Court of Appeal Clarifies the Limits of Developers’ Liability for Defective Delivery of Vacant Possession
Does the absence of strata titles at the time of handing over vacant possession automatically expose a property developer to liquidated ascertained damages (LAD), even where the purchasers have received their keys and occupied their properties within the contractual timeframe?
This was the central question considered by the Mayland Universal Sdn Bhd v Kong Aik Weng & Ors [2026] 6 MLRA 751; [2026] CLJU 3341.
In a decision of particular significance to property developers, the Court of Appeal overturned the High Court’s ruling which had allowed purchasers to claim LAD until the issuance of separate strata titles, notwithstanding that vacant possession had been physically delivered within the stipulated period.
The decision reinforces an important distinction under the statutory Sale and Purchase Agreement (SPA) prescribed by Schedule H of the Housing Development (Control and Licensing) Regulations 1989: a delay in delivering vacant possession is not necessarily equivalent to a defect in the manner of its delivery.
While developers remain responsible for complying with their statutory and contractual obligations, the Court of Appeal clarified that not every instance of non-compliance automatically triggers liability for LAD.
Background of the Case
The dispute arose from the development of Residensi Dorsett Sri Hartamas, a serviced apartment project undertaken by Mayland Universal Sdn Bhd (“Developer”).
The purchasers (“Purchasers”) had entered into SPAs with the Developer, governed by Schedule H of the Housing Development (Control and Licensing) Regulations 1989.
Under Clause 25(1) of the SPAs, the Developer was required to deliver vacant possession within thirty-six (36) months from the respective dates of the agreements. Clause 25(2) further provided for LAD at the rate of 10% per annum of the purchase price in the event of late delivery. The Developer delivered vacant possession between March and June 2019, within the stipulated 36-month period. The Purchasers received their keys and took physical possession of their respective units.
However, the separate strata titles had not been issued at the time of delivery. The Purchasers contended that the delivery of vacant possession was defective because Clause 27(1)(b) of the SPAs required the issuance of separate strata titles as one of the conditions for delivery.
They argued that physical possession alone did not constitute valid delivery of vacant possession and consequently sought LAD until the issuance of strata titles.
The High Court ruled in favour of the Purchasers, finding that vacant possession had been delivered incompletely and defectively without the strata titles or the Controller’s written certification.
Dissatisfied with the decision, the Developer appealed to the Court of Appeal.
The Central Legal Issue
The principal issue before the Court of Appeal was:
Whether the failure to deliver separate strata titles together with vacant possession constitutes late delivery under Clause 25 of Schedule H, thereby entitling purchasers to LAD, despite physical possession having been delivered within the contractual period.
In determining this issue, the Court considered the relationship between three provisions of the statutory SPA:
- Clause 25: Prescribes the timeframe for delivery of vacant possession and the LAD payable for late delivery.
- Clause 27: Prescribes the manner and conditions for delivering vacant possession, including the issuance of separate strata titles.
- Clause 28: Provides a mechanism for delivery of vacant possession without strata titles, subject to obtaining the Controller’s written certification where the non-issuance is attributable to reasons beyond the developer’s control.
The distinction between these provisions was crucial in determining whether the Purchasers were entitled to LAD.
Court of Appeal’s Decision and Analysis
A. Late Delivery and Defective Delivery Are Legally Distinct
The Court of Appeal unanimously allowed the Developer’s appeal and set aside the High Court’s decision. In reaching its conclusion, the Court relied on the Federal Court’s decision in Remeggious Krishnan v SKS Southern Sdn Bhd (formerly known as MB Builders Sdn Bhd) [2023] 3 MLJ 1.
The Court reaffirmed that the timeframe for delivery of vacant possession is distinct from the manner in which vacant possession is delivered.
Clause 25(2) specifically provides LAD for failure to deliver vacant possession within the stipulated period. A breach concerning the manner of delivery under Clause 27 does not, by itself, trigger LAD under Clause 25(2).
In the present case, it was undisputed that the Developer had delivered physical possession within 36 months. The Purchasers’ complaint concerned the absence of strata titles rather than a delay in receiving possession of their units.
Accordingly, the Court held that the High Court had erred by treating non-compliance with the manner of delivery as a breach of the stipulated timeframe.
B. Clause 28 Provides an Important Statutory Safeguard for Developers
A significant aspect of the judgment concerns the operation of Clause 28(1) of Schedule H.
Under this provision, where separate strata titles have not been issued for reasons not attributable to the developer, the developer may apply to the Controller for written certification permitting delivery of vacant possession notwithstanding the absence of those titles.
In this case, the Developer had applied for the requisite certification, and the Controller granted conditional approval on 25 January 2019, before the Purchasers took possession of their units.
Although the Developer had failed to accompany the delivery of vacant possession with a copy of the Controller’s written certification, the Court considered this a technical breach which did not justify the imposition of LAD under Clause 25(2).
The Court further held that the subsequent expiry of the conditional approval did not negate the fact that the Developer had obtained the requisite certification at the material time.
The significance for developers is clear: Clause 28(1) provides a statutory mechanism to facilitate timely delivery of vacant possession where strata titles remain unavailable, provided the applicable requirements are satisfied.
However, developers should not interpret the decision as dispensing with the obligation to obtain the necessary certification or comply with the statutory requirements governing delivery.
C. Not Every Contractual Breach Automatically Entitles Purchasers to LAD
The Court of Appeal further distinguished between claims for LAD and claims for compensatory damages.
The Court explained that a breach relating to the manner of delivery may give rise to a claim for compensatory damages under section 74 of the Contracts Act 1950, where the purchaser can establish loss arising from the breach.
This is distinct from LAD payable for late delivery under Clause 25(2), considered by the Court in the context of section 75 of the Contracts Act 1950.
The Court observed that the Purchasers had enjoyed possession and use of their respective units since 2019 and had not adduced evidence of actual loss arising from the alleged defects in the manner of delivery.
Consequently, the Purchasers were not entitled to LAD merely because the separate strata titles had not been issued at the time vacant possession was delivered.
The decision illustrates that the appropriate remedy depends on the nature of the contractual breach, rather than the mere existence of non-compliance.
D. Homebuyer Protection Must Be Balanced Against Fairness to Developers
Another noteworthy aspect of the judgment is the Court’s consideration of unjust enrichment.
The Court referred to the Federal Court’s decision in Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd [2024] 5 MLJ 897, which addressed the circumstances in which an award of liquidated damages could result in unjust enrichment.
In the present case, the Purchasers had received vacant possession within the stipulated period and had enjoyed occupation of their properties. The Court found that awarding LAD under Clause 25(2) on the particular facts would unjustly enrich the Purchasers.
Importantly, the Court acknowledged that Schedule H forms part of social legislation intended to protect homebuyers.
Nevertheless, it emphasised that the statutory SPA must be interpreted in a manner that balances purchasers’ interests with fairness to developers.
The protective purpose of housing development legislation does not justify extending LAD liability beyond the contractual breach for which it was intended.
Key Takeaways for Property Developers
The decision provides several important practical lessons for developers:
1. Timely delivery of vacant possession remains essential.
Developers should continue to comply strictly with the contractual delivery period. Where vacant possession is delivered within the stipulated timeframe, an alleged defect in the manner of delivery does not automatically trigger LAD under Clause 25(2).
2. Obtain the Controller’s written certification where required.
Where separate strata titles cannot be issued for reasons beyond the developer’s control, developers should consider the statutory mechanism under Clause 28(1) and ensure the requisite certification is obtained before delivery.
3. Maintain proper documentation of compliance.
Developers should retain clear records of the Controller’s approval, notices of vacant possession, certificates of completion and compliance, and other supporting documentation. The written certification should also accompany delivery as required by Clause 28(1).
4. Distinguish between LAD claims and compensatory damages.
Not every contractual breach attracts the same remedy. Developers assessing purchasers’ claims should identify the precise contractual obligation allegedly breached and whether the claim concerns late delivery or defective performance.
5. Statutory protection is not absolute immunity.
Although the Court rejected the LAD claim in this case, developers may still face claims for proven losses arising from breaches of their contractual obligations. Further, Clause 28(4) separately provides for liquidated damages where the developer fails to deliver the original issue document of strata title within the prescribed period following registration in the purchaser’s name.
Conclusion
The Court of Appeal’s decision in Mayland Universal Sdn Bhd v Kong Aik Weng & 6 Ors provides valuable clarification on the limits of developers’ liability for LAD under Schedule H.
By distinguishing between the timeframe and manner of delivering vacant possession, the Court reaffirmed that LAD under Clause 25(2) is intended to address late delivery, rather than every form of contractual non-compliance.
The judgment also highlights the importance of Clause 28(1) as a statutory mechanism available to developers facing delays in the issuance of strata titles.
Ultimately, the decision serves as a reminder that while developers must comply with their statutory and contractual obligations, liability for LAD must be determined according to the nature of the breach and the remedy prescribed by law.
For property developers, the lesson is not that technical non-compliance carries no consequences, but that timely delivery, proper statutory approvals and comprehensive documentation remain essential safeguards against unwarranted claims.
For further information, please contact Dato’ George Miranda at george@mirandasamuel.com.
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– By George Miranda, Joy Sam Jia Qian, Shahidatul Anisha –
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.
