In the dynamic field of property buying in Malaysia, understanding the concept of Liquidated Ascertained Damages (LAD) is paramount. This term may seem daunting at first, but getting familiar with what it entails is vital for potential property buyers. This comprehensive guide will shed light on the concept of LAD, its importance in property transactions in Malaysia, and what actions a buyer can take in case of related issues.
What is Liquidated Ascertained Damages (LAD)?
Liquidated Ascertained Damages (LAD) is a pre-determined compensation amount stipulated in a contract. In the Malaysian property context, it is the compensation that a developer agrees to pay the buyer if they fail to complete the project or hand over the property within the agreed time. The LAD clause is essential in the Sales and Purchase Agreement (SPA) signed between the developer and the buyer.
Importance of LAD
LAD serves as a financial safety net for property buyers in Malaysia. It exerts pressure on developers to adhere to their project timelines and discourages project delays. If the developer fails to deliver the property on time, the buyers are entitled to claim LAD, providing them with a form of compensation for the inconvenience and potential financial loss.
How is LAD Calculated?
In Malaysia, LAD is typically calculated based on a percentage of the purchase price per day of delay. This percentage can vary, but it generally stands at 10% per annum.
For instance, let’s say a buyer purchased a property worth RM 500,000, and the developer delayed the handover by 30 days. The LAD would then be calculated as:
LAD in the Context of COVID-19
The COVID-19 pandemic has had a significant impact on the property market, with many developers unable to complete projects on time due to lockdowns and other restrictions. This situation has led to a surge in LAD cases. However, some developers have invoked the “force majeure” clause in their contracts, arguing that the pandemic is an unforeseen event that prevents them from fulfilling their obligations. Whether this defense is valid or not is subject to the interpretation of the courts.
What Should Buyers Do if They Encounter LAD Issues?
If a buyer faces LAD issues, such as the developer refusing to pay the agreed LAD or disagreements over the calculation, they have several options:
- Consult the Sales and Purchase Agreement (SPA): The SPA should detail the terms and conditions related to LAD.
- Seek Legal Advice: If the issue remains unresolved after consulting the SPA, it is advisable to seek legal advice. Lawyers with experience in property law can guide you and assist in taking the matter to court if necessary.
- Lodge a Complaint: Buyers can lodge a complaint with the relevant authorities, such as the Housing and Local Government Ministry in Malaysia.
FAQs
Q: Can LAD be waived by developers?
A: Generally, developers cannot waive the LAD unless it is stipulated in the SPA. Any waiver should be treated with caution, and it is advisable to seek legal advice.
Q: What happens if the developer refuses to pay LAD?
A: If a developer refuses to pay LAD, buyers can take legal action to enforce the terms of the contract.
Q: Can LAD be claimed if the property is handed over but not completed to the agreed standard?
A: This depends on the terms of the SPA. Some agreements may allow for LAD claims in this situation, while others may not.
Q: How long does it take to receive LAD?
A: The time it takes to receive LAD can vary greatly depending on the circumstances. If the developer agrees to pay without dispute, it can be relatively quick. However, if the matter has to go to court, it can take several years.
In conclusion, understanding Liquidated Ascertained Damages (LAD) is crucial for all property buyers in Malaysia. It can help protect your rights and provide recourse in the event of a delay in property handover. Always remember to consult your SPA and seek legal advice if you encounter any issues related to LAD.
