Overview

As the world economy attempts to recover from the slow down caused by the coronavirus disease (COVID-19), Malaysia has taken steps to mitigate the impact of the pandemic caused by COVID-19 on the various sectors of its economy and the community affected by it in the form of the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Bill 2020 (“COVID-19 Bill”). The COVID-19 Bill has been passed by the House of Representatives on 25 August 2020 and (at the time of writing) is pending deliberation and passing in the Senate.

The COVID-19 Bill aims to provide for temporary measures to reduce the impact of COVID-19 by modifying the provisions of several legislations, including modifications to the contracts of sale prescribed in Schedules G, H, I and J of the Housing Development (Control and Licensing) Regulations 1989 which were entered into before 18 March 2020 (“Agreements”).

In anticipation of its publication in the Gazette after receiving the royal assent by the Yang di-Pertuan Agong, the following summary is based on the presumption that the COVID-19 Bill in the form as it is introduced in the House of Representatives will become law and hence be referred to below as “the Act”.

Modifications to the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”)

a) Late payment charges

Where a purchaser of an Agreement fails to pay any instalment of the purchase price for the period from 18 March 2020 to 31 August 2020 due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988 (“PCID Act 1988”) to control or prevent the spread of COVID-19, the developer is not allowed to impose on the purchaser late payment charges on the unpaid instalment(s).¹

The purchaser may apply to the Minister of housing and local government (“Minister”) for an extension and if the Minister is satisfied that additional time is required by the purchaser, the Minister may extend the period in which the developer is not allowed to impose any late payment charges on the purchaser in respect of such unpaid instalment up to 31 December 2020.²

b) Delivery of vacant possession and liquidated damages

The period from 18 March 2020 to 31 August 2020 shall be excluded from the calculation of:-

1. The time for delivery of vacant possession of a housing accommodation by a developer to a purchaser; and
2. The liquidated damages payable by the developer for the failure to deliver vacant possession of a housing accommodation to the purchaser.³

The developer may apply to the Minister for an extension and if the Minister is satisfied that additional time is required by the developer to deliver vacant possession of a housing accommodation to a purchaser, the Minister may grant to the developer an extension of up to 31 December 2020.⁴

If, during the period from 18 March 2020 to 31 August 2020, a purchaser is unable to enter into possession of occupation of a housing accommodation from the date of the developer’s service of a notice to take vacant possession, the purchaser shall not be deemed to have taken vacant possession of the same.⁵ However, it is unclear from the plain wording of the relevant section of the Act as to exactly when the purchaser will be deemed to have taken possession. That may be something for the authorities to clarify or for the courts to interpret at a later date.

c) Defect liability period

The period from 18 March 2020 to 31 August 2020 shall also be excluded from the calculation of:-

1. The defect liability period after the date the purchaser takes vacant possession of a housing accommodation; and
2. The time for the developer to carry out works to repair and make good the defect, shrinkages and other faults in a housing accommodation.⁶

The purchaser may apply to the Minister for an extension and if the Minister is satisfied that additional time is required by the purchaser, the Minister may exclude the period up to 31 December 2020 from the calculation of time period above.⁷

d) Limitation period for filing of claim to the Tribunal for Homebuyer Claims

If the limitation period for a homebuyer to file a claim with the Tribunal for Homebuyer Claims has expired during the period from 18 March 2020 to 9 June 2020, the homebuyer is entitled to file such claim from 4 May 2020 to 31 December 2020.

Commencement

Except where the date of commencement and period of operation of the respective part of the Act have been provided, the Act will come into operation on the date of publication and will remain in operation for two (2) years from then.

Subject to the passing of the Act, the modifications to the HDA 1966 would be deemed to have come into operation on 18 March 2020.⁸

The Prime Minister may extend the operation of the Act by order published in the Gazette and such power to order for extension may be exercised more than once.

Comments

Section 37 of the Act provides that the modifications to the HDA 1966 by the Act shall not affect any legal proceedings commenced or judgement/award obtained to recover any sum during the period from 18 March 2020 to the date of publication of the Act. As the Act has not yet been passed, parties to the Agreements may be seeking urgent action to preserve their rights under the Agreement before the Act comes into operation. In such a situation, it remains to be seen whether the Act would be as effective as intended in reducing the impact of COVID-19 on the housing development sector.

Zain & Co. acknowledges Associate Lee Chea Shinh for her contributions to this article. For further information or any related inquiries, please contact our Head of Banking & Real Estate, Zainal Azlan Abdul Kadir.

1. Section 34(1) of the Act↩
2. Section 34(2) and (3) of the Act↩
3. Section 35(1) of the Act↩
4. Section 35(2) and (3) of the Act↩
5. Section 35(4) of the Act↩
6. Section 36(1) of the Act↩
7. Section 36(2) and (3) of the Act↩
8. Section 32 of the Act↩