Page 56 - Interactive report Ar Site Practice

CALCULATING THE RATE OF LADS

The cost of Liquidated Ascertained Damages can vary by contract, although there is a
standard calculation for a SPA which can help guide your understanding.

In general terms, LAD takes into account a whole range of potential financial losses which a
client

Might occur if the project is not delivered on time, such as:

❑Loss of rent
❑Loss of income
❑Storage costs
❑Additional rental costs
❑Fees or fines from third parties
❑Financing costs for loans etc

These are all foreseeable costs based on financial calculations which are made, given the

promised completion date.

For example, a developer has rented out a
commercial space to a third party from the 1st of
January, but the project overruns by six months,
then they have lost out on six months of agreed
rent. Those are the type of calculations which LAD
is designed to cover.

The standard clause stipulates that the developer

shall owe compensation equivalent to 10% per
annum of the property purchase price. Here’s a
simple example:

SPA date = 01/07/2016
Completion date = 30/06/2019
Actual delivery of vacant possession = 31/08/2019
Days of delay (from 30/06/2019 to 31/08/2019) = 63 days
LAD amount:
Purchase price (RM100,000) x interest (10%) x 63 days = RM1,726.03
Divided by 365