A “FORCE majeure” law to protect housing developers from suits for being unable to meet contractual deadlines need not be unfair to buyers, said commercial lawyers.

They urged the government to enact such a law as the Covid-19 pandemic has made it impossible to meet construction targets, and for developers and buyers to begin discussions on safeguarding the interests of both parties.

Developers are pressing Putrajaya for a law to protect them by inserting a “force majeure” exemption clause under Schedule H or G of the Housing Development (Control and Licensing) Act 1966.

This would absolve 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 the parties in the contract.

“The proposed Covid-19 (Temporary Measures) Bill is a necessity as it will provide some level of protection, clarification and guidance to all industry players, businesses and even consumers against any form of penalisation that may be imposed in a normal situation,” said lawyer Tay Hock Ang.

When the movement-control order (MCO) was implemented on March 18, most industries were forced to halt operations.

Developers have said they are unable to meet deadlines because construction activities are suspended.

“Therefore, if the proposed bill is not passed, it may open the floodgates to suits and claims against developers for being unable to complete construction on time,” said Tay.

“This is of course unfair as it is not entirely their fault if they are unable to meet timelines or deadlines due to the MCO.

“As to whether consumer rights would be affected in such a situation, my view is that they won’t because it is unfair to punish developers for something that is not their fault.”

Tay proposed that developers be asked to exempt late-payment interest charged for progressive billing and extend the statutory defect liability period provided to buyers during the MCO.

In the meantime, buyers and developers should come to the discussion table to avoid costly litigation.

“There is nothing cut and dried for developers to persuade buyers to allow a time extension,” said lawyer Alfred Lai.

He said a federal gazette on a waiver or suspension with regard to the completion of a housing project is a realistic way to assist developers.

“Apart from legal positions in contract and law, I strongly recommend that developers and buyers adopt a collaborative approach in this time of crisis.

“I do not see any difficulty in buyers consenting to an extension, which is heartening for a time like this.

“Effective communication between parties is the key to success in any negotiation. In this trying time, both developers and buyers are the most crucial stakeholders in the housing development ecosystem. A failure in this ecosystem would be both disastrous and unpalatable.”

Lai Yee Fan, also a commercial lawyer, believes that the enactment of a law to protect contracting parties during the MCO period is likely to serve both sides fairly.

Currently, the obligations and liabilities of the contracting parties are reciprocal, he said.

While developers are obligated to deliver the vacant possession of properties to buyers within a stipulated time frame, the buyers, too, have to serve progressive payments in a timely manner.

“Any proposed enactment to protect parties that are unable to meet contractual deadlines due to the pandemic would have an equal bearing on both sides in a sale and purchase transaction,” said Lai.

“On this basis, it is my view that it is a fallacy to suggest that one’s rights would be prejudiced greater than the other, in the event that such a law is indeed enacted.

“However, the enactment of a law takes time. Due to the extraordinary circumstances arising from the MCO, before the proposed law is put in place, it is suggested and encouraged that all parties, including the purchaser, vendor, solicitor and real estate agent, attempt, in the spirit of reasonableness, to negotiate and agree on an extended deadline.”

The Real Estate and Housing Developers’ Association Malaysia about two weeks ago proposed a waiver in the hope that Putrajaya would follow Singapore, which has gazetted short-term measures to protect companies from legal claims. – May 1, 2020.