Developers must pay if projects not completed on time

01/05/2008 New Straits Times

PUTRAJAYA: Housing developers must immediately pay damages if they fail to deliver properties to purchasers within the time frame stated in the sale and purchase agreement.

In making this ruling, the Court of Appeal yesterday also said that buyers were not required to give notice to their developers of their intention to claim compensation.

Judge Datuk Gopal Sri Ram said section 56(3) of the Contracts Act, which stated that a party must give notice to claim damages, was not applicable to a statutory agreement under the Housing Development (Control and Licensing) Act 1966.

"The contract (between the developer and purchaser) in the present cases is a special contract. It is prescribed by statute," he said in the court's unanimous decision upholding 10 High Court decisions.

The 10 decisions entitled 127 purchasers of apartment units at Sang Suria Condominium in Sentul, Kuala Lumpur, to claim damages from the developer, Sentul Raya Sdn Bhd, for late delivery.

Sitting with Sri Ram were Datuk Heliliah Mohd Yusof and Datuk Ahmad Maarop.

Sri Ram said the sale and purchase agreements between the developer and purchasers were found in Schedule H of the Housing Developers (Control and Licensing Regulations ) 1989.

"The requirement of notice under section 56(3) is an additional obligation to the detriment of the purchaser," he said.

Sri Ram said the defence of frustration failed because the 1997 financial crisis perhaps only made it more expensive for the developer to perform his obligations.

"It did not render the contract radically different," he said.

Purchasers had signed the sale and purchase agreements with Sentul Raya in 1995.

The developer was scheduled to deliver vacant possession of the properties in 36 months from the date of agreement, but the project was only completed in October 2002.

Sentul Raya issued a notice to purchasers to collect the keys to their apartments and also demanded that the buyers pay the balance purchase price.

The purchases wrote to the developer and claimed compensation for late delivery and asked the company to set-off the damages against the balance purchase price.

The developer refused and threatened to terminate the sale and purchase agreement and forfeit between 10 and 20 per cent of the purchase price.

The purchasers, represented by N.V. Sree Harry, then filed 10 suits, claiming damages which were heard and disposed of by six High Court judges.

The developer has since paid the damages to the purchasers, but appealed against the decisions.