Expanded Covid-19 temporary measures offer relief for buyers of new homes
By Cecilia Chow
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - The Ministry of Law updated the Covid-19 (Temporary Measures) Act on May 13 to include those who have purchased residential properties directly from housing developers or from HDB, and who now find themselves unable to fulfil their obligations due to disruption caused by Covid-19.
“The expanded provisions provide an avenue for a deserving buyer caught in a difficult situation to seek up to six months’ extension to make payments for a new home purchase from a developer,” says Karamjit Singh, CEO of Showsuite Consultancy. “In so doing, the developer cannot terminate the contract.”
The Updated Relief will apply to those who have signed an option to purchase (OTP) a residential property, or have entered into a sale & purchase agreement (SPA) with a housing developer for the purchase of a new residential or commercial unit in a housing project.
Under the Updated Relief measures, home buyers will be protected from having their booking fee or deposit forfeited by the developer. They will also be able to extend or defer the payment of deposit or instalments (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Relief from forfeiture of deposit, termination of contract
These home buyers will be protected from having their booking fee or deposit forfeited by the developer. They will also be able to extend or defer the payment of deposit or instalments. These contracts must have been entered into before March 25, 2020, with contractual performance due on or after Feb 1, 2020.
For instance, a buyer who was issued an OTP for a residential unit prior to March 25, 2020, but failed to exercise it within the prescribed option period, would have been notified by the developer that the booking fee (or part thereof) is forfeited. Under the Updated Relief, the buyer “can now seek a refund of the amount forfeited by the developer”, says Norman Ho, senior partner of corporate real estate at Rajah & Tann Singapore. “It will also prevent the developer from terminating the SPA during the temporary relief period for six months from April 20 to Oct 19, 2020.”
Before they are entitled to the relief, the home buyers must first file the Notification for Relief (NFR) in accordance with the Act.
Showsuite’s Karamjit cautions: “This is not a free pass for a buyer to terminate a purchase contract with a developer.”
The Updated Relief applies to OTP and SPA for residential projects and mixed-use developments with a substantial residential component, and includes projects that are under construction as well as completed ones.
For HDB buyers, the relief applies to OTP and SPA between HDB and a purchaser, says Dentons’ Lee. Under HDB, such an agreement is known as “Agreement for Lease” (Photo: Samuel Isaac Chua/EdgeProp Singapore)
“There are cases where developers are selling new units in developments which have already obtained CSC [Certificate of Statutory Completion] and separate strata titles,” explains Lee Liat Yeang, senior partner of Dentons Rodyk & Davidson. “Such developers are no longer required by COH [Controller of Housing] to be licensed and will then use their own private treaty option contracts to sell.”
For HDB buyers, the relief applies to OTP and SPA between HDB and a purchaser, says Dentons’ Lee. Under HDB, such an agreement is known as “Agreement for Lease”.
The relief, however, does not extend to a sale and purchase contract of a resale property, points out Showsuite’s Karamjit.
Dentons’ Lee reckons this is because the bulk of the contracts are for OTP and SPA between home buyers and developers. He further clarifies that the relief does not extend to lease agreements between landlords and tenants of residential properties.
The provisions under the Updated Relief extend to property developers who may need protection from being sued for failing to fulfil contractual obligations arising from Covid-19 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Temporary relief for developers
The provisions under the Updated Relief extend to property developers who may need protection from being sued for failing to fulfil contractual obligations arising from Covid-19. To do so, however, the developers have to file an NFR in accordance with the requirements of the Act as well, points out Dentons’ Lee.
The relief for developers will only be for six months — from April 20 to Oct 19, 2020. It will benefit developers “who are unable to deliver vacant possession of the units or complete the SPA within the agreed timeline, and are unable to meet the contractual deadlines that fall within the relief period because of Covid-19”, explains Rajah & Tann’s Ho.
Developers will not be protected from being sued by purchasers for non-fulfilment of their contractual obligations outside the relief period, emphasises Ho, even if their inability to do so is caused by Covid-19.
“Even during the relief period, the provisions of the Act do not absolve a housing developer from having to pay liquidated damages for failure to deliver vacant possession of the units by the contractual deadlines,” adds Ho.
The Real Estate Developers’ Association of Singapore (Redas) said in a statement that “developers will work out amiable arrangements with their purchasers, depending on the merit of each case”.
Given today’s tough market conditions amid Covid-19, most developers should be willing to give home buyers “more time” to exercise options and to make their instalment payments, notes Dentons’ Lee.
Read also:
Follow Us
Follow our channels to receive property news updates 24/7 round the clock.
EdgeProp Telegram
EdgeProp FacebookSubscribe to our newsletter
Search Articles