Can Developers compel house buyers to waive LAD?

Datuk Chang Kim Loong is the Honourary Secretary- General of the National House Buyers Association (HBA). Image from PropertyGuru

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This article is written by Datuk Chang Kim Loong, Hon Sec-Gen of the National House Buyers Association (HBA) Email: info@hba.org.my 

Unscrupulous developers are making a mockery out of the system by impelling ‘arm-twisting tactics’ to force waiver (of home buyers’ legitimate rights, benefits and entitlement) 

Over the years, the National Home Buyers Association (HBA) has written countless articles to educate, empower and enrich home buyers with information on their legitimate rights.

However, this article intended primarily for the benefit of house buyers may appear a little technical for the common man. This cannot be avoided completely as it involves an analysis of the housing legislation and relevant case laws.

Nevertheless. every effort has been made to ensure that it is easy to understand even for the average home buyer. So, do not be discouraged and read on to know your rights and be empowered.  

Developers try in whatever devious ways to avoid paying compensation for the late delivery of a new project to house buyers who have suffered immensely through no fault of theirs. This compensation is calculated in the form of liquidated damages, more commonly referred to as ‘LAD’- (Liquidated Ascertained Damages).

Many developers will try misleading home buyers into granting an extension of time (EOT); others will seek an extension from the Controller of Housing; failing which by approaching the Housing Minister to put forth all kinds of defence to delay or deflect the home buyers’ legitimate claims for LAD.

This includes any steps to avoid paying what is rightfully due to the home buyers including getting them to sign ‘Waiver Letters’ which purportedly claim to waive their rights for LAD. 

Simpleton argument 

Can developers rely on such waiver letters to avoid payment of LAD? Can home buyers waive their right to LAD in the first place?

Why not, one school of thought may say:  ‘If the right belongs to the home buyer surely it is his/ her to waive’. He/ She just signed the waiver letter and that is a binding contract. Is this true? 

HBA viewpoints 

HBA has differing views and would like to expand our viewpoints. The reasons a home buyer cannot waive his/her right to LAD can best be understood by tracing the purpose for which the provisions for LAD were created. 

For decades, countless innocent home buyers have suffered at the hands of irresponsible developers who are interested in nothing but making profits at the expense of innocent home buyers, so much so that Parliament had to intervene with housing legislation to protect the home buyers.

It began with the passing of the Housing Developers (Control and Licensing) Act in the year 1966 known as Act 118. This Act and the regulations made thereunder had to undergo several amendments over the years to keep up not just with development but with shrewd developers who would stop at nothing to avoid their legal obligations.

Despite a line of authoritative judgements where the courts have decided that developers are unable to contract out of the provisions of the housing legislation, the relentless attempts by developers continue to persist.

Unethical developers attempt to take away the rights, benefits and entitlement given to home buyers by Parliament and continue to hoodwink them into conceding. 

In 2002, the title to this Act was amended to Housing Development (Control and Licensing) Act when several quarters accused the Government of peddling to the developers and that the Act was drafted by the developers to regulate themselves.

Thus, the change of the word ‘Developers’ to ‘Development’ within the Act. And in the year 2007, the housing law was further amended to make it crystal clear that the Act was for the protection of home buyers. 

Unfortunately, there appears to be a general principle in common law that a person may waive rights granted to him by statute and nowhere in the Act or the regulations made thereunder does it expressly say that a home buyer cannot waive any rights given to him under the Act or the regulations.

When all else fails, some unscrupulous developers resort to squeezing waivers of LAD out of innocent and unwary home buyers. The worst among those affected are the naïve first-time home buyers. 

HDA and its governing Regulations 

Compensation must be awarded to home buyers under the HDA for the delayed completion of a property. Image from Freepik

Under the Housing Development (Control and Licensing) Regulations 1989 (“HDR”) [which are regulations made under the Housing Development (Control and Licensing) Act 1966 (“HDA”)], the Sale and Purchase Agreement (SPA”) for any housing accommodation sold by a housing developer must be in the format prescribed under the HDR.

This SPA, unlike any other contract of sale, contains provisions which cannot be changed at all unless such changes have been sanctioned by the Controller of Housing at the Ministry of Housing & Local Government (MOH).

In other words, this SPA is a statutory contract and all the provisions in this SPA are statutory requirements which must be strictly complied with. 

One of the provisions of the SPA gives the home buyer a right to be paid LAD immediately by the developer in the event of delay in the completion of the housing accommodation. It is found in Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H – Sale & Purchase Agreement. 

Can this statutory right be waived by the home buyer? According to the Federal Court, the answer lies in the overall purpose of the legislation and whether this purpose would be defeated by permitting waiver and contracting out.  

There is no shortage of cases whereby the Courts of Law have decided that the housing legislations are a form of social legislation – the main purpose of which is to protect the interest of home buyers.

Furthermore, according to the Federal Court, the protection given to home buyers under the HDA and HDR is not just a private right but a matter of public interest.

Such court decisions have even received affirmation and endorsement by Parliament in 2007 when it amended the long title to the HDA to read as “An Act to provide for ……. the protection of the interest of purchasers …. “. 

If statutory rights given to home buyers could be waived by them individually, surely the good and commendable intention of Parliament to provide the much-needed protection for home buyers and the whole purpose of the housing legislation would be defeated and eroded. 

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are written on.

They cannot be held against the home buyers and must be declared null and void. Developers must be made to stop trying to wriggle their way out of paying LAD. 

Word of Caution 

Having said the above, home buyers are nevertheless strongly advised not to sign waiver letters to avoid possible undesired delay or outcome in their claims and unnecessary legal battles with unscrupulous developers who will raise whatever issues possible to avoid or simply delay the legitimate claims from the home buyers.  

“But what can I do if the letter contains a waiver? I don’t have a choice. I want my keys and the developer says I must sign then only can give me the keys.” 

Sign ‘UNDER PROTEST’ is one way. The home buyer can write a note on the letter that he does not agree to waive LAD or that he does not agree to waive his rights or that it is ‘WITHOUT PREJUDICE’ to his/ her rights under the SPA. Alternatively, he can delete the offending words or sentences and initial his/her signature at the deletion.  

If the developer refuses to pass the keys unless the home buyer signs without adding or deleting any word from the letter, the home buyer can still sign and collect the keys but should immediately after start writing to the developer to state that they were not given a choice and that they do not agree to waive the LAD or other rights.

A complaint should be immediately lodged with the Enforcement Division of the Housing Ministry (www.kpkt.gov.my) and a claim can be filed at the Housing Tribunal, both of which should be done expeditiously.  

Even if the purchaser signs away his rights because the developer is withholding the keys to the home the purchaser has paid for, it is not a valid waiver of his rights because it was done under duress.

The purchaser needs only to produce his claim to the developer made before the purported waiver and the document prepared by the developer as evidence of the so-called waiver to restore his rights to his claim. 

There is an English case which held that a person who gives up his rights under duress is still entitled to his claims whether the language of the written law allows waiver or not.

The law is concerned only with a waiver in honourable, voluntary circumstances not involving arm-twisting tactics, lies or misleading, self-serving advice from the party who stands to benefit from the waiver. 

Case Laws 

Readers who want a more in-depth understanding of this area of the law will profit from reading the following cases:- 

(1) City Investment Sdn Bhd V Koperasi Serbaguna Cuepacs Tanggungan Bhd [1985] 1 MLJ 285  wherein the Federal Court said that:- 

“Having regard to the policy and objective of Housing Developers Act 1966 and the 1970 Rules made thereunder the protection afforded by this legislation to house buyers is not merely a private right but a matter of public interest which Parliament has intended to protect from being bargained away or renounced in advance by an individual purchaser” 

(2) Kimlin Housing Development Sdn Bhd (Appointed Receiver And Manager) (In Liquidation) V Bank Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805, another Federal Court decision. The principle in relation to a waiver of a statutory right was summarized by the Federal Court as follows:- 

“The question of whether a person entitled to the performance of statutory duty can effectively waive performance of the duty by the person bound and the latter can effectively contract out of performing the duty, depends on the language of the particular statute and, if this is not clear, on the overall purpose of the statute and whether this purpose would be defeated by permitting waiver and contracting out. Trietel on Contract (at p 782) has correctly pointed out: Difficult questions can arise where a person attempts by contract to waive a right conferred on him by statute. Although there is a general principle that a person may waive any right conferred on him by statute (quilibet potest renunciare juri pro se introducto), difficulties arise in determining whether the right is exclusively personal or is designed to serve other more broad public purposes. In the latter situation, public policy would require that the right be treated as mandatory and not be waivable by the party for whose benefit it operates. Whether a statutory right is waivable depends on the overall purpose of the statute and whether this purpose would be frustrated by permitting waiver.”  

DISCLAIMER: This article is intended to offer an insight into the case authorities and is not intended to be nor should it be relied upon as a substitute for legal or any professional advice

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