Introduction
This article examines the modifications made by the Temporary Measures for Reducing the Impact of Coronavirus Disease (COVID-19) Act 2020 (“COVID-19 Act”) to the Housing Development (Control & Licensing) Act 1966 (“HDA 1966”).
Scope of Application
Upon enforcement on 23 October 2020, the COVID-19 Act applies retrospectively from 18 March 2020 to certain sale and purchase agreements (SPAs) governed under Schedule G, H, I, and J (“Statutory SPAs”) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR 1989”).
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Other types of SPAs, such as those for commercial properties under construction, are not covered.
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Construction contracts, however, may still invoke Part II of the COVID-19 Act (“Inability to Perform Contractual Obligation”) to relieve contractors from obligations under their contracts.
Relief under the COVID-19 Act is limited to homebuyers whose failure to pay is directly caused by measures under the Prevention and Control of Infectious Diseases Act 1988 (PCID Act), such as the Movement Control Order (MCO), Conditional MCO, and Recovery MCO. General claims of hardship due to the pandemic are insufficient.
Delivery of Vacant Possession and Liquidated Damages
The COVID-19 Act provides two main forms of relief:
- Exclusion of the Prescribed Period – The period from 18 March 2020 to 31 August 2020 (“Prescribed Period”) is excluded from the computation of time for the delivery of vacant possession.
- Liquidated Damages – Any liquidated damages for delayed delivery of vacant possession exclude the Prescribed Period.
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Housing developers may apply to the Minister to extend the Prescribed Period up to 31 December 2020.
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Conventionally, developers are penalised for late delivery, but under the COVID-19 Act, time effectively stops running during the Prescribed Period, providing a temporary reprieve.
Defect Liability Period (DLP)
The COVID-19 Act also suspends the running of the DLP during the Prescribed Period:
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Homebuyers’ rights to claim defects are extended by about 166 days.
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Developers may apply for an extension up to 31 December 2020.
Practical concern:
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For construction contracts with DLP periods mirroring the Statutory SPAs, contractors may no longer be obligated after the contractually defined DLP ends, while developers remain liable to homebuyers due to the extended DLP.
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This may result in additional costs for developers, as they may not be able to claim reimbursement from contractors.
Saving Provisions
The COVID-19 Act ensures that:
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Legal proceedings, judgments, or awards prior to the Act’s enforcement remain valid.
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Late payment charges paid by homebuyers and liquidated damages paid by developers prior to 23 October 2020 are not refundable.
Limitation Period for Claims Before the Tribunal for Homebuyer Claims
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If the limitation period under Section 16N(2) of HDA 1966 expired between 18 March 2020 and 9 June 2020, homebuyers are entitled to file claims from 4 May 2020 to 31 December 2020.
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The Tribunal for Homebuyer Claims retains jurisdiction to hear these claims.
Conclusion
Overall, both developers and homebuyers continue to benefit from the COVID-19 Act:
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Developers gain relief from contractual time constraints and liability during the Prescribed Period.
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Homebuyers gain protection from claims arising during MCOs.
It is foreseeable that some parties may invoke the “saving” provisions to protect their interests if they perceive the Act as unfavourable.
The government may consider further amendments or additional measures to extend protections, particularly for developers of commercial properties, in line with the Act’s overarching goal to safeguard businesses from economic devastation caused by the pandemic.
This article is authored by:
Tan Min Lee
Partner, Gan Partnership
E: minlee@ganlaw.my
Benjamin Kho Jia Yuan
Pupil-in-Chambers, Gan Partnership
E: jiayuan@ganlaw.my
DISCLAIMER: This article is for general information only and should not be relied upon as legal advice. The position stated is as at 12 November 2020.
