Property Developer commits Fraud?

I was asked by a friend who had bought a commercial premise in Kl to peruse an invoice issued by Magna Park pertaining to the delivery of Vacant Possession (VP).

Magna Park has directed the purchaser to take delivery of VP(letter dated 26th September 2005) and had invoiced $12,775.00 for quit rent, insurances and maintenance cost.




The invoice states that the purchaser is required to pay within 14 days for:

Quit Rent for year 2004 and 2005 $1,588.80
Insurance Premium for invoice Year 2004 and 2005 $1,186.60
Maintenance Charges invoiced $5,400.00
Renovation Deposit $4,500.00
Consent Fee $100.00

Reading the the invoice, I was perplex and flabbergasted.

Isn't this daylight robbery?

First, the letter dated 26th September 2005 informed the purchaser to take delivery of vacant possession. Therefore, vacant possession could only take place after this date.

The Sales and Purchase Agreement (S&P) states that Upon completion of the said Property, and ONLY upon completion, the purchaser will then be required to insure and keep insured the respective property against loss or damages (section 4.03(a). 4.03(b) of the S&P states that "From the date the Purchaser takes vacant possession of the said Property or the date deemed to have taken vacant possession, the purchaser will then have to pay insurance premium."

Similarly, section 5.06 of the S&P states that the Purchaser shall from the date he takes vacant possession contribute from time to time, a fair and justifiable proportion of the cost and expenses of their maintenance, upkeep and repair.



Both the two conditions clearly specify that such payment for maintenance and insurance shall only be paid after the delivery of Vacant Possession. What is puzzling is that the invoiced payment was for the period 2004 and 2005. Assuming that Vacant Possession did take place in September 2005, how can the developer invoice quit rent, maintenance and insurance premium for 2004 and 2005? Is this fraud?

Coming back to Vacant Possession, the developer had only sent this letter informing the purchaser that Vacant Possession can now take place.

However, Clause 23 of the Housing Development Act 1966 (HDA 1966) specify the Time for delivery of vacant possession. It states that Vacant Possession shall be delivered to the Purchaser in the manner prescribed in Clause 24 HDA 1966.

Clause 24(1) stipulates the manner of delivery of Vacant Possession. First, the Architect must certify that the construction of the property must be duly completed and water and electricity supply are ready for connection; and secondly, the Vendor has applied for the issuance of the Certificate of Fitness for Occupation from the Authority in compliance with all the relevant provisions of the Uniform By-Law 1984. Then if all these are complied, the purchaser would then be required to pay all other monies due under the S&P; thereupon, the Vendor shall let the purchaser take possession of the said property.

Clause 24(2) states that the delivery of vacant possession by the Vendor SHALL (must) be supported by (a) a certificate by the Architect certifying that the building is duly constructed and completed in accordance with the terms and conditions stipulated in the S&P and also in compliance with the relevant Acts, By-Laws, and Regulations imposed by the Authority; and that (b) a letter of confirmation from the Authority certifying that FORM E as prescribed under the Uniform Building By-Law 1984 has been duly submited by the Vendor, checked and accepted by the Authority.

At such, it is condition precedent that the vendor must have fully complied with Clause 24, that is, the purchaser must have received a Certificate of Completion issued by the Architect; and the Vendor had submitted FORM E to the Authority and it was duly accepted by the Authority; and that water and electricity supply are made ready for connection to the said Building; then the Vendor can seek to deliver vacant Possession to the Purchaser and the Purchaser would then be required to pay all the other monies due.

The vendor will have to deliver all the documentary proof to the purchaser that they had duly complied with Clause 24; otherwise, the property will not be construed to be ready for vacant possession. If the contract period had passed and the Vendor fails to deliver vacant possession, the Vendor shall be liable to pay to the Purchaser Liquidated Damages (LAD) at the rate of 10% per annum calculated from the date stipulated in the contract (S&P) to the date when the Purchaser takes Vacant Possession. Such LAD shall be paid immediately upon the date the Purchaser takes Vacant Possession (Clause 23(2)).

As can be seen, Magna Park did not provide the documentary proof to the purchaser in accordance with Clause 24 HDA 1966. At such, no vacant possession could had taken place as per the letter from the developer. The purchaser is advised not to pay the monies requested. Any attempt to apply undue influence or to exert duress upon the purchaser will be construed as a breach of contract and an act of repudiation of contract. Section 74 of the contracts Act 1950 would then apply.

Whatever it is, the claim of $12,775.40 is wrongful and not in accordance with the terms and conditions of contract. The Vendor can only invoice the quit rent, insurance premium and maintenance charges beginning from the date of vacant possession. As the invoice had stated the charges for the period of 2004, that is, before the date of vacant possession, it is an attempt to mislead or misrepresent to the purchaser to induce him to pay for services beyond the terms of the contract. This can be implied that the developer may have misrepresented their claim and of which would cause innocent/ignorant purchaser to suffer losses beyond the terms of the agreement.It is unprofessional and unwise for the developer to act at such and would destroy their integrity.