UOB reaffirms offer to buyers of two condo projects under receivership

Singapore

UNITED Overseas Bank (UOB) has reaffirmed its offer to bear the additional costs to complete the construction of two unfinished residential projects which have been put under receivership after their developers ran into financial difficulties.

However, the bank, which is the mortgagee in both projects, told The Business Times that this remains conditional on the home buyers waiving their rights to claim liquidated damages - compensation that developers must pay buyers for delays - against their progress payments. Based on the sale and purchase agreement, the developer will have to pay liquidated damages of 10 per cent per annum of what buyers have to pay.

"We appreciate the concerns of the homebuyers of the Sycamore Tree and Laurel Tree projects and the unique circumstances of this situation. Our intention is to assist these homebuyers to take ownership of their completed units by helping to see to the full completion of both projects for their benefit," a UOB spokesman said.

The receivers for both Sycamore Tree and Laurel Tree - three partners of KPMG led by Bob Yap - have commenced a tender process to identify financially sound and quality contractors to determine the cost to take over and complete the construction.

"Given the complexities and after evaluating the various possible courses of action with new contractors assessing and taking over the completion of the delayed projects, we have offered to cover the additional costs expected to be incurred," the spokesman added.

"UOB's offer will save homebuyers from having to make additional fund top-ups beyond their agreed unit purchase price. This is subject to all the homebuyers agreeing not to deduct any claims for liquidated damages against their remaining scheduled payments to be made into the project accounts."

The receivers from KPMG said this is necessary as "the proposal is intended to allow the receivers to oversee the completion of the construction works for both development projects so that the purchasers of Laurel Tree and Sycamore Tree can take possession of their units".

"The proposal is premised on all purchasers agreeing to continue to make outstanding progress payments for the construction and not set off such liquidated damages due from the original developer against progress payments," the receivers said.

More information will be shared during the next townhall meeting, which is likely to be held in July-August, when the receivers will provide updates on the replacement contractors appointed and the expected timeline to completion.

BT understands that the waiver is necessary to protect future progress payments from potential liquidated damages, which could result in insufficent funds to complete the projects.

However, it does not mean buyers are waiving their rights to sue the original developer for liquidated damages arising from the delays in construction. Buyers who wish to pursue this course of action will have to consult their own lawyers.

If accepted, buyers will have to enter into a separate amended sales and purchase agreement. Save the waiver condition, the terms will essentially be the same - delivering vacant possession of the unit, the Certificate of Statutory Completion, separate legal title to the unit, and providing the benefit of a 12-month defect liability.

Some 183 people received a nasty surprise when construction of the 70-unit freehold condominium at Laurel Tree in Hillview Terrace and the 96 residential units and 17 shops at Sycamore Tree in Joo Chiat, stalled after the project accounts were found to have insufficient funds for the next phases of construction.

Project accounts hold payments from buyers that can only be used to pay construction and other costs relating to the project. The two freehold projects were supposed to have received their Temporary Occupancy Permit in 2016.

Astoria Development was the developer behind Sycamore Tree, while Lerida was the developer of Laurel Tree.

Both developers are linked to Tan Hock Keng, a former property player and one of the "Geylang Kings" before the Asian Financial Crisis wiped out his property portfolio.

The Controller of Housing at the Urban Redevelopment Authority is examining the project accounts of the two projects to check whether money earmarked for them has been misused, and if there have been other regulatory breaches.