On 19 January 2021, the Federal Court delivered a landmark judgment in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor that has significant implications for housing developers and property purchasers across Malaysia. The decision settled a long-standing question regarding the calculation of liquidated ascertained damages (LAD) for late delivery of vacant possession: should the computation begin from the date the booking fee was paid, or from the date the Sale and Purchase Agreement (SPA) was formally signed?
Update: in July 2024 the Federal Court decided a related question on extensions of time granted before Ang Ming Lee. See Obata-Ambak v Prema Bonanza: Can Buyers Still Claim LAD After Ang Ming Lee?
The Federal Court unequivocally held that LAD for late delivery of vacant possession begins from the date the booking fee was paid, not from the date the SPA was executed. This ruling reinforces the protective purpose of housing legislation in Malaysia and carries profound consequences for developers who have long relied on the SPA date as the starting point for their delivery obligations.
Background of the Case
The case arose from a claim before the Housing Tribunal (Tribunal Tuntutan Pembeli Rumah) where a purchaser sought LAD from a housing developer for late delivery of vacant possession. The developer, PJD Regency Sdn Bhd, argued that the LAD period should be calculated from the date the SPA was signed rather than the earlier date on which the purchaser had paid a booking fee. The difference between these two dates is often a matter of weeks or months, but the financial impact on LAD calculations can be substantial.
The Housing Tribunal ruled in favour of the purchaser, calculating LAD from the booking fee date. The developer challenged this decision through the courts, and the matter ultimately reached the Federal Court for a definitive determination on the correct legal position.
The Federal Court's Reasoning
The Federal Court's decision rested on several interconnected principles drawn from the Housing Development (Control and Licensing) Act 1966 (HDA 1966) and the Housing Development (Control and Licensing) Regulations 1989. The Court emphasised that the HDA 1966 is social legislation enacted specifically to protect purchasers of housing accommodation from unscrupulous developers. As social legislation, it must be interpreted liberally in favour of the class of persons it was designed to protect, namely house purchasers.
A central element of the Court's analysis concerned Regulation 11(2) of the Housing Development (Control and Licensing) Regulations 1989, which provides an absolute prohibition against the collection of booking fees or any payment by whatever name from prospective purchasers before the execution of the SPA. The rationale behind this prohibition is clear: once a booking fee is collected, a binding contractual relationship has been established between the developer and the purchaser, and the developer should not be allowed to delay the formal execution of the SPA in order to shorten the LAD calculation period.
A Valid Contract From the Date of Booking Fee
The Federal Court found that a valid and binding contract comes into being at the point when the purchaser pays the booking fee to the developer. The SPA, which is required to be in the prescribed statutory form under Schedule G or Schedule H of the Regulations, merely formalises this pre-existing contractual relationship. Since the developer is prohibited by law from collecting any booking fee at all, it follows that if the developer nonetheless collects such a fee, the developer cannot benefit from its own breach of the Regulations by using the later SPA date as the commencement point for LAD calculations.
The Court further noted that the SPA requires payment of 10% of the purchase price upon signing. Since the booking fee is typically applied towards this 10% deposit, there should logically be only one operative date for the commencement of the developer's delivery obligations, the date when the purchaser first parted with money, which is the booking fee date.
Consistency With Earlier Decisions
PJD Regency should be read together with two other Federal Court decisions. In Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor [2020] 1 MLJ 281, the Federal Court held that Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 was ultra vires, so the Controller of Housing had no power to grant developers extensions of time. Ang Ming Lee therefore decides whether an extension of time is valid, while PJD Regency decides the date from which LAD is calculated. Later, in Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd [2024] 5 MLJ 897, the Federal Court held that the six-year limitation period under section 6(1)(a) of the Limitation Act 1953 applied to the claim, that time ran from the date the sale and purchase agreements were signed (or breached), and that Ang Ming Lee applies prospectively only.
Limitation warning: On the facts of Obata-Ambak, purchasers who sued in June 2020 on agreements dated July 2012 were out of time. Purchasers should therefore not assume that time only starts to run once delivery is late. Whether the same approach applies where the booking fee date precedes the SPA date has not, to our knowledge, been settled, so a purchaser with a possible LAD claim should take legal advice promptly.
By aligning the PJD Regency decision with these earlier authorities, the Federal Court has created a robust and consistent body of jurisprudence that gives effect to the intention of Parliament rather than the intention of the contracting parties. Parliament's intention, as expressed through the HDA 1966 and its Regulations, is to protect purchasers and ensure that developers fulfil their delivery obligations within the prescribed timeframe.
Practical Implications for Housing Developers
The implications of this decision for housing developers are far-reaching. Developers who have collected booking fees, a practice that remains widespread in the Malaysian property market despite its statutory prohibition, now face exposure to LAD claims calculated from the date of booking fee payment rather than the SPA date. In developments with significant delays, this additional period can result in materially higher LAD liability.
Perhaps more importantly, the Federal Court's decision sends a clear signal that housing developers should cease the practice of collecting booking fees altogether until such time as the law is amended to permit it. The collection of booking fees places developers in breach of Regulation 11(2) and, as this case demonstrates, exposes them to the adverse consequence of LAD being computed from an earlier date than they may have anticipated.
Effect on the Intention of Parliament
The Court's emphasis on giving effect to the intention of Parliament rather than the intention of the parties is a recurring theme in Malaysian housing law. The statutory SPA prescribed under the Regulations is not merely a suggested template but a mandatory contractual form that reflects the policy choices made by Parliament. Developers cannot contract out of these protections, and any arrangement that has the effect of diluting the purchaser's entitlement to LAD will not be countenanced by the courts.
What This Means for Property Purchasers
For property purchasers, the PJD Regency decision is a welcome development. It affirms that the period during which a purchaser is waiting for vacant possession, and during which the purchaser's funds are committed, begins from the very first payment made to the developer. Purchasers who have been denied full LAD on the basis that their booking fee date preceded the SPA date may now have grounds to revisit their claims, subject to the six-year limitation period discussed below.
Purchasers should ensure they retain clear records of booking fee payments, including receipts, bank statements and any correspondence with the developer acknowledging receipt of the booking fee. These documents will be critical in establishing the correct commencement date for LAD calculations in any claim before the Housing Tribunal or the courts.
Key Takeaways
- The Federal Court in PJD Regency held that LAD for late delivery of vacant possession begins from the date the booking fee was paid, not the date the SPA was signed.
- Regulation 11(2) of the Housing Development Regulations 1989 imposes an absolute prohibition on collecting booking fees before SPA execution, developers who breach this cannot benefit from the later SPA date.
- A valid contract arises when the purchaser pays the booking fee. The SPA merely formalises this pre-existing contractual relationship.
- The HDA 1966 is social legislation to be interpreted liberally in favour of house purchasers, giving effect to the intention of Parliament over the intention of the parties.
- Housing developers should cease collecting booking fees until the law is amended, as the practice exposes them to extended LAD liability.
- Purchasers should retain all records of booking fee payments to support LAD claims calculated from the earliest possible date.
If your developer has delivered late, or you are about to sign a sale and purchase agreement, speak to our property lawyers or read how conveyancing works from offer to vacant possession.
