Developers may seek extension to delivery date of possession

Singapore

WITH construction timelines under pressure, developers plagued by construction delays will now get some relief in the form of an extension should they be unable to meet the delivery date of possession in their sale and purchase (S&P) agreements.

According to a circular issued on Thursday to developers by the Urban Redevelopment Authority's (URA) Controller of Housing (COH), effective July 1, developers who need to can serve a notice on property buyers for an extension of up to 122 days, in line with the extension granted to construction projects. This is subject to certain qualifying conditions.

Developers can extend the delivery date of the new property without being liable to pay liquidated damages for late delivery up to the extended period.

Those who need an extension of more than 122 days will need to have an assessor determine the period of extension, which would be equivalent to the length of construction delay as a result of the pandemic.

The relief measures (Part 8C) were passed by Parliament in November 2020 under the third set of amendments to the Covid-19 (Temporary Measures) Act. Further amendments were made to the Act on April 5, 2021, to enable the implementation and delivery of relief.

Meanwhile, property buyers who rack up certain out-of-pocket costs due to a delay in the delivery of their unit, such as having to rent alternative premises, will be able to seek reimbursement from developers. Where damages apply, there will be a cap of up to 70 per cent of the liquidated damages originally payable.

"This approach allows for co-sharing of the delay costs between the developer and purchaser," the COH added.

Generally, for failing to meet the delivery date of possession in the S&P agreement, a developer would be liable to pay liquidated damages of 10 per cent per year on the sum paid by the buyer.

Similarly, those buying flats from the Housing and Development Board will also be able to claim up to 70 per cent of the liquidated damages, the circular showed.

The Real Estate Developers' Association of Singapore (Redas) had flagged the issue in the past, pointing out that developers could get hit by penalties if projects are delayed, adding to the other costs they were already grappling with.

In response to queries, Redas said: "Covid-19 has affected the construction industry severely and resulted in delay of completion for many projects. The government's decision to implement Part 8C of Covid-19 (Temporary Measures) Act to address such an unexpected delay in a reasonable and amicable manner is appreciated and supported."

With challenges such as the labour shortage, escalating costs and project delays expected to persist, Redas added that it will continue to work with the government to monitor the situation and address issues.

The operating environment for developers and contractors, already affected by last year's "circuit breaker", has seen further headwinds after Singapore closed its borders to South Asian nations to curb the spread of the virus, resulting in a labour crunch. The ongoing lockdown in Malaysia hasn't helped either, hampering the flow of construction materials to Singapore.

Given the disrupted timelines, the government this week announced another six-month extension to the project completion period (PCP) for qualifying residential, commercial and industrial development projects.

This is on top of two six-month extensions that were announced in May and October 2020 respectively.

Similarly, the commencement and completion timelines for residential projects in relation to the remission of Additional Buyer's Stamp Duty (ABSD) for developers has also been extended by another six months, for a total of 18 months.

However, there was no further extension to the remission condition timeline for sale, which means that eligible developers have to sell all their units in a five and a half year time span, instead of five years. One six-month extension was announced in May 2020.

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