Liquidated Ascertained Damages (LAD)
Liquidated Ascertained Damages (LAD) is a contractual clause that specifies a fixed amount of money that the developer must pay to the buyer as compensation for any delay in the completion or delivery of the property. The LAD is pre-determined and agreed upon in the Sales & Purchase Agreement (S&P).
Key Points
- Agreement Clause:
In the SPA, the developer agrees to deliver the property by a certain date. If the property is not completed or handed over by that date, the buyer is entitled to claim LAD for the delay. - LAD Formula:
The LAD amount is usually calculated based on a daily rate (e.g., RM10 to RM50 per day) and can vary depending on the terms set in the SPA. It’s typically a percentage of the purchase price or a fixed amount per day of delay. - Claim Process:
If the property is not delivered on time, the buyer can file a claim for LAD. This involves notifying the developer in writing about the delay and requesting compensation as per the SPA terms. If the developer fails to fulfill this obligation, the buyer may seek legal action or a claim via the Tribunal for Homebuyer Claims (if applicable). - Limitations on LAD Claims:
There are usually limits on how long the developer can delay the property completion without incurring LAD claims. For instance, the SPA might specify a grace period of 30 to 90 days, within which the developer can still deliver the property without facing any penalties. - Reasons for Delay:
Some delays may be justifiable (e.g., natural disasters, unforeseen circumstances, or force majeure events), and in such cases, the developer may not be liable for LAD. However, the developer is still obligated to deliver the property as soon as possible. - Benefits of LAD for Buyers:
Financial Compensation: Buyers are compensated for the inconvenience or financial losses caused by the delay in the property handover. - Encourages Timely Delivery:
LAD serves as an incentive for developers to complete and deliver properties on time.
Example
If the SPA specifies that a developer must complete and deliver a property by March 31, but the property is only ready for handover by May 15, the buyer could claim LAD for the delay between April 1 and May 15. If the agreed LAD rate is RM50 per day, the buyer could claim RM50 x 45 days = RM2,250 in compensation.
