Verdict on collection of booking fees and CCC made

By Chang Kim Loong and Wong Renn Xin

In a landmark decision on Jan 19, 2021, the Federal Court has delivered its grounds of judgement in respect of the case of PJD Regency Sdn Bhd vs Tribunal Tuntutan Pembeli Rumah & Ors. It has finally clarified the legal position as to when time starts to run, in respect of vacant possession (VP) of the property.

Though this issue had earlier been decided by two Supreme Court cases in Hoo See Sen & Anor vs Public Bank Bhd and Faber Union Sdn Bhd vs Chew Nyat Shong & Anor, the legal position had remained unresolved for 32 years before it was revisited again recently. National House Buyers Association (HBA) volunteer lawyers, led by Datuk KL Wong and Wong Renn Xin, working on a pro bono basis, had taken up this case for Wong Kien Choon and Ng Chee Kuan against their developer, PJD Regency Sdn Bhd.

HBA held a watching brief by lawyers Viola De Cruz and Koh Kean Kang. The purchasers had paid a booking fee of RM10,000 to the developer earlier but the sale and purchase agreement (SPA) was only executed two months thereafter by the developer. The SPA stated VP to be within 42 months from the date of the agreement. Upon late VP, the purchasers made a claim in the Tribunal for Homebuyers Claim based on the date the booking fee was paid. The Tribunal awarded the sum claimed by the purchasers.

The developer then filed a judicial review application with the High Court, followed by the Court of Appeal, but both were dismissed. The developer then filed an appeal to the Federal Court on the following questions of law. Question 1 For the purpose of ascertaining the date of VP or completion of common facilities under a statutory agreement prescribed in the Housing Development (Control & Licensing) Regulations, 1989 (Regulations) made pursuant to the Housing Development (Control & Licensing) Act, 1966 (Act), whether the date when time starts to run is the date of the agreement notwithstanding the decision of the Supreme Court in the two earlier cases.

Chang (centre) with the volunteer lawyers (from left) Koh, De Cruz, Wong and Renn Xin.

Question 2 For the purpose of ascertaining the date of completion of common facilities under a statutory agreement prescribed in Schedule H and J of the Regulations, whether the relevant date is when the prescribed architect certifies they are completed. The Federal Court highlighted the Third Schedule (Schedule of Payment of Purchase Price) of the SPA, which clearly states that the SPA should be dated on when the first payment of 10% is made by the purchaser.

Thus, speaking in ideal terms, if the law is strictly complied with, there is no question as to whether the date of calculation of the Liquidated Ascertained Damages (LAD) runs from the date of payment of the booking fee or from the formal date of the agreement. However, in order to circumvent this rule, the developer had split the payment of 10% into two parts (2% and 8%).

The reason was to ensure the SPA was not dated when the developer collected the 2% but only when the balance 8% was collected. This would reduce the amount of LAD the developer had to pay the purchaser. The developer did so in spite of the fact that Regulations 11(2) expressly prohibits all types of collection of any form of payment from the purchaser before the SPA is signed.

The scope of prohibition is wide enough to include estate agents, lawyers and any third parties purportedly acting as stakeholders for the housing developer in respect of collection of the booking fees. It is clear that developers are not allowed to collect any payment from purchasers before the SPA is signed. Yet, it does not seem to deter many developers. There remains to be a plethora of cases involving the issue of collection of booking fees by developers because of the lack of enforcement.

Criminal offence 

In fact, it is a criminal offence to collect booking fees as stipulated in Regulations 13(1): “Any person who contravenes any of the provisions of these Regulations shall be guilty of an offence and shall be liable on conviction to a fine not exceeding fifty thousand Ringgit or to a term of imprisonment not exceeding five years or to both.”

Chief Justice Tun Tengku Maimun Tuan Mat had this to say: “If it is the developer’s attempt to secure an early bargain through the collection of booking fees, then the protective veil cast by the legislature over the purchasers should operate in a way so as to bind the developers to the booking fees. In this way, the developer would have to bear the full extent of the LAD payable to them to the purchasers consistent with the overall intent of the written law in respect of late VP.”

The objective of the Act and its regulations is to protect the purchaser who is in a more vulnerable position due to inequality of bargaining powers. If this mischief of collection of booking fees, which is legally prohibited, is not corrected, it would be a retrospective step for the protection of the unsuspecting purchasers and their rights would be severely eroded.

Thus, in answering Question 1, the Federal Court held the following: “Where there is a delay in the VP by a Developer to the Purchaser in respect of scheduled contracts, the date for calculation of LAD begins from the date of payment of deposit or booking fee or initial fee or expression of intention to purchase and not from the date of the SPA literally.”

The second question is whether the developer can be deemed to have delivered common facilities to the purchaser upon the issuance of the Certificate of Practical Completion (CPC) and not the Certificate of Completion and Compliance (CCC). Reverting to the principles of interpretation of social legislation, the Court is required to construe the statutory contract in a manner most favourable to the purchasers. It is clear that the SPA only refers to one type of certification, namely the CCC.

This CCC issued by the architect is required for the VP to the purchasers. Tengku Maimun held the following: “It cannot be the intention of the legislature to refer to one standard in respect of VP and another standard in respect of the completion of common facilities.

Furthermore, CCC is a legal requirement imposed by law which will be issued upon the developer complying with all regulatory laws such as the Street, Drainage and Building Act, 1974. This affords protection to purchasers who can rest assured that the relevant authorities have approved the construction. The same cannot be said in respect of the CPC or any other such documents not amounting to a CCC.”

Hence, it is clear from the decision that common parcels and facilities ought to be completed and handed over to the buyers simultaneously and not separately. Completion of common facilities must be in tandem with the completion of the property itself, as the purposes of the common facilities are for the use and comfort of the purchasers. 

This article is jointly written by Wong Renn Xin, one of the legal advisors of the HBA and Datuk Chang Kim Loong, honorary secretary-general of HBA, a voluntary non-government and not-for-profit organisation manned wholly by volunteers.

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