Time to take action
02/11/2002 The Star Articles of Law with
Bhag Singh
MANY house buyers must place great hope in the announcement on changes in the law regulating housing
development. Some see it as a new law on the subject.
Though the Act has a different name, it is not an entirely new Act. It is the existing Act which has been
amended. And this amendment includes a change to the name of the Act while also creating a tribunal that will deal with some of
the woes of the house buyer.
However, there are some basic aspects that will remain unaltered which house buyers must continue to be aware
of. One is the time within which the house buyer must act to claim liquidated damages where there has been a delay in completing
the house.
When this happens the house buyer must be aware of the law of limitations. This is a law that requires a person
to institute action within six years from the date of the “cause of action” arising. Instituting action here means filing it in
court.
“Cause of action” can be said to mean “legal right to sue”. Such right must be exercised within six years
otherwise it is completely lost. In this case it will be a breach by the housing developer that will give rise to a cause of
action.
But at what stage does one begin to compute the six-year term?
This question arises because one view is that the six-year period begins to run from the time that the period
stipulated for completion is reached. Where the time for completion is 24 months, then as soon as the 24th month is over, the
cause of action arises and the house buyer must institute an action within six years from that date.
The other view is that the six-years period begins to run when the house is completed and handed over. The
reason given for this is “that only at this stage is it possible to determine what is the amount that can be claimed”.
In a recent case the facts were that the Sale and Purchase Agreement (SPA) was dated Dec 12, 1984 and the house
was delivered on March 25, 1994. Clause 18 of the SPA provided:
a) The said building shall be completed by the vendor and vacant possession delivered to the purchaser within
24 calendar months from the date of this agreement.
b) If the vendor fails to deliver vacant possession of the said building in time the vendor shall pay
immediately to the purchaser liquidated damages to be calculated from day to day at the rate of 10 per centum per annum of the
purchase price.
The house buyer commenced action on July 31, 1993 and if the limitation period started when the house was
handed over, the house buyer was well within the required period. However, if the limitation period started to run after the end
of 24 months, then the period would have commenced on Dec 12, 1986 and limitation would have set around Dec 12, 1992 and the house
buyer would have taken legal action too late.
So what should a house buyer do when the house is not completed within 24 months as stipulated in the SPA or
within 36 months if it is a compartmentalised unit?
After the period for completion has expired, should the house buyer institute action within six years from the
date the house or compartmentalised unit ought to have been completed, or wait until the unit is actually completed?
This requires a consideration of when the cause of action arises, and on the basis of the existing provision
the better view seems to be that the cause of action arises when the point that the house or compartmentalised unit ought to have
been completed is reached.
The argument that, unless the house is completed it would be impossible to know what the damage would be, has
been considered in various cases. However, it has been pointed out that a distinction exists between a cause of action and relief
claimed. The expiry of the stipulated expiry period gives rise to the cause of action but the computation of the liquidated
damages is a matter of the amount that a party is entitled to. Time therefore begins to run when the date for completion is
reached.
There is another aspect that needs to be considered. If it is said that the cause of action arises only when
the house is completed, what happens if the house is never completed? This view would lead to the absurd proposition that a cause
of action will not arise for an indefinite period.
Though there are cases which have been decided under previous legislation which lay down the principle that the
cause of action arises when the house is completed, the authorities take the view that time begins to run from the time when the
house ought to have been completed.
It is therefore advisable for house buyers not to wait until the house is completed before making a claim for
liquidated damages. This does not mean that they must rush into filing a court action as soon as the 24-month or 36-month period
is over.
It should be remembered that unless the problem is satisfactorily resolved, the time within which an action in
court or, for that matter, elsewhere where relief is available, must be filed within six years of the date when the house or
compartmentalised unit ought to have been completed. |
