As soon as a purchaser signs their sales and purchase agreement (SPA), housing legislation requires the unit to be completed within 24 months if it’s a landed property, and 36 months if it’s a high-rise unit.
Purchasers are then entitled to claim liquidated ascertained damages (LAD) in the case of any delays.
But should property developers really be held accountable for delays that are unavoidable, such as the deadly Covid-19 pandemic?
Lawyer Ranjan N Chandran, commercial and construction partner at Hakem Arabi & Associates, has already received a flood of enquiries, said business and financial publications, The Edge in a report.
“There will be more breaches of contracts by developers due to non-compliance of terms and conditions for the completion of a development project during this Covid-19 period. These contracts will have LAD clauses that will entitle purchasers to claim,” Ranjan was quoted as saying in a report.
SPAs under the Housing Development (Control and Licensing) Act 1966 (HDA) do not include a force majeure clause that would automatically provide a moratorium.
Apart from the few weeks of a total shutdown, Ranjan listed other issues that could cause further delays in completion. These include difficulty in mobilising the workforce at construction sites, stop-work orders (where cases of Covid-19 have been detected or because SOPs were not adhered to), SOPs on the number of workers allowed on site and social-distancing measures.
“Without an adequate workforce at the site, it is next to impossible to meet timelines,” he said, adding that the disruption in imported material supplies could also exacerbate the situation.
The news portal also reported REHDA president Datuk Soam Heng Choon as saying that builders have had to completely stop work, with zero revenue and cash flow. What was originally thought to be a two weeks’ break ended up becoming a month and half of halted construction.
Data from the Construction Industry Development Board (CIDB) shows that up to June 14 — 89 days since the start of the MCO — only 28% of 7,760 sites nationwide had resumed construction work.
Much of the delay is because foreign workers were required to undergo Covid-19 testing and get a clean bill of health before they could return to work.
However, the requirement has now been relaxed. On June 11, CIDB announced that foreign workers can return to work if they have applied to take the tests and are waiting their turn to be tested or for their test results, provided that they adhere to the SOPs.
Soam believes that a majority of property developers resumed work last week.
Typically, delays in handing over vacant possession are likely to attract LAD. However, Soam Soam is hopeful that the Covid-19 Temporary Measures Bill, expected to be tabled in July, will provide relief from contractual obligations and any proceedings for non-fulfilment of contracts.
But would a mere six-month moratorium – similar to what was provided under Singapore’s Covid-19 (Temporary Measures) Act (2020) – suffice for a stay of legal proceedings?
Malaysia’s bill is likely to have a retrospective effect from March 18. However, Soam says REHDA’s request for “a longer and more practical (moratorium) period” is currently being deliberated. Nevertheless, he was mum on the proposed duration.
However that works out, a spike in claims appears inevitable.