Accrual of Cause of Action for Liquidated Damages in Housing Development Contracts of Sale

by | May 25, 2021 | Law

Section 24 of the Housing Development (Control and Licensing) Act 1966 [“HDA 1966”] empowers the Minister of Housing and Local Government to make regulations for the purpose of carrying into effect the provisions of the HDA 1966.

Pursuant to Section 24 of the HDA 1966, the Minister introduced the Housing Development (Control and Licensing) Regulations 1989 [“HDR 1989”] which came into force on 1st April 1989.

Clause 22(3) of Schedule G to the HDR 1989 states:

“For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Building.” (underline mine)

Clause 25(3) of Schedule H to the HDR 1989 provides the following:

“For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Parcel.” (underline mine)

Both clauses were first introduced by way of the Housing Developers (Control and Licensing) (Amendment) Regulations 2002 [PU(A) 473/2002].[1] Subsequently, when the Housing Developers (Control and Licensing) (Amendment) Regulations 2007 [PU(A) 395/2007] was introduced, both clauses remained in Schedules G and H of the HDR 1989 respectively.

The Minister’s intention in introducing Clause 22(3) of Schedule G and/or Clause 25(3) of Schedule H to the HDR 1989 may have been noble, namely to prevent limitation from setting in[2] and barring claims for liquidated damages from purchasers.

However, a plain reading of both clauses results in an undesirable scenario whereby purchasers are unable to bring a civil suit against the developer for liquidated damages until and unless they have received vacant possession.

Assuming a developer is x years late and vacant possession has not yet been delivered to the purchasers, a civil suit by a purchaser against the developer would be legally premature and could possibly be struck out e.g. for lack of a reasonable cause of action.

Unscrupulous developers would be better off not completing the housing development rather than completing it late.

This would undoubtedly defeat the intention of Parliament (in relation to the HDA 1966) and the Minister (in relation to the HDR 1989) in enacting such social legislation for the protection of the purchasers.[3]

Some of the options considered to avoid the above undesirable scenario include the parties’ modification, sidestepping the clauses, and the controller’s modification.

(more…)