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  • Writer's pictureThomas W. L. Chin

Legal Implications of the Federal Court Decision on Regulation 11(3) in Housing Development

Updated: Mar 19

The recent Federal Court decision in Ang Ming Lee has cast a spotlight on the contractual and statutory rights of house buyers concerning the delivery of vacant possession. This case has garnered significant attention since Hanipah Farikullah J's declaration in June 2017 that Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 ("the Regulations") was ultra vires the Housing Development (Control and Licensing) Act 1966 ("the Act"). This declaration marked a turning point in the legal landscape. (Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Ors [2017] MLJU 1366).

Understanding Regulation 11(3):

Regulation 11(3) allows the Controller to waive or modify contract of sale provisions if special circumstances, hardship or necessity render compliance impractical or unnecessary. Housing developers can apply to the Controller under this regulation to seek an extension of time for delivering vacant possession by modifying the standard terms of the sale and purchase agreement (SPA). This modification can occur both before and after the SPA is executed. The standard SPAs are outlined in Schedules G and H of the Regulations, depending on whether it involves buildings or land intended for subdivision. For instance, Clause 24(1) of Schedule G stipulates a 24-month timeframe for delivering vacant possession, while Clause 25(1) of Schedule H extends this to 36 months.

Diverging Views in the Judiciary:

The judiciary has not been unanimous in its interpretation of Regulation 11(3) concerning its alignment with the Act. While Hanipah Farikullah J's initial declaration marked Regulation 11(3) as ultra vires the Act, the Court of Appeal took a different stance, asserting that it was a provision designed to regulate and control the terms of the SPA, as envisioned by Section 24(2)(e) of the Act (Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor v Ang Ming Lee & Ors and Other Appeals [2018] 4 MLJ 545).

This divergence in views prompted discussions about the potential ramifications of deeming Regulation 11(3) ultra vires the Act. Concerns were raised that it could disrupt the housing development industry and impact numerous SPAs. However, it's worth noting that this policy argument was not a stated ground for the Court of Appeal's decision.

The Federal Court's Perspective:

The Federal Court, on November 26, 2019, finally resolved this legal quandary, overturning the Court of Appeal's decision and reaffirming Hanipah Farikullah J's judgment regarding the ultra vires nature of Regulation 11(3). The Federal Court emphasized the need for a strict construction of Section 24(2)(e) of the Act, highlighting that the Minister's power to regulate and prohibit terms and conditions of sale contracts should not be delegated to the Controller. In essence, the Minister should exercise this power personally to fulfill the Act's objective of safeguarding house buyers' interests (Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and Other Appeals [2020] 1 CLJ 162).

Implications for Modified SPAs:

So, what does this Federal Court decision mean for SPAs of other housing developments modified pursuant to Regulation 11(3)? Any such modification that extended the delivery period beyond what is allowed by the Act is now considered null and void. This opens the door for purchasers to seek legal recourse, including claiming liquidated ascertained damages (LAD) for late delivery of vacant possession, which can be significant if the extension was substantial, potentially spanning several months or more.

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