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Case Review: Banking
Summary of some of the decisions made by the Mediators on some of the complaints received by FMB.
This summary is for information only and should not be used for other purpose. [Previous]………[Next]
LATE PAYMENT CHARGES BY DEVELOPER (Case reference no : 1-0147)
Mr. K obtained a housing loan from Bank H to finance the purchase of a double storey link house in the Klang Valley. Mr. K accepted the Letter of Offer on 13/03/02 and had executed all facility documents. The bank had issued a letter of undertaking to disburse the progress payments to the Developer. The loan documentations were perfected and Bank H received advise from their solicitor on 03/05/02 that it was in order for the bank to release the loan sum to the developer progressively.
The individual title to the property was issued on 04/04/03 and upon receipt of the Title, Bank H's solicitors proceeded to effect the stamping and registration of the legal charge in favour of the bank. The Developer issued the first billing on 10/07/03 requiring the bank to effect the drawdown. The bank did not release the progress payment. Despite repeated requests made by the borrower both orally and in writing to the bank, the bank refused payment on the ground that the charge was yet to be perfected i.e. stamped and registered.
The charge was stamped and presented for registration in March 2004 and the bank made payment to the Developer on 15/03/04. The developer invoiced the borrower a sum of RM3,800/- being interest charges for late payment.
An inquiry was held to mediate the dispute.
The Bureau had scrutinized the documents and found that there is nothing stated in the Letter of Offer or the Loan Agreement which entitles the Bank to with hold progress payment until the legal charge is registered. Clause 5 of the Letter of Offer merely states that in the event that the individual or strata title is issued to be replaced by legal charge. The Bank already had the relevant security documents and was liable to make payment upon receipt of progress payment invoice including the Letter of Undertaking from the Developer. Therefore, the Bank ought to have made the progress payments on due dates whilst pursuing the perfection of the legal charge.
The bank was liable for the late payment charges less the interest payable by the borrower.
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