Federal Court Ruling Redefines Rights Of Developers And Homebuyers

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From Leonard Yeoh, Chen Mei Yan and Goh Jing Xuan
Today, a five-member Federal Court bench led by Court of Appeal president Abang Iskandar Abang Hashim held that a November 2019 ruling in the Ang Ming Lee (AML) case is to be applied prospectively in the interests of justice.
This decision provided relief and finality to developers who had acted in good faith under the previous understanding of the law, and had applied for extensions of time (EOTs) due to genuine need.
It marked an important clarification, ensuring that developers who had obtained EOTs before the AML decision would not be unfairly penalised.
As a result of this 2024 decision by the Federal Court, many homebuyers are expected to withdraw their claims for liquidated ascertained damages against developers.
However, it is pertinent to note that the AML ruling still stands and continues to uphold the intent of the statute to protect homebuyers.
The key takeaway from this latest development is the recognition of the need for a balanced approach that considers the interests of both homebuyers and developers.
While protecting homebuyers remains a priority, the decision underscores the importance of fairness and clarity in legal processes, ensuring that all parties involved in the real estate industry are treated justly.
What led to the ruling
The Housing Development (Control and Licensing) Regulations 1989, which govern the sale and purchase of homes, mandate that developers deliver vacant possession within 24 months for landed properties and 36 months for high-rise properties.
However, developers had the option to apply for an extension of time in cases of special circumstances, hardship, or when strict adherence to the contract of sale was impractical or unnecessary.
In November 2019, a landmark Federal Court ruling changed the landscape of housing development in Malaysia.
The Federal Court, in the case of Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor, ruled that the interests of homebuyers should precede that of developers. The court declared that the power of the controller of housing to grant EOTs was ultra vires, meaning it exceeded legal authority.
At first, this ruling appeared to be a win for homebuyers.
It compelled developers to adhere strictly to agreed timelines and provided homebuyers with the assurance of compensation in case of delays. This was seen as a guard against unscrupulous and profit-oriented developers who might otherwise take advantage of the homebuyers.
However, the decision had significant and unintended consequences.
The AML ruling applied retrospectively, affecting developers who had secured EOTs before the ruling. These developers had followed the law and the prescribed procedures to apply for EOTs and for many, had informed homebuyers about them during the signing of their sale and purchase agreements.
Consequently, these developers faced lawsuits from homebuyers claiming damages even when there was no delay since extensions had been validly granted by the controller.
The confusion arose from the retrospective effect of the AML ruling. If a court does not specify whether a ruling should apply prospectively (only to future cases) or retrospectively, the default position generally is prospective.
In the AML case, the Federal Court in 2019 did not clarify this, leading to a wave of legal challenges and uncertainty for developers. This legal uncertainty led to the case of Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd and two other appeals. - FMT
Leonard Yeoh, Chen Mei Yan and Goh Jing Xuan are with the firm of Tay & Partners.
The views expressed are those of the writers and do not necessarily reflect those of MMKtT.

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