What is LAD (Liquidated Ascertained Damages)? Developer failed to deliver your house in accordance with the promised timeline.

 With developers failing to complete the construction and delivery of housing projects in accoirdance with the promised timeline, what then happens to the affected homeowners? Well, there is a clause in the Sale and Purchase Agreement (SPA) called Liquidated Ascertained Damages (LAD) that allows you to claim for compensation in such circumstances.

The LAD is a contractually ascertained or pre-determined amount of damages that are claimable by either party in the event of a breach of contract (SPA). This clause can be found in the SPA.

If you are buying a house from a housing developer, Clause 24 (2) of Schedule G of the Housing Development (Control and Licensing) Act 1966 (HDA) and Clause 25 (2) of Schedule H of the HDA provides that a purchaser has the right to claim for LAD for any delay in the delivery of vacant possession (VP) at the daily rate of 10% per year of the property purchase price. The delay in question would begin from the expiry of the period for delivery of vacant possession ( up to the keys handover date to the buyer.

Developers are required to deliver the VP of a landed home with an individual title within 24 months from the SPA date whereas for strata-titled properties such as serviced residences, condominiums and apartments VP has to be delivered within 36 months.

How is the LAD calculated?

The LAD started in the moment the developer delays on the delivery of VP of the property. Confusion over the actual start date for the LAD is pretty common. It should be noted in a recent Court of Appeal case, it was held that the period for delivery of VP is to be calculated from the date of the SPA and not the date of the booking fee.

Furthermore, Regulation 11(2) of the Housing Development (Control and Licensing Regulations) 1989 (HDR) prohibits housing developers from collecting any payment by whatever name called except as prescribed by the contract of sale (i.e. the SPA). This means that developers are not supposed to collect any payments before the SPA has been signed, and the 2-3% of the purchase price which is usually treated as the booking fee or earnest deposit, should only be collected after signing the SPA and not before.

As an example, say the property purchase price is RM500,000:

Date of SPA: 01/09/2016
Expected completion date as per SPA: 31/08/2019
Actual date of vacant possession: 31/12/2019
Days of delay (from 31/08/2019 till 31/12/2019): 123 days

LAD calculation:
Purchase price (RM500,000) x 10% (LAD damages) x 123 days = RM16.849.32
                                                      365 days

Thus, the amount of LAD claimable by the buyer would be RM16,849.32

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But what about a situation where the developer issues a notice of VP but has yet to obtain the certificate of completion and compliance (CCC)? In such circumstances, the LAD would be calculated from the date of the expected completion date until the date of the CCC.

This is because VP cannot be said to be delivered unless the developer has already obtained the CCC – other conditions include the issuance of the strata title, ready connection of water and electricity supply to the property, and payment of the purchase price by the buyer. 

How to claim for LAD?

There are two channels for purchasers to claim for LAD – you can either file a claim at the Tribunal for Homebuyer Claims or file a civil action at the Legal Courts.

1. Tribunal for Homebuyer Claims

If the total amount of LAD less than RM50,000, buyers can lodge a claim at the Homebuyers’ Tribunal. The claim may be made in person and must be lodged within 12 months from:

• The date of issuance of CCC for the housing accommodation or the common facilities; or
• The expiry date of the defects liability period as set out in the SPA; or
• The date of termination of SPA by either party and such termination occurred before the date of issuance of the CCC

To start the LAD claims in the Housing Tribunal, buyers must fill in the Form 1 – Statement of Claim which can be obtained from the Ministry of Housing and Local Government’s website.

Along with the Form 1, supporting documents such as the SPA, notice of VP, CCC and any other relevant documents must be attached during the submission process. The filing fee for the LAD claim is RM10.

2. Legal courts

If the total amount more than RM50,000, home buyers will need to start a legal action against the developer in court to claim for breach of the SPA, LAD and general damages for the late delivery of vacant possession. The court action must be commenced within 6 years from the breach of contract (i.e. the late delivery of VP).

Buyers would need to employ a lawyer who would appear for them in court. They should also bring along documents such as the SPA, VP letter and CCC during their lawyer consultation to enable their lawyers to build a case for them.

Generally, LAD claims through the courts should be made on an individual basis. However, in circumstances where the developer has abandoned the housing project, a representative or class action may be initiated by the aggrieved buyers. It would be better to consult a lawyer regarding the action as Malaysia does not have a broad process on class actions.

call LIM @ O16 - 2O1 5998 for buy / sell / rent of any properties. Thanks

**source from iproperty.com.my