Water and electricity must be connected upon VP — ringing endorsement from apex court

• If there was any lingering doubt … it is now completely exonerated by the latest Federal Court decision, which endorsed the High Court decision and reinforced the developer's obligation to provide such utility facilities.

The controversy surrounding the compulsory supply of actual water and electricity upon vacant possession (VP) under the sale and purchase agreement (SPA) that was prescribed under the Housing Development (Control and Licensing) Act 1966 (HDA 1966) has finally been laid to rest following the Federal Court’s decision in the case of Remeggious Krishnan vs SKS Southern Sdn Bhd (formerly known as MB Builders Sdn Bhd) [2023] 3 MLJ 1.  

The Federal Court had on March 6, 2023 ruled in this case that the phrase “ready for connection” in Clause 27(1)(c) of the SPA under Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (HDR 1989) shall be construed to mean the property must be installed with actual supply of electricity during the delivery of VP. Thus, it reversed the decision of the Court of Appeal (COA) where it had been held that the term “ready for connection” does not require the property be installed with actual supply of electricity. 

In layman terms, the developer is contractually and duty bound under HDA 1966 to provide and ensure that the property must be installed or fitted with electricity and water meters upon VP with rooms illuminated with light, water flowing from the taps when these electrical switches and taps are turned on. 

If there was any lingering doubt over the High Court decision in Bandar Eco-Setia Sdn Bhd vs Tribunal Tuntutan Pembeli Rumah & 2 Ors  [2020] 5 AMR 251 (read below), it is now completely exonerated by the latest Federal Court decision, which endorsed the High Court decision and reinforced the developer's obligation to provide such utility facilities.

(Read: Water must be flowing and electricity running when handing over Vacant Possession: says Court of Law)

Facts of the case
The purchaser bought an apartment unit from the developer. The developer delivered vacant possession to the purchaser with no actual supply of electricity connection to the property. The purchaser then filed a claim against the developer in the Housing Tribunal, which awarded damages in favour of the purchaser for the delay in the connection of electricity. 

The developer then applied for a judicial review against the Housing Tribunal’s decision. However, the High Court dismissed the developer’s judicial review application, among others, on the ground that the developer failed to deliver VP with an actual supply of electricity to the property and this was clearly in breach of Clause 27 of the SPA. 

However, the developer then appealed against the High Court’s decision to the COA, which unanimously allowed the appeal and held that, inter alia, the High Court had erred in the interpretation of Clause 27(1)(c) of the SPA. The COA took the position that the provision of “ready for connection” stipulated in clause 27(1)(c) of the SPA did not necessarily mean the property must be installed with an actual supply of electricity. 

Subsequently, the Federal Court ruled that the COA's interpretation could not be accurate since it had failed to take into account Clause 27(1)(k), which, when read together with Clause 27(1)(c) of the SPA, would warrant the actual supply of water and electricity to the apartment unit. These clauses are as follows:
Clause 27 — Manner of delivery of vacant possession
(1) The Developer shall let the Purchaser into possession of the said parcel upon the following:
(c)   water and electricity supply are ready for connection to the said Parcel;
(k)   “ready for connection” means electrical points and water fittings and fixtures in the said Parcel have been installed by the Developer and are fully functional and supply is available for tapping into individual parcels; 

As there was no actual supply of electricity at the material time of VP, the developer was therefore in breach of the manner of delivery as stipulated in Clause 27 of the SPA. Hence, the purchaser was correctly awarded compensatory damages.

Other salient takeaways for purchasers
1) The decision reinforces that HDA 1966 is a social legislation designed to protect the house buyers and the interest of the purchasers shall be the paramount consideration against the interest of the developers as underscored by the Chief Justice of Malaysia, YAM Tun Tengku Maimum bt Tuan Mat in Ang Ming Lee & Ors vs Menteri Kesejahteraan Bandar & others (2020) 1 MLJ 281 (FC).

2) The ruling for the phrase “ready for connection” in relation to the supply of water and electricity shall apply to all the SPAs (Schedules G, H, I & J) comprising all landed and stratified housing properties prescribed under HDR 1989 and read together with HDA 1966. 

3) The Federal Court distinguished the developer's obligation on the time frame for delivery of VP under Clause 25 from that of the manner of delivery of VP under Clause 27. Hence, the developer is liable for liquidated damages arising from failure to deliver VP within the time frame stipulated in Clause 25, otherwise is culpable for compensatory damages owing from failure to comply with the manner of delivery of VP stipulated in Clause 27. 

Consequently, housing developers will still be liable for compensatory damages if there is no an actual supply of electricity and water in the units at the time of VP, even if VP is delivered to the purchasers within the time frame specified in the SPAs. 

4) To avoid getting penalised, now that the law is settled on this issue, it will be good administrative sense for housing developers to make the necessary early applications and pay the requisite deposits to the relevant utility authorities/service providers in advance of the projected VP. This will help to secure installation of such meters to ensure actual supply of electricity and water upon VP. 

Common sense questions: How can a house be habitable when electricity and water is not available for immediate usage upon VP? Similarly, how can a CCC (Certificate of Completion and Compliance) be issued by the architect if the utilities are not connected?

This article is jointly written by National House Buyers Association (HBA) honorary secretary-general Datuk Chang Kim Loong and Ar YS Ng, HBA’s technical advisor. HBA is a voluntary non-government and not-for-profit organisation manned wholly by volunteers.

HBA can be contacted at: 
Email: [email protected]
Website: www.hba.org.my 
Tel: +6012 334 5676
The views expressed are the writer’s and do not necessarily reflect EdgeProp’s.

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