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Manner of delivery of vacant possession

During the time of delivery of vacant possession of the property, is it enough for the Housing Developer to discharge their duty so long the water and electricity sub-stations are energized and commissioned and not necessarily supply to each individual parcel unit? Whether water and electricity must be installed and energized before vacant possession handed over to purchaser?

The Law

According to Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) read together with the Housing Development (Control and Licensing) Regulations 1989 (“HDR 1989”), the housing developer have a duty to ensure that water and electricity supplies must be “ready for connection” to the property at the time of delivery of vacant possessionof the said property.

in Tay Ket v Bumibakti Development Sdn Bhd [1994] 3 CLJ 256, it was held that the developer only required to build and energize the sub-station for the supply of electricity to all the houses as only LLN can install the meters and connect the electricity to the houses. Also, in Salmah Sulaiman & Anor v Metroplex Development Sdn Bhd [1997] 2 CLJ 148, it was decided that the duty of the housing developer is only to ensure the external electricity and water mains of the appropriate public authorities are connect to the internal mains within the house. The housing developer is not obligated to ensure the flow of water and electricity into the house as these are the responsibility of the relevant authorities. However, it should be noted that these cases were decided based on the 1982 Regulations where the words “with connection of water and electricity supply to the said Buliding” are absent.

In Hoya Holding, it was held by the High Court that the phrase “with the connection of water and electricity supply to the said building” in their plain and ordinary meaning can only mean one thing which is there must be water and electricity supplies actually running through the internal waterpipes, electric lines and powerlines in the property before one could decide the question of whether or not vacant possession has been delivered on time.

In the recent case of Remeggious Krishnan, the court held that the phrase “ready for connection” means that the electrical points are fully functional and supply is available for tapping into the electricity to the property. Pursuant to the terms of the SPA, there was an obligation on the developer to provide actual supply of water and electricity to the property.

By a statutory Sales and Purchase Agreements (“SPA”), the purchaser agreed to purchase the property from the developer at the price of RM569,080. Although the delivery of vacant possession took place within 36 months from the date of the SPA which is in compliance with clause 25 of the SPA, the electricity was, however, only delivered 2 months later due to a delay by the developer in making the application for electricity supply to TNB. This raised an issue as to whether such act constitutes to a non-compliance with clause 27 of the SPA which states that vacant possession shall be delivered when, water and electricity supply were ready for connection to the property. 

The relevant question is whether “in view of the definition of “ready for connection” as stated in Clause 1(k) of the Sale and Purchase Agreement and Clause 22 of the Sale and Purchase Agreement as well as admission of liability by the respondent, whether Clause 27 of the Sale and Purchase Agreement is breach.” In other words, whether the fact that the developer has failed to provide a parcel with electricity supply will render the delivery of vacant possession itself invalid as the property is yet to be ready as per Clause 27.

Clause 1(k):“ready for connection” means electrical points and water fittings and fixtures have been installed by the Vendor and tested and commissioned by the Appropriate Authority or its authorised agent and supply is ready for tapping into individual parcel units”.Clause 27 (1):The Developer shall let the Purchaser into possession of the said parcel upon the following: (a) …(b) …(c) water and electricity supply are ready for connection to the said Parcel.

The Federal Court in reading both Clauses 1(k) and 27(1)(c) of the SPA together held that in pursuant to the terms of the SPA, there was an obligation on the developer to provide actual supply of water and electricity to the property. The court held that the phrase “ready for connection” means that the electrical points are fully functional and supply is available for tapping into the electricity to the property. “Any other interpretation would be unfair to the purchasers save for the payment of any deposits for the supply of water and electricity if the SPA provided for it.” Although the said property was delivered within the period of 36 months, the conditions to delivering vacant possession i.e. Clause 27, is not complied by the developer. By not supplying the electricity, the purchaser has suffered losses as he was deprived of the opportunity to utilize and enjoy the Property. Damages were ordered for the delay of 63 days as a result for the breach of Clause 27.

The Federal Court in Remeggious Krishnan again stressed on the point that HDA 1966 was enacted as a piece of social legislation to protect house buyers. Thus, any term or provision in the statute must be interpreted in a way to ensure maximum protection for the purchasers against the developer. When delivering the vacant possession, housing developers owed a duty of care to the purchaser to ensure that there is a proper supply of water, with water running if one turn on the tap and a full supply of electricity such as light. “It is not sufficient for the developer to just lay the pipes and cables for electricity and water to connect the building to the substation or water mains. The developer must ensure, at the time of delivery of vacant possession of the said building, that there is supply of water and electricity ready for tapping into the building” (Justice James Foong in Syarikat Kemajuan Perumahan Negara Sdn Bhd v Lee Cheng & Anor (2005).

By Property Department

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.

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