High Court Rules Against Developers Delivering Vacant Possession Without Occupancy Rights
In a landmark decision, the High Court has ruled that delivering vacant possession of a property without granting purchasers the right to occupy it violates public policy and undermines the purpose of vacant possession. The ruling, delivered by Judge Datuk Ahmad Shahrir Salleh, has far-reaching implications for the property development sector.
Unequal Bargaining Power Between Developers and Purchasers
Judge Ahmad Shahrir noted the power imbalance between developers and purchasers, emphasizing that developers cannot rely on clauses in the Sales and Purchase Agreement (SPA) to avoid paying liquidated ascertained damages (LAD) for late delivery of properties. He stated, “Delivering vacant possession without the right to occupy contravenes public policy and is unlawful under Section 24(e) of the Contracts Act 1950.”
Section 24(e) stipulates that agreements are unlawful if they are opposed to public policy, rendering them void. The judge clarified that while courts are generally cautious about interfering in contracts, they retain the authority to determine whether contractual terms align with public policy and the law.
Case Details: Purchasers Denied Occupancy
The case involved two appellants who purchased a commercial property from Alpine Return Sdn Bhd in 2014. The developer handed over vacant possession of the unit on July 22, 2018, but the purchasers were denied access to occupy the property.
The appellants argued that this violated the SPA, which required the developer to deliver vacant possession within 48 months of development plan approval. After the Sessions Court dismissed their claim in March, the purchasers appealed, leading to the High Court’s ruling in their favor.
Significant Ruling and Compensation
In overturning the Sessions Court’s decision, the High Court declared the developer’s actions as a failure to deliver vacant possession. Judge Ahmad Shahrir awarded the appellants RM309,225.61 in liquidated ascertained damages (LAD), along with interest.
Implications for Developers
This decision sets a critical precedent, highlighting that:
- Vacant possession must include occupancy rights: Developers can no longer argue that handing over vacant possession excludes granting access to the property.
- Public policy overrides contractual clauses: Clauses in SPAs that contravene public policy will be deemed void.
- Developers’ accountability: This ruling ensures developers are held accountable for delays and breaches of agreements.
Legal Representation
The appellants were represented by Sachpreetraj Singh Sohanpal, Rajesh Nagarajan, and Ambbi Balakrishnan of Messrs Raj & Sach. The developer, Alpine Return, was represented by Cecilia Tan and Fann Izyan Mohd Fadzil of Soh Hayati & Co.
Conclusion
This judgment strengthens the rights of property purchasers, ensuring they are protected against practices that undermine the essence of vacant possession. It also sets a higher standard of accountability for developers, emphasizing fairness and compliance with public policy.
