DEVELOPERS are pressing Putrajaya to enact a law to protect them for being unable to meet contractual deadlines as the Covid-19 pandemic has made it impossible to meet construction targets. 

The Real Estate and Housing Developers Association Malaysia (Rehda) proposed the waiver about two weeks ago, in the hope that Putrajaya would follow Singapore, which gazetted short-term measures to protect companies from legal claims.

Property Real Estate Lawyers’ Association president Pretam Singh Darshan Singh said there is no “force majeure” exemption clause under Schedule H or Schedule G under the Housing Development (Control and Licensing) Act (HDA) of 1966.

Force majeure (literally meaning superior force) is a legal term that is sometimes incorporated into contracts that absolves parties from fulfilling the terms of an agreement in the event of  war, terrorism, earthquakes, hurricanes, acts of government, explosions, fire, plagues or epidemics and other events beyond the control of parties in the contract.

Rehda proposed that an all-encompassing law be enacted that protects all industries for failing to meet contractual obligations because of the Covid-19 pandemic.

Without such exemption, Pretam said it will be difficult to resolve disputes between developers and homebuyers, as projects are seeing an unprecedented delay.

As of today, Malaysia has spent more than 40 days under the movement-control order, which has ground most construction work to halt. And there are still about two more weeks to go before the order expires on May 12.

Even then, no one expects the economy or the construction sector to swing back into action, as the authorities have warned about embracing a new normal of social distancing and enhanced vigilance against new infections. 

Rehda president Soam Heng Choon said things will not go back to normal so soon for the construction industry, as the number of workers allowed at a project site will be limited even after the MCO is lifted.

“When work resumes, the number of construction employees will be reduced by at least 50%. So, progress will be affected.”

Construction work was suspended during the MCO, causing developers to fail to deliver on time.

“We hope that the government can enact a Covid-19 (Temporary Measures) Act 2019,” he said, referring to the proposed force majeure bill from Rehda.

Master Builders Association Malaysia (MBAM) president Foo Chek Lee said all construction works stopped during Phase 1 and Phase 2 of the MCO, except for some critical works allowed by the government.

“Other than that, all projects were put on hold. For those projects that should have been completed in March, April and May, the contractors concerned should apply for time extensions from their clients.

“Therefore, we really hope that more projects will be allowed to operate soon by stages to avoid unnecessary contractual implications,” Foo said.

Last week, the government said the construction sector could resume work under strict procedures, including first applying for approval, screening workers and limited hours and manpower.

However, Soam said of the 19,077 applications for resumption of work submitted to the International Trade and Industry Ministry, only 1,856 have been approved as of April 21.

“According to the official response, the reasons for rejection included incomplete information. I urge members to ensure that application documents are complete and must be signed by the company’s directors,” he said.

Soam also said Rehda would issue a set of frequently asked questions (FAQ) for developers by next week.

“This is a guide for developers to deal with the problems faced at construction sites and projects. 

“We are also in close contact with the Ministry of International Trade and Industry, which we will meet next week.”

The Works Ministry and Construction Industry Development Board Malaysia (CIDB), meanwhile, have circulated guidelines on Covid-19 prevention at construction sites.

MBAM’s Foo also said the association produced its own guidelines to advise members on avoiding infections and making contingency plans if workers get infected.

National House Buyers’ Association Chinese division head Tan Chong Leng said he hopes that homebuyers will understand the quandary developers are in and accept that Covid-19 is a special situation. 

“After the government allows resumption of work, if the relevant builder fails to meet the requirements to resume work and delays delivery, this is the fault of the builder.  

“However, I believe that if the suspension of work due and delayed delivery of the house is due to the impact of the pandemic, then it is understandable.

Tan said Bank Negara has ordered financial institutions to give a six-month moratorium on car and house loans.

The force majeure exemption is all the more needed in view of a Federal Court ruling last year that the housing controller has no power to grant an extension of time (EOT) to developers to complete their development projects.

Chief Justice Tengku Maimun Tuan Mat, who led a five-member panel, held that Regulation 11 (3) of the Housing Development (Control and Licensing) Regulations 1989, which confers power on the controller to waive and modify the terms and conditions of the contract of sale between purchasers and the developer was ultra vires the Housing Development (Control and Licensing) Act.

The benchmarking ruling led to fears that homebuyers will use this as a case to file suits. – April 28, 2020.