Law

Hot: (12.8.2020) Covid-19 Bill and its impact on DEVELOPER (issues relating to Defect Liability Period, Liquidated Ascertained Damages)

The much anticipated Covid-19 Bill was read in the Dewan Rakyat for its 1st Reading today (12.8.2020). A copy can be downloaded below:

Its preamble states that it is to provide temporary measures to reduce the impact of Covid-19 and it seeks to modify several existing legislation including:

  1. Limitation Act 1953;
  2. Sabah Limitation Ordinance;
  3. Sarawak Limitation Ordinance;
  4. Public Authorities Protection Act 1948;
  5. Insolvency Act 1967;
  6. Hire Purchase Act 1967;
  7. Consumer Protection Act 1999;
  8. Distress Act 1951;
  9. Housing Development (Control and Licensing) Act 1966;
  10. Industrial Relations Act 1967;
  11. Private Employment Agencies Act 1981;
  12. Land Public Transport Act 2010;
  13. Commercial Vehicles Licensing Board Act 1987;
  14. Courts of Judicature Act 1964;
  15. Subordinate Courts Act 1948;
  16. Subordinate Courts Rules Act 1955.

For purposes of this article, we will only focus on the part where it relates to contractual obligations (eg: contracts entered into by the Developer, JMB, MC) and modifications set out in Housing Development (Control and Licensing) Act 1966.

(a) Contractual Obligation (Part II, Sections 5-10)

In the context of contractual obligation, the inability to perform them arising from any of the categories specified in the schedule which includes:

(1) construction work contract or construction consultancy contract and any other contract related to supply of construction material, equipment or workers in connection with a construction contract

(2) performance bond or equivalent pursuant to a construction contract or a supply contract

(3) professional services contract

(4) lease or tenancy of non-residential immovable property;

(5) event contract;

(6) contract by a tourism enterprise;

(7) religious pilgrimage-related contract)

will not give rise to the other party exercising his rights under the contract. In other words the innocent party will not be able to enforce his/her rights set out in the contract against the defaulting party.

Any dispute arising from inability to pay from the categories above may be settled by way of mediation.

This part will come into operation on 18.3.2020 to 31.12.2020.

(b) Modifications to the Housing Development (Control and Licensing Act) 1966 (Part XI, Sections 32-38)

In this part XI, “agreement” refers to the sale and purchase agreement of housing accommodation in the forms prescribed in Schedules G, H, I and J of the Housing Development (Control and Licensing) Regulations 1989 entered into before 18.3.2020.

Late Payment Charges

In Section 34, it provides that if the purchaser fails to pay any installment from 18.3.2020 to 31.8.2020, the developer shall not impose any late payment charges for the unpaid installment.

A purchaser is allowed to apply to the Minister for an extension of the period until 31.12.2020 for not imposing any late payment charges.

View Brochure for Strata Management Seminar 2020 Series 3.

Delivery of Vacant Possession and Liquidated Damages

For purposes of delivering of vacant possession of a housing accommodation, the period from 18.3.2020 to 31.8.2020 will be excluded notwithstanding the SPA. In a similar vein, liquidated damages for failure to deliver vacant possession of a housing accommodation shall exclude the period from 18.3.2020 to 31.8.2020.

A developer however is allowed to apply to the Minister for an extension of the period until 31.12.2020 for purposes of delivering vacant possession.

If the purchaser is unable to enter into possession from the date of service of a notice to take vacant possession during the period from 18.3.2020 to 31.8.2020, the purchaser shall not be deemed to have taken such vacant possession.

Defect Liability Period

The defect liability period after a purchase takes vacant possession of a housing accommodation and time for the developer to carry out works to repair and make good defects shall exclude the period from 18.3.2020 to 31.8.2020.

The purchaser can also apply to the Minister for an extension of the period beyond 31.8.2020 until 31.12.2020 and if the Minister is satisfied with such application, the excluded period shall be extended up to 31.12.2020 from the calculation of the defect liability period and time for developer to carry out works to repair and make good the defect.

Existing Legal Proceedings

Section 37 however provides that the extension of time above shall not affect any legal proceedings commenced, or any judgment or award obtained to:

(a) recover late payment charges;

(b) late payment charges paid by purchaser;

(c) liquidated damages paid by developer

Modification to Section 16N

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Section 38 grants an extension of time for a homebuyer to file a claim in the Tribunal for Homebuyer Claims if the limitation period for the homebuyer has expired during the period from 18.3.2020 to 9.6.2020.

Assuming the Covid-19 Bill proceeds to the 2nd reading and subsequently getting the royal assent (and of course with no change of government in between), this Bill will come into operation on the date of publication and will be in operation for a period of 2 years from the date of publication.

Strata Management Seminar 2020 Series 3. View Brochure.
Disclaimer: The content provided on this website does not constitute legal advice but are for general informational purposes only. It may not be the most up-to-date legal information after the published date. To seek professional legal advice, please check with your lawyer.
Lai Chee Hoe
Partner at Chee Hoe & Associates. With 10+ years of experience under his belt, he specializes in civil and corporate litigation. He is also the current Chairperson of various Joint Management Bodies.

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