Court rules water must be flowing and electricity running when handing over Vacant Possession

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Delivery of Vacant Possession (VP) under Housing Development (Control and Licensing) Act 1966 (HDA 1966) has presented a perennial poser to the purchasers: Why are the purchasers being delivered purportedly completed housing property that could not be occupied due to not having an actual supply of running water and electricity?       

Under the current regime of HDA 1966 read together with Housing Development (Control and Licensing) Regulations 1989 (HDR 1989), the developer are supposed to deliver VP of the completed property to the purchasers with water and electricity supply ‘ready for connection’.

Some irresponsible housing developers contend that their job is completed as soon as the sub-stations are energized and commissioned and that the supply of those basic necessities of water and electricity to each individual parcel unit are beyond their control. 

And this has created a dilemma for the purchasers. Without running water and electricity supply, the purchasers could not possibly occupy their property. It is not habitable for human occupation.

The agony of waiting to occupy their property, which they have fully paid to the developers, continues notwithstanding the fact that the purchasers have made the requisite deposits to the utility providers for the meters. 

Actual Supply of Water and Electricity must be available 

In the recent case at the Shah Alam High Court in the decision of Bandar Eco-Setia Sdn Bhd v.  Tribunal Tuntutan Pembeli Rumah & 2 Ors  [2020] 1 LNS 778 the issue on ‘ready for connection’ was eloquently and articulately expressed by Justice Wong Kian Kheong. The decision has cast an important precedent that dealt with the interpretation on the need to provide an actual supply of water and electricity to a completed house in the delivery of vacant possession since the introduction of HDR 1989.

Even though the decision was based on Sale & Purchase Agreement (SPA) prescribed in Schedule I (BTS 10:90 model) to HDR 1989, it is equally applicable to Schedule G for land and building, and Schedule H & J for building and land intended for subdivision into parcels. 

This was a case where 2 purchasers jointly purchased a double-storey semi-detached house from the developer. They filed a claim at the Tribunal for Home Buyers Claims for liquidated damage for breach of SPA conditions on the delivery of vacant possession when they found out that there was no actual supply of water and electricity to their house upon collection of the keys.

They claimed that the developer was obliged under the agreement to deliver vacant possession with an actual supply of water and electricity within the prescribed period of 24 months, failing which the delivery of VP cannot be valid. 

However, the developer contended they were only required under Clause 21(1) of the SPA to apply for the internal connection of water and electricity from the house to the mains under the terms of the agreement and that there was no time frame set to do so.

Hence, they were not obliged to provide an actual supply of water and electricity within the 24 months period. The Tribunal decided in favour of the purchasers and allowed the claim. 

Aggrieved by the decision, the developer applied for judicial review to the High Court. 

‘Ready for Connection’ argued 

The SPA in contention was a Schedule I contract based on the Built Then Sell (BTS) 10:90 mode of payment.  

The main relevant clauses argued were:- 

     i) Clause 26(1)(b) that the developer shall let the purchaser into possession upon the issuance of a certificate of completion and “water and electricity supply are ready for connection to the Building”; and 

     ii) definition of “ready for connection” in Interpretation Clause 1(f) of the SPA, which was defined as “…..means electrical points and water fittings and fixtures in the said Building have been installed by the Developer and are fully functional and supply is available for tapping into individual building units”.   

A literal interpretation of such relevant clauses was sufficient to convince the Court of Law that the actual supply of water and electricity was an integral part of the delivery of Vacant Possession and therefore it is incumbent on the housing developer to ensure that these actual supplies are provided to the Property.

The presiding Judge averred the following reasons for his decision:- 

1) If a Developer is not bound by the relevant clauses to ensure actual supply of water and electricity to property when the Developer delivers VP of the property within the 24 Months period, then it will be detrimental to the Purchasers and is contrary to the objectives of HDA 1966 and HDR 1989 as explained in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar & others (2020) 1 CLJ 162 

2) Where in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar & others, precedent case HDA 1966 was emphasised by the Chief Justice of Malaysia, YAM Tun Tengku Maimum bt Tuan Mat as social legislation designed to protect the house buyers, the interests of the purchasers shall be the paramount consideration against the interest of the developers; 

3) If the Purchasers cannot occupy their purchased property without actual water and electricity supply to the property, such an outcome is clearly unjust to Purchasers who have fulfilled all their obligations owed to the Developer and only to find out that they cannot occupy their property at delivery of vacant possession; and 

4) It is crystal clear that it is incumbent on the Developers to ensure that there is actual water and electricity supply to the property when delivering vacant possession to their purchasers. 

What does the decision mean for the purchasers? 

The decision serves to clarify the requirement of the utility supplies for delivery of VP under Clause 26 (1), which created much controversy prior to the decision. The Court of Law has decided that the actual supply of water and electricity is an essential integral part of the delivery of VP. 

Hence, delivery of VP shall be completed with actual supply of water and electricity with the connection of utility meters and this has been the legitimate expectation all along following the introduction of HDR 1989. 

More importantly, it allows the purchasers to claim for liquidated damages for the period from the expiry of the 24 months (Schedule G & I) or 36 months (Schedule H) till the actual supply of water and electricity to the properties if such supplies are not ready at the time of delivery of VP. 

Be Forewarned 

Those housing developers especially those State economic agencies who deliver vacant possession to their purchasers without connection and supply of water and electricity supply available and expects their purchasers/ customers themselves to queue up at those TNB and Syabas or Service Providers offices be forewarned. 

Purchasers expect the following vis-à-vis utility supply: 

  • Water supply: with water running when one turns on the tap; and 
  • Electricity supply: when one affixes the bulb and switches on 

Quotes from past Courts decision 

Simply put: It means when the Purchasers entered the house upon delivery of vacant possession and turned on the lights it will be illuminated when he affixes a bulb to it. I cannot comprehend it to mean electricity supply only to a sub-station in the housing estate where the house is erected, be that terminal near or far” 

       … Justice James Foong in Lew Yoke Leng & others v Sykt Kar King Sdn Bhd (2000) 4 CLJ 184 

“It is not sufficient for the developer to just lay the pipes and cables for electricity and water to connect the building to the substation or water mains. The developer must ensure, at the time of delivery of vacant possession of the said building, that there is supply of water and electricity ready for tapping into the building” 

….. Justice Abdul Malek Ahmad, Justice Tengku Baharudin Shah and Justice James Foong, Court Of Appeal in Syarikat Kemajuan Perumahan Negara Sdn Bhd v Lee Cheng & anor.(2005) 

This article is written jointly by Datuk Chang Kim Loong, Hon Sec-Gen and Ar. Y S Ng, Technical Advisor of the National House Buyers Association (HBA). 

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