|
Why settle for less when you can get more?
30/04/1996 The Star Articles of
Law with Bhag Singh
You have bought a house from a housing developer and made sure that all payments were
made when due. The loan is in place, and the bank releases parts of the loan according to requests for progress payments from the
developer.
However, the house could not be completed and handed over within the agreed and
stipulated period of 24 calendar months. In fact, it was completed and vacant possession handed over only more than a year later.
What do you do, however, when the housing developer offers you 60 per cent of the
RM25,000 you are entitles to based on the number of days of delay, on condition that the matter is not pursued any further?
The right of the house buyers to compensation is provided for in the Standard Sale
and Purchase Agreement prescribed pursuant to the Housing Developers (Control and Licensing) Act 1966 and in particular clause 20
(1) and (2) of the prescribed agreement which states that:
"(1) Vacant possession of the said building to which water and electricity supply are
ready for connection shall be handed over to the purchaser within 24 calendar months from the date of this agreement.
"(2) If the vendor fails to hand over vacant possession of the said building, to
which water and electricity supply are ready for connection to the said building, in time, the vendor shall pay immediately to the
purchaser liquidated damages to be calculated from day to day at the rate of 10% per annum of the purchase prices."
On the basis of these provisions, it will be seen that the developer is clearly
required to pay compensation at the stipulated rate and immediately too. The only real basis on which a developer can be excused
from such payment is when given an extension of time by the authorities. This is rare though.
So when a developer admits the delay and offers only 60% in settlement, the house
buyer is placed in a dilemma of sorts as the developer is tempting him to give up his rights by offering an immediate cash
payment, albeit at a discount.
This is because the developer is likely to have made the offer on a without prejudice
basis, meaning that it is not an admission of liability but made only for the purpose of negotiating a settlement. The effect is
that the particular letter cannot be used as an admission of liability against the developer.
If the house buyer does not accept the offer, the developer will refuse to pay
anything. The house buyer will then have to sue the developer to recover the compensation that should have been made as a matter
of course once the delay is not disputed.
However, when an action is filed in court the developer is likely to put up defences
of a technical nature to the delay, and deny the claim by the house buyer. This tactic serves to wear out the house buyer. The
house buyer's resources are in most cases limited and the developer knows this.
However, a house buyer who stands firm on his rights, especially so when he has
fulfilled his obligations under the Sale and Purchase Agreement, is most likely to recover the compensation in full. In addition,
the house buyer would also be entitled to interest and costs.
Yet many a house buyers would succumb to accepting the 60% offered by the developer
to avoid legal action, and having to bear the costs in terms of time and money spent.
In doing so, the house buyer compromises even further. Even if the delay in payment
exceeds a one-year period - and often it is longer by the time the money is paid - the house buyer is giving up on interest which
he would otherwise be entitled to. This could work out to another 10% of the claim.
Or the house buyer could be half way through seeing his solicitor when the settlement
is accepted, thus giving his rights to costs.
Therefore when a house buyer accepts 60% in full settlement he may in reality be
getting 50% or even less of what he is entitled to if he had pursued the case to its logical conclusion.
A reader asked why a house buyer should compromise and why the developer would not
want to honour its obligations.
Well, the house buyer does not have to compromise. He can and should pursue the
matter to recover what is due to him unless his circumstances warrant a different course of action.
As regards the second part of the question, the answer would be the same as for any
other situation where a party is obliged to make payment but drags its feet because it is reluctant to part with the money.
In instances where the house buyer is not at fault in anyway, the offer to pay 60% as
in the example given can be said to be unjustified and unethical.
This appears to be especially so when it is observed that a developer will not hand
over the keys to the house buyer unless all outstanding payments, including interest on any late payments or other charges are
settled, even when this may amount to a few ringgit or sen.
Yet when the developer is admittedly in breach and is liable to pay compensation
which may run into thousands of ringgit, the developer would in making such a proposal, be expecting a discount constituting
almost half is not more of what is legitimately payable to the house buyer.
The unfairness of the situation notwithstanding, developers very often get their way.
This is because the developers is, in most instances invariably a corporation whose resources, both financial and otherwise, are
far superior to those of the individual house buyer.
Thus the house buyer needs greater protection in terms of bargaining power and
negotiating strength. To this end, the law by way of the provisions in the prescribed agreement provides clearly for the house
buyer to be entitled to compensation. The aggrieved house buyer should therefore stand by and assert his rights. |
