the Housing Controller with a stroke of his pen: that is what it means. Ultimately the developer who committed the breach stands to benefit hundreds of thousands or even millions of ringgit at the homebuyers’ suffering.
There had been a group of homebuyers who had suffered losses due to a delay in the completion of their homes by their developer. The Housing Controller ‘signed away’ their rights and remedies by granting the developer an Extension of Time (EOT) – thereby taking away any compensation the homebuyers were entitled to.
Housing Development Regulation 11(3) was being misused
What is the section of the law that was invoked against homebuyers? 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?
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) is meant to be used against homebuyers, let alone blatantly take away rights which are expressly given to them by Parliament. If discretionary powers are not exercised with prudence, perhaps it is time for these powers to be removed or the minister replaced.