Housing Development | Delivery of Vacant Possession | Extension of Time | LAD Claims

In light of the recent Federal Court decision in Ang Ming Lee, house buyers may wish to revisit their contractual and statutory right in respect of the time period for delivery of vacant possession.

I have been following the case of Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Ors since Hanipah Farikullah J ordered a declaration on 15 June 2017 that Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 ("the Regulations") was ultra vires the Housing Development (Control and Licensing) Act 1966 ("the Act"). See Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Ors [2017] MLJU 1366.

What does Regulation 11(3) provide? It states: -

"Where the Controller [of Housing] is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions:

Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller."

Regulation 11(3) basically allows a housing developer to apply to the Controller of Housing for an extension of time for delivery of vacant possession by modifying the standard terms of the sale and purchase agreement (SPA). The SPA may be modified before of after the SPA is executed.

The standard SPA is set out in Schedule G of the Regulations. Whereas, for building or land intended for subdivision into parcels, the standard SPA is set out in Schedule H of the Regulations.

Clause 24(1) of Schedule G provides that "Vacant possession of the said Property shall be delivered to the Purchaser in the manner stipulated in clause 26 within twenty-four (24) months from the date of this Agreement." Whereas, Clause 25(1) of Schedule H provides that "Vacant possession of the said Parcel shall be delivered to the Purchaser in the manner stipulated in clause 27 within thirty-six (36) months from the date of this Agreement."

Now the judiciary has differing views on whether Regulation 11(3) is ultra vires the Act. The Court of Appeal took a different view from Hanipah Farikullah J - it held that Regulation 11(3) was not ultra vires the Act as it was a provision designed to regulate and control the terms of the SPA as envisaged by Section 24(2)(e) of the Act. See Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor v Ang Ming Lee & Ors and Other Appeals [2018] 4 MLJ 545.

Perhaps that was a policy decision when a policy argument was submitted by watching brief counsel during the Court of Appeal hearing - i.e. holding Regulation 11(3) ultra vires the Act would cause chaos in the housing development industry especially since other SPAs of many other housing developments would be affected as well. Of course, this was not a stated ground for the Court of Appeal's decision. But the Court of Appeal held that the Controller's decision to grant an extension of time in this particular case was null and void albeit on different grounds.

It took the Federal Court on 26 November 2019 to overturn the Court of Appeal's decision and affirm Hanipah Farikullah J's decision on the ultra vires point. The Federal Court held that: -

"By virtue of s. 24(2)(e) of the Act, the Minister is empowered, or given the discretion, by Parliament to regulate and prohibit the terms and conditions of the contract of sale. Having regard to the object and purpose of the Act [to protect the interests of house buyers], the words ‘to regulate and to prohibit’ in s. 24(2)(e) should be given a strict construction, in the sense that the Minister is expected to apply his own mind to the matter and not to delegate that responsibility to the Controller. As the power to regulate does not include the power to delegate, the Minister’s action, in delegating the power to modify the terms and conditions of the contract of sale, may be construed as having exceeded what was intended by Parliament." See Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and Other Appeals [2020] 1 CLJ 162.

What happens then to SPAs of other housing developments that have been modified pursuant to Regulation 11(3)? I have seen SPAs where it was modified from 36 months to 54 months. Such a modification is null and void pursuant to the Federal Court's decision. This would entitle the purchasers to sue for liquidated ascertained damages (LAD) for late delivery of vacant possession by 18 months!