|
Why settle for less when you can
get more?
30/04/1996
The Star Articles
of Law with Bhag Singh
You have bought
a house from a housing developer and made sure that all payments were made
when due. The loan is in place, and the bank releases parts of the loan according
to requests for progress payments from the developer.
However, the
house could not be completed and handed over within the agreed and stipulated
period of 24 calendar months. In fact, it was completed and vacant possession
handed over only more than a year later.
What do you
do, however, when the housing developer offers you 60 per cent of the RM25,000
you are entitles to based on the number of days of delay, on condition that
the matter is not pursued any further?
The right
of the house buyers to compensation is provided for in the Standard Sale and
Purchase Agreement prescribed pursuant to the Housing Developers (Control
and Licensing) Act 1966 and in particular clause 20 (1) and (2) of the prescribed
agreement which states that:
"(1) Vacant
possession of the said building to which water and electricity supply are
ready for connection shall be handed over to the purchaser within 24 calendar
months from the date of this agreement.
"(2) If the
vendor fails to hand over vacant possession of the said building, to which
water and electricity supply are ready for connection to 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 annum of the purchase
prices."
On the basis
of these provisions, it will be seen that the developer is clearly required
to pay compensation at the stipulated rate and immediately too. The only real
basis on which a developer can be excused from such payment is when given
an extension of time by the authorities. This is rare though.
So when a
developer admits the delay and offers only 60% in settlement, the house buyer
is placed in a dilemma of sorts as the developer is tempting him to give up
his rights by offering an immediate cash payment, albeit at a discount.
This is because
the developer is likely to have made the offer on a without prejudice basis,
meaning that it is not an admission of liability but made only for the purpose
of negotiating a settlement. The effect is that the particular letter cannot
be used as an admission of liability against the developer.
If the house
buyer does not accept the offer, the developer will refuse to pay anything.
The house buyer will then have to sue the developer to recover the compensation
that should have been made as a matter of course once the delay is not disputed.
However, when
an action is filed in court the developer is likely to put up defences of
a technical nature to the delay, and deny the claim by the house buyer. This
tactic serves to wear out the house buyer. The house buyer's resources are
in most cases limited and the developer knows this.
However, a
house buyer who stands firm on his rights, especially so when he has fulfilled
his obligations under the Sale and Purchase Agreement, is most likely to recover
the compensation in full. In addition, the house buyer would also be entitled
to interest and costs.
Yet many a
house buyers would succumb to accepting the 60% offered by the developer to
avoid legal action, and having to bear the costs in terms of time and money
spent.
In doing so,
the house buyer compromises even further. Even if the delay in payment exceeds
a one-year period - and often it is longer by the time the money is paid -
the house buyer is giving up on interest which he would otherwise be entitled
to. This could work out to another 10% of the claim.
Or the house
buyer could be half way through seeing his solicitor when the settlement is
accepted, thus giving his rights to costs.
Therefore
when a house buyer accepts 60% in full settlement he may in reality be getting
50% or even less of what he is entitled to if he had pursued the case to its
logical conclusion.
A reader asked
why a house buyer should compromise and why the developer would not want to
honour its obligations.
Well, the
house buyer does not have to compromise. He can and should pursue the matter
to recover what is due to him unless his circumstances warrant a different
course of action.
As regards
the second part of the question, the answer would be the same as for any other
situation where a party is obliged to make payment but drags its feet because
it is reluctant to part with the money.
In instances
where the house buyer is not at fault in anyway, the offer to pay 60% as in
the example given can be said to be unjustified and unethical.
This appears
to be especially so when it is observed that a developer will not hand over
the keys to the house buyer unless all outstanding payments, including interest
on any late payments or other charges are settled, even when this may amount
to a few ringgit or sen.
Yet when the
developer is admittedly in breach and is liable to pay compensation which
may run into thousands of ringgit, the developer would in making such a proposal,
be expecting a discount constituting almost half is not more of what is legitimately
payable to the house buyer.
The unfairness
of the situation notwithstanding, developers very often get their way. This
is because the developers is, in most instances invariably a corporation whose
resources, both financial and otherwise, are far superior to those of the
individual house buyer.
Thus the house
buyer needs greater protection in terms of bargaining power and negotiating
strength. To this end, the law by way of the provisions in the prescribed
agreement provides clearly for the house buyer to be entitled to compensation.
The aggrieved house buyer should therefore stand by and assert his rights.
|
