Buying homes: The importance of house keys
02/11/2006 The Star

ACCORDING to the Ministry of Housing and Local Government, the legal term "handing over vacant posession" in the standard sale and purchase agreement means handing over the house keys to the purchaser.

The handing over of vacant possession is significant because it is then that:

• The final payment becomes due, and if the payment is delayed, the purchaser is penalised with a 10 per cent per annum interest;

• The warranty period of 18 months commences;

• If vacant possession is delayed beyond the completion date the developer has to pay LAD at 10 per cent per annum until the date vacant possession is handed over;

• The time period for the developer to withdraw excess monies in the housing development account starts running and;

• The time period for the stakeholder to release the stakeholder money to the developer starts running.

In one case in Penang, Archlaw Development Sdn Bhd demanded the final payment and triggered the time-periods to his advantage but refused to hand over the house keys.

The developer claimed that the standard S&P does not have any provision for the handing over of the keys and that the phrase "handing over vacant possession" meant informing the purchaser that water and electricity lines were ready for connection.

The purchaser took the matter to the House Buyer Claims Tribunal only to find the tribunal supporting the developer’s contention.

The tribunal asserted that the word "keys" was not mentioned in the S&P. It held that "delivery of vacant possession" and handing over of keys were two separate matters.

The purchaser filed for a judicial review. The High Court held that vacant possession was not handed over until the developer was willing to hand over the keys.

The High Court reaffirmed what is common sense, that you cannot have possession of a house until you have the keys which give you access to it.

Handing over of the house key is such a fundamental matter and yet the Housing Development Act 1966 does not provide a standard format for developers.

Neither the Act nor the standard S&P provides a definition of the term "handing over vacant possession". It took a determined house buyer to challenge the tribunal’s decision to confirm his conviction that vacant possession of a house cannot be handed over without handing over the house keys.

We wonder how many other cases have been decided by the tribunal in the same manner as this one, that is, that there is no need to hand over the keys to satisfy the contractual requirement of "handing over vacant possession".

SM MOHAMED IDRIS, President Consumers Association of Penang