Providing justice to home buyers

I REFER to the report “Too little, too late” (Sunday Star, April 21) on developers who refuse to pay full damages to home buyers for delivering properties late.

The report quoted National House Buyers Association honorary secretary-general Datuk Chang Kim Loong saying that the association is proposing for the government to come up with a “set off” mechanism to solve this problem. “For example, if the developer owes LAD (Liquidated Ascertained Damages) to house buyers, the sum can be set off with the amount owed by the house buyers to the developer.

“This means the house buyer pays less charges to the developer, so that the full LAD payment owed by the developer can be cancelled off,” he says.

This gives the impression that “set off” is not allowed and the government should come up with the mechanism. I beg to defer.

Case law that developed on this matter has clearly allowed for this set off mechanism. In Sentul Raya Sdn Bhd v Hariram Jayaram & ORS and Other Appeals (2008) 4 CLJ 618, the Federal Court held that: “The respondents were entitled to set-off of the sums owing to them against the sum owing by them.”

This case was followed by, among others, Kumaraguru Thandavathevar v Ooi Soo Teik & Anor (2017) 10 CLJ 129: “The plaintiff did not breach the 1994 SPA when he did not pay the sum demanded by Ever Noble for stages three and four since, by this time, the LAD had far exceeded the required payments for stages three and four due to the prolonged delay of the project. The balance of purchase price due to the developer and the LAD due to the plaintiff arose from the same transaction. The plaintiff had a right to set-off to reduce the sum he owed the developer.”

Amendments to the standard Sale and Purchase Agreement (Schedule H) in 2015 have considered the earlier judicial pronouncement allowing for set off, and accordingly the set off provision was inserted in Clause 25. Clause 25(3) now provides: “The Developer shall pay any liquidated damages referred to in sub-clause (2) to the Purchaser immediately after the Developer has given notice requesting the Purchaser to take possession of the said Parcel in the manner stipulated in clause 27, failing which the Purchaser shall be entitled to deduct such liquidated damages from any instalment of the purchase price due to the Developer.”

It is therefore apparent that when a purchaser receives a notice from the developer to take vacant possession of the property, he can immediately advise his end financier to withhold further instalment payments and set off the balance sum due to developer from the sum due as LAD from the developer.

This benevolent amendment would go a long way in providing justice to the home buyers.

DATUK PRETAM SINGH DARSHAN SINGH President Real Estate Lawyers Association