CONTRACT – ILLEGALITY – HOUSING DEVELOPMENT (CONTROL & LICENSING) ACT 1966

In brief

•  The Plaintiffs were purchasers of the Defendant’s residential housing project. The Plaintiffs’ Sale and Purchase Agreements (“SPAs”) with the Defendant are in the prescribed form of Schedule H, which was created in accordance with the Housing Development (Control and Licensing) Regulations 1989 (“HDR”). The Plaintiffs served notice on the Defendant four months before the completion date, requesting that the SPAs be terminated for anticipatory breach of the SPA fundamental conditions. The Plaintiffs claim that at the time, the Defendant had not even completed half of the project’s construction. The Plaintiffs sought a refund of all monies contributed toward the purchase price, as well as compensation from the Defendant for any fees and expenses incurred as a result of the SPAs.

Q. Can you terminate the SPA if the developer failed to deliver vacant possession to the buyer?

A. Yes, the Court of Appeal determined that it is only fair and just to return the parties to their former positions as if the SPAs had never been implemented. This is because for example, the SPA specified in clauses 25 and 27 that the Defendant must deliver vacant possession of the units and complete common facilities within 48 months of the SPA date. Therefore, if the developer failed to deliver vacant possession to the buyer within the time frame, it amounted to a breach of contract.

Whether the SPAS are illegal and unenforceable?

•  The illegality is based on non-compliance with the period of delivery of vacant possession and completion of common amenities provided in the SPAs, which in this case is 48 months.
•  Moreover, clauses 25 and 29 of Schedule H state that the delivery of vacant possession and construction of common facilities must be completed within 36 months of the agreement’s date. However, in this case, it is clear from clauses 25 and 27 of the SPAs that the above-mentioned 36-month period has been extended to 48 months. Given that the goal of the Housing Developers legislation is to protect buyers from developers, parties cannot contract outside of the scheduled form.
•  In the end, the Court of Appeal agreed with the High Court and concluded that the SPAs violated Schedule H of the HDR, rendering them unconstitutional and unenforceable.

Is it true that Regulation 11(3) of the Housing Development Regulations granted the controller of housing the authority to waive or alter any provision of the SPA?

•  The Federal Court ruled in Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor and Other Appeals that the Housing Controller has no authority to change the stipulated Schedule H in the HDR. This is due to the fact that regulation 11(3) of the HDR, the basis on which the Housing Controller used its powers to issue a time extension, is in violation of the Housing Development (Control and Licensing) Act 1966.
•  The Court of Appeal also rejected the attempt to distinguish the case of Ang Ming Lee. In this regard, the Court of Appeal took the hard and strict stance that the issue of whether the approval is acquired before or after the SPAs are executed is irrelevant, given that the judgement of Ang Ming Lee is unambiguous in that the Housing Controller has no ability to amend the specified Schedule H. This is despite the fact that the parties agreed to the longer duration when they signed the SPAs.