Understanding LAD in Malaysia: A Guide to Liquidated Ascertained Damages

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Liquidated Ascertained Damages (LAD) is a critical concept in Malaysia, especially in property development and construction. LAD refers to the compensation payable by a developer or contractor if they fail to deliver a project on time. This safeguard ensures that buyers or clients are compensated for potential financial losses due to project delays, providing a measure of security in contracts.


What is LAD in Malaysia?

LAD is a pre-determined amount agreed upon in a contract to cover the losses if one party does not meet their contractual obligations on time. In Malaysia, LAD is primarily found in property development agreements, stipulating a daily compensation rate for delays in handover. This clause is legally enforceable, provided the amount is a reasonable estimation of potential losses.

For instance, if a property developer fails to deliver a unit by the agreed date, the buyer can claim LAD based on the delay, calculated daily, to compensate for inconvenience or financial costs, such as rent or loan interest.


Best Way to Obtain LAD in Malaysia

Securing LAD compensation in Malaysia involves specific steps, largely guided by contract terms and the type of project. Here’s the process:

  1. Review the Contract Terms: Examine the sale and purchase agreement (SPA) or contract to understand the LAD clause, including the compensation rate and conditions for making a claim.
  2. Confirm the Delay: Verify the actual delay by comparing the contractual completion or handover date to the actual delivery date. Relevant documentation, like an official project handover letter, is essential for establishing the delay.
  3. Submit an LAD Claim: Submit a formal LAD claim to the developer, including documentation such as the SPA, proof of delay, and LAD calculations. Written claims, ideally with legal assistance, can help ensure the validity of your request.
  4. Negotiate or Seek Legal Assistance if Necessary: If the developer disputes the claim or fails to respond, consider mediation or arbitration. Buyers may also initiate legal proceedings to enforce the LAD clause.

How a Lawyer Can Assist You in Claiming LAD

A lawyer’s expertise can be invaluable in securing LAD, particularly in complex cases. Here’s how legal assistance can help:

  1. Contract Review and Analysis: A lawyer can help interpret contract clauses and assess if the LAD clause is enforceable, providing clarity on your rights.
  2. Assistance with Documentation: Lawyers ensure that all documentation is prepared and submitted correctly, strengthening your claim. They can also provide guidance on calculating the LAD amount accurately.
  3. Legal Representation and Negotiation: In cases where developers dispute LAD claims, a lawyer can represent you in negotiations, helping mediate a settlement or guiding the case toward arbitration or court.
  4. Bankruptcy Proceedings Support: If the developer is facing financial issues, legal expertise is critical. A lawyer can help you register as a creditor in bankruptcy proceedings and negotiate your standing relative to other creditors.
  5. Expediting the Claim Process: Lawyers help expedite the LAD claim by managing deadlines, tracking required filings, and monitoring any developments from the opposing party, especially if bankruptcy is imminent.

Is It Time-Critical to Claim LAD if the Company is Facing Bankruptcy?

Yes, it is time-sensitive to file an LAD claim if the developer is facing potential bankruptcy. When a company goes bankrupt, assets are liquidated to pay creditors, and LAD claimants may be lower in priority than secured creditors like banks. Here’s what to do:

  1. File Early: Submit the LAD claim at the first sign of delay, especially if there are concerns about the developer’s financial health.
  2. Seek Legal Help: Engaging a lawyer experienced in property law and bankruptcy proceedings can provide strategic advantages in the claim process.
  3. Monitor the Bankruptcy Proceedings: Track the bankruptcy case closely and, if possible, register as a creditor to increase your chances of receiving compensation from any distributions.

FAQs on LAD in Malaysia

1. What is LAD in property contracts?
LAD (Liquidated Ascertained Damages) is a contractual clause outlining a pre-determined amount payable in case of project delays. It’s calculated on a daily basis from the expected delivery date until the property is handed over.

2. How can I claim LAD?
To claim LAD, review your contract to understand the LAD clause, verify the delay with supporting documents, and submit a formal claim to the developer. Legal assistance may be beneficial for accurate claims and, if needed, for negotiations or legal actions.

3. Can I still claim LAD if the developer is bankrupt?
Yes, but timing is critical. Acting quickly, consulting a lawyer, and registering as a creditor during bankruptcy proceedings can help you secure priority in the liquidation process.

4. What is the role of a lawyer in LAD claims?
A lawyer helps with contract interpretation, documentation, negotiation, and representation in legal proceedings. They are especially beneficial if the developer disputes the claim or is bankrupt.

5. Is there a limit to LAD claims?
The amount of LAD is usually capped by the terms in the contract, which specify the daily rate and applicable period. It’s important to check these limits within the contract’s LAD clause.

This overview provides a comprehensive guide on LAD in Malaysia, covering what it entails, the best methods for making claims, and the importance of timely action and legal assistance.