When Does Time Start Running in a Property SPA?

For developers and purchasers alike, the timeline for delivering vacant possession is often one of the most important provisions in a Sale and Purchase Agreement (“SPA”). A delay can have significant financial consequences, particularly where the developer becomes liable to pay liquidated damages (“LAD”).

However, determining whether a delivery of vacant possession is “late” is not always straightforward. Before asking whether the developer has met the deadline, we must first determine when the contractual timeline actually starts to run.

This was the key issue before the Federal Court in Icon City Development Sdn. Bhd. (formerly known as Sierra Peninsular Development Sdn. Bhd.) v Lee Kean Hwa & Ors [2025] 6 MLJ 901.

Background Facts

The dispute arose from the late delivery of vacant possession of SOVO (small office/versatile office) units under a commercial SPA. The purchasers claimed LAD, while the developer disputed when the 42-month delivery period should start.

The High Court held that the 42-month delivery period runs from the date the required approvals were actually obtained, and entered summary judgment in favour of the purchasers. The Court of Appeal affirmed that decision, and the developer appealed to the Federal Court. As the material facts were undisputed, the appeal turned solely on the interpretation of the SPA.

The Federal Court’s Decision

• When does the 42-month delivery period start?

Held: The 42-month period begins from the date the required approvals are actually obtained, provided they are obtained within the contractual Approval Period. It does not begin only upon the expiry of the Approval Period.

• If the building plans are amended later, does the delivery timeline restart?

Held: No. The relevant date is the first approval of the building plans that enables construction to commence. Subsequent amendments do not restart or extend the contractual delivery period.

• Can this type of dispute be decided without a full trial?

Held: Yes. Where the material facts are undisputed and the dispute concerns only the interpretation of the SPA, the Court may determine the matter by way of summary judgment under Order 14 of the Rules of Court 2012, without the need for a full trial.

Why Did the Federal Court Decide This Way?

The Federal Court adopted a business common sense approach to contractual interpretation. Rather than reading the contractual definition of “building plans” literally and in isolation, the Court considered the commercial purpose of the SPA as a whole.

The Court rejected the developer’s argument. The developer relied on the SPA’s definition of “building plans”, which includes amendments, alterations and modifications, to say that the delivery period should start only once the last amended building plans were approved.

The Court observed that this approach would create a “moving” or “roving” deadline that restarts whenever amended plans are approved. This would undermine commercial certainty, defeat the contractual intention that time is of the essence, and potentially allow developers to prolong their obligations indefinitely.

Instead, the Court held that once the approvals necessary to commence construction had been obtained, the contractual clock began to run. This interpretation better reflected the commercial purpose of the parties’ agreement.

Why This Decision Matters

Although the dispute arose from a bespoke commercial SPA for SOVO units, its significance extends beyond property law. The judgment reaffirms that courts will interpret commercial contracts in a commercially sensible manner and that disputes involving pure questions of contractual interpretation may be resolved efficiently through summary judgment.

Key Takeaways

1. Developers cannot rely on later amendments to building plans to postpone contractual delivery deadlines unless the SPA expressly provides otherwise.
2. Courts will favour commercially sensible interpretations over technical arguments that undermine contractual certainty.
3. Where the material facts are undisputed, disputes involving contractual interpretation may be suitable for summary judgment under Order 14.
4. Commercial parties should ensure that contractual timelines are drafted clearly to minimize future disputes.

Conclusion

The Icon City decision demonstrates the Federal Court’s commitment to upholding commercial certainty. By adopting a business common sense approach, the Court confirmed that contractual timelines cannot be manipulated through technical interpretations or subsequent amendments to building plans. The judgment also reinforces that where only contractual interpretation is in issue, summary judgment remains an effective and efficient procedural mechanism.