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.
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