Extension of time: Federal Court decision to have major implications for property segment

KUALA LUMPUR: Without a doubt, the Federal Court’s “landmark” ruling that the housing controller has no power to grant an extension of time (EOT) to developers to complete their development projects would have “major implications” for the property development industry.

A number of stakeholders spoke to The Star on the issue, with Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong saying that “it was a good judgment”.

“It is the contractual obligation between the developer and the buyers.

“If the developer fails to deliver, he has to pay LAD. That’s fair because there is a contractual obligation between the developer and the buyers. The previous court of appeal decision has not protected the buyers,” he added.

Kong also explained that “extensions can and should only be given for exceptional” cases such as natural disasters or “unavoidable circumstances of a special nature”.

It should not be “at the whims and fancies of the minister or housing controller”.

National House Buyers Association (HBA) honorary secretary-general Datuk Chang Kim Loong told the daily that the ruling is “is retrospective. This is a big sweep and will affect other such cases.”

“Regulation 11(3) is destroyed,” Chang said.

Yesterday, Chief Justice Tan Sri Tengku Maimun Tuan Mat who led a five-member panel held that Regulation 11 (3) of the Housing Development (Control and Licensing) Regulations 1989 which confers power on the controller to waive and modify the terms and conditions of the contract of sale between purchasers and the developer was ultra vires the Housing Development (Control and Licensing) Act 1966, reported Bernama.

The Real Estate and Housing Developers’ Association or Rehda president Datuk Soam Heng Choon told The Star that the “decision made is specific to BHL Construction and the letter signed for the extension is not valid. This means BHL Construction lost the case and has to pay LAD [liquidated ascertained damages]”.

“Let’s wait for the complete written judgment,” Soam added.

According to previous reports, in February 2017, the High Court, in allowing a judicial review application by the purchasers, had set aside the order by the minister to give a 12-month extension to BHL Construction Sdn Bhd to complete the project.

In their application for judicial review, they sought an order to quash the decision allowing BHL Construction an extension of time for delivery of vacant possession from 36 months to 48 months.

The developer failed to complete and hand over the units to the purchasers and wrote to the Controller of Housing under the ministry for an extension of time. The controller rejected the developer's application for extension of time.

The developer then appealed to the Minister of Urban Wellbeing, Housing and Local Government who, on Nov 17, 2015, allowed an extension of 12 months.

As a result of the extension of time, the purchasers were unable to claim for LAD as provided for in the SPA.

The Court of Appeal last year reversed the High Court ruling stating that the controller had wide powers under the Act.