Liquidated Ascertained Damages ('LAD')

Liquidated Ascertained Damages (LAD) are pre-determined compensation amounts stipulated in a contract, payable by the developer to the purchaser if the developer fails to deliver vacant possession of a property within the agreed timeline. LAD clauses are common in Sale and Purchase Agreements (SPAs) governed by the Housing Development (Control and Licensing) Act 1966 (HDA) in Malaysia.

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(Click here for more info from Messrs Lui Bhullar)

 

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Legal Framework

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Under the HDA, developers must adhere to statutory timelines for completing and delivering housing projects. For Schedule G (landed properties) and Schedule H (stratified properties), the timelines are typically 24 months and 36 months respectively, from the date of the SPA. If the developer fails to deliver within these periods, LAD compensates the purchaser for the delay.

(Click here to download the Housing Development (Control and Licensing) Act 1966)

 

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How to Calculate LAD

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The calculation of LAD is straightforward and is usually defined within the SPA itself. The standard formula is:

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LAD of the unit =(Purchase Price​) / 365 days X  10% X Number of Days of Delay​

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LAD of the common area =(Purchase Price​) / 365 days X  2% X Number of Days of Delay

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Step-by-Step Calculation:

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• Determine the Purchase Price: The total amount agreed upon for the purchase of the property as stated in the SPA.

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• Identify the Delay Period: Calculate the number of days between the agreed delivery date and the actual delivery date of vacant possession.

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• Apply the Formula: Divide the purchase price by 365 days (to get the daily LAD rate) multiply 10% (LAD for the parcel) and 2% (LADS for the common area) and multiply by the number of days delayed.

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For easy calculation, click this link to access a proprietary LAD calculator developed by Messrs Lui & Bhullar.  ( https://www.luibhullar.com/ladcalculator )

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Example Calculation:

• Purchase Price: RM 500,000

• Statutory Delivery Date: 1 January 2022

• Actual Delivery Date: 1 July 2022

• Days of Delay: 182 days (1 January to 1 July)

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LAD of the unit

(500,000)Purchase Price​ / 365 days X  10% X (182)Number of Days of Delay = RM 24,931.50​

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LAD of the common area 

(500,000)Purchase Price​) / 365 days X  2% X (182)Number of Days of Delay = RM 4,986.30

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In this example, the developer would owe RM 29,917.80 in LAD to the purchaser.

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Some Case Studies:

(Click here to find out how 96 homebuyers were successful in claiming LAD)

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(Click here to find out how 30 homebuyers were successful in claiming LAD)

 

(Click here to find out what the law is on Schedule H)

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Important Considerations:

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• Contractual Obligations: Ensure the SPA explicitly states the LAD clause and calculation method to avoid disputes.

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• Non-Waivable Rights: According to Malaysian case law, such as the Ang Ming Lee case, purchasers' rights to claim LAD cannot be waived by agreements that contradict statutory requirements.

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• Legal Recourse: If the developer fails to pay LAD, purchasers can pursue legal action. A writ action is typically the proper mode to claim LAD.