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Housebuyers vs developers
14/03/2000 The Star Articles of Law with Bhag Singh
THERE is much talk about making changes to the law involving housing. To
what extent these will improve the lot of housebuyers remains to be seen.
A major problem faced by housebuyers is getting compensation for late
completion. There are not many "gentlemen" among housing developers who will
honour the terms of the Sales and Purchase Agreement (SPA). Whilst most
developers will ensure that every sen is paid to them before possession of
the property is handed over to the housebuyer, the reverse is not true when
it is the developer who is owing money to the housebuyer.
Far from adjusting accounts at the time the house is handed over so that
what is due to the housebuyer is set off against what is due to the
developer, many developers demand payment of what is due to them.
After having settled whatever is due to the housing developer, the
housebuyer then seeks payment for what is due to him and he encounters
attempts to whittle down what is legitimately due to him and a veiled threat
that if he does not accept what is offered, he will have to fight for every
sen. A reader complains: "I bought a condo in...and the developer refuses to
pay more than 50% of the liquidated damages. Clause 22 (2) states that: 'If
the vendor fails to hand over vacant possession of the said parcel to which
water and electricity supply...the vendor shall pay immediately to the
purchaser liquidated damages to be calculated from day to day at the rate of
10% p.a. of the purchase price.'
"When the purchasers' pro-tem committee met with the developer's lawyer, the
lawyer said 'immediately does not mean immediately and that liquidated
damages are at the discretion of the management.'
"My question is--what does that mean? What is the purpose of signing a Sale
& Purchase Agreement if one party does not honour it? The developer even
challenged us to take them to court. Doesn't the Housing Act protect
purchasers?"
Clause 22 (2) is actually part of the prescribed SPA for Subdivided Building
constituting Schedule 4 of the Housing Developer (Control and Licensing)
Regulations 1989 prescribed pursuant to Regulation 11 (1).
Regulations 11 (1) states that "Every contract of sale for the sale and
purchase of a housing accommodation together with the subdivisional portion
of land appurtenant thereto shall be in the form prescribed in schedule H."
The rights of the condo buyers depend on what the agreement says and not
what the developer's lawyer says. And the clause concerned is quite clear
even by ordinary reading. Anyone can give his opinion on what a clause
means. But what really matters is the interpretation given by the court. I
cannot agree with the interpretation that it is at the discretion of the
developer to decide when to pay the liquidated damages. This would mean that
the housing developer can make unilateral decisions detrimental to the condo
buyer. The agreement and the law give no such rights.
In a different context, clause 8 provides that if the purchaser fails to pay
the instalments according to the Third Schedule, the developer is entitled
to annul the sale and terminate the agreement. Surely when it comes to the
obligations to the developer, it cannot be that the developer only needs to
pay when he would like to.
The word "immediately" has to be construed to mean as soon as the
obligations of the developer arise. This happens when the developer is ready
to hand over possession to the condo to the buyer. At this stage, the
liabilities of both the condo buyer and developer can be determined, subject
to any claim on account of defective workmanship. Either the housing
developer is late in delivering the condo or he is not. If he is late, then
the only basis to avoid liability would be for the housing developer to get
an extension of time from the Controller of Housing. Whether the Controller
of Housing should exercise his powers to grant an extension and thereby
defeat the rights of the condominium buyers is another matter.
In the absence of any extension, the housing developer has no reason to deny
liability for payment of the full sum. The delay can be mathematically
calculated. The rate at which damages are to be paid is already fixed,
Our reader also asked what the purpose is of signing the SPA when one party
does not honour it? The answer is that the contract sets out the obligations
of parties. When one party refuses to honour, the aggrieved part can and
must enforce his/her rights by making a claim in court.
But many readers may wonder why a housing developer would refuse to pay when
the obligation is clearly set out in the agreement. Whilst there may be
cases in which the developer has a genuine reason not to pay, there are also
many cases in which there is no justification for such refusal.
The answer is simply that the housing developer does not want to honour his
obligations. Unless a lesser sum is accepted the developer wants to make
life difficult for the housebuyer. Most developers know that if sufficient
barriers are placed in the way of the housebuyer, many will be intimidated
into giving up or giving up partially.
If most housebuyers remain firm on their rights, housing developers would
take them more seriously. And such a stand may even make developers finish
construction on time.
Morever, most housebuyers tend to be apathetic in this regard. Individually
it is a loss many of them are prepared to tolerate instead of spending more
time and money to pursue the claim. However collectively, it translates into
a big gain for the housing developer. Certainly the housebuyer's apathy is
the housing developer's gain.
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