On 3 November 2020, Parliament passed the COVID-19 (Temporary Measures) Act 2020 (Amendment No. 3) Bill, which among other things, inserts a new Part 8C to the COVID-19 (Temporary Measures) Act 2020 (the Act), relating to the developers’ deadline to deliver possession of units to purchasers and the liability for failure to comply with the said deadline.

In sum, this new Part 8C allows both housing developers and commercial developers to extend the original deadline to deliver possession of the units to purchasers under the sale and purchase agreements (Original Delivery Date) to a later date (Extended Delivery Date), subject to the fulfilment of certain conditions.

Affected Agreements

This new Part 8C only applies if [1]:-

1. The sale and purchase agreements entered into between a developer and purchaser before 25 March 2020, or pursuant to Option granted before 25 Mar 2020;
2. The Original Delivery Date is a date that is on or after 1 February 2020;
3. The permit to carry out structural works was granted by the Commissioner of Building Control before 7 April 2020;
4. The temporary occupation permit in respect of the development (TOP) has not been granted as at 7 April 2020; and
5. Provided that no proceedings, judgment, settlement etc has been commenced or made before 2 November 2020 in relation to a failure to deliver possession in accordance with the Original Delivery Date,

(referred to as the Affected Agreements).

Extension Period for Delivery of Possession for Affected Agreements

(A) Extensions within the 122-days period [2]

A developer is allowed to extend the Original Delivery Date by a period not exceeding 122 days in total, by notifying purchasers of the extension period in the prescribed form and manner and within the prescribed time.

This extension is somewhat “automatic” in nature as it will take effect upon notification.

(B) Extensions beyond the 122-days period [3]

If necessary, the developer may also extend the Original Delivery Date by more than 122 days, provided that it similarly notifies the purchasers of the same and, in addition, obtains an additional certification from the assessor (Assessor’s Certification) [4]. The Assessor’s Certification may be made in relation to all or any number of specified units in the development, and will be binding on both the developer and the purchasers of each of the applicable units.

The developer is required to furnish the relevant prescribed fees and the requisite declaration, information and/or documents to the Assessor, before the Assessor can determine the following for the purposes of the Assessor’s Certification [5]:-

1. Whether developer is unable to deliver possession by the delivery date in question;
2. Whether the said inability is materially caused by a COVID-19 event; and
3. The period at the end of which developer can reasonably be expected to deliver possession.
4. After the Assessor’s Certification is obtained, the developer is to notify the purchasers of the Assessor’s Certification in the prescribed form and manner and within the prescribed time.

Pending the issuance of the Assessor’s Certification, a moratorium period is imposed where purchasers are precluded from taking certain actions against the developer in relation to developer’s failure to deliver possession by Original Delivery Date or Extended Delivery Date (as the case may be) [6]. Such actions include making deductions from the instalments or payments due under the Affected Agreements for any damages, liquidated damages and any other costs allowed under the Affected Agreements. This moratorium period starts on the day on which the purchasers are notified of the developer’s intention to extend the delivery date beyond the 122-days period, and ends on the day the purchasers are notified of the Assessor’s Certification or such prescribed date, whichever is earlier.

Qualifying Costs

For extensions of the Original Delivery Date both within and beyond the 122-days period, the Extended Delivery Date is then treated as the new delivery date provided in the Affected Agreements. Correspondingly, the developer’s liability for failure to comply with the Original Delivery Date is extinguished (e.g. liability to pay liquidated damages under the prescribed form of sale and purchase agreements under the Housing Developer Rules (HDR)), unless prescribed otherwise [7].

However, developers are now liable to reimburse purchasers the qualifying costs as prescribed under the Act (Qualifying Costs) [8]. This includes costs incurred by affected purchasers who have to seek alternative accommodation arising from the extension to the Original Delivery Deadline such as (a) rent, or (b) estate agent fees, moving costs and such other costs as may be prescribed [9], and such costs will be subject to a capped prescribed amount [10]. Purchasers are required to submit their claims to the developer in the prescribed form and manner and within the prescribed time, and accompanied with such prescribed information or document.

As the aforesaid payment is on a reimbursement basis, the purchasers ought to have actually incurred the expense and ought to provide evidence of such expenditure.

If the developer does not dispute the claim for Qualifying Costs, it must pay the purchaser in cash or cash equivalent, and within the prescribed time. In an event of dispute as to the Qualifying Costs to be reimbursed to the purchaser, either the developer or purchaser may make an application for assessor’s determination, where the Assessor is to determine (Assessor’s Determination) [11]:-

1. Whether such costs claimed are Qualifying Costs;
2. The amount which the purchaser is entitled to claim; and
3. Where it is just and fair to do so, the reimbursement sum to be an aggregate of the rent for alternative premises and a prescribed percentage of the said rent, subject to a capped prescribed amount.

No appeal is allowed from the Assessor’s Determination, and it will be final and binding upon all parties.

Purchasers are also allowed to set-off the Qualifying Costs in whole or in part against any installment payable by purchaser to developer after the moratorium period and if the amount has been agreed upon or if an Assessor’s Determination is made (whichever applicable) [12]. However, as the moratorium period only applies to situations where there is an extension beyond the 122-days period, it is unclear if purchasers will be allowed to apply the same set-off where the extension is within the 122-days period [13].

Conclusion

In conclusion, we wish to highlight that:-

1. Housing developers, in considering what the Extended Delivery Date ought to be, must do the following:-
   1. Firstly determine what the expected TOP issuance date is likely to be; and
   2. Then add on a minimum of 36 days [14] plus such further buffer period of time they anticipate they need in order to get the units ready for delivery to the purchasers,

   to arrive at the Extended Delivery Date.

2. As the process to obtain the Assessor’s Certification may take some time, if a developer needs an extension beyond 122 days, they may consider serving, at the first instance, the notification under Section 39I(1) on purchasers to automatically extend the Original Delivery Deadline by a period of 122 days, and concurrently or thereafter notify the purchasers under Section 39I(4) and apply for the Assessor’s Certification to further extend the Original Delivery Deadline beyond the 122-days period. This is to secure the first 122 days extension first, rather than leave it to the determination of the Assessor.
3. There are important details, such as the prescribed timing, manner and format for service of notifications and the prescribed capped sum for Qualifying Costs, which have not been set out in this Bill and which are to be prescribed by the Minister. The relevant regulations [15] need to be passed first, in order for developers to make a complete analysis of their costs and exposure and to properly plan their next steps. We await the further regulations to be prescribed by the Minister for fuller details.

We understand that developers have long-awaited the passing of legislation to extend the deadline to deliver possession of units to purchasers. We had hoped for an automatic extension of a minimum of six months, consistent with the initial extensions granted by the authorities to developers for the Project Completion Period, the deadline to complete construction of all housing units in a residential development project under the Qualifying Certificate regime, and the deadline to commence and complete the residential development in relation to the remission of the Additional Buyer’s Stamp Duty for housing developers. Although the first 122 days automatic extension mirrors the extension granted to contractors to complete their projects, developers still need some time (approximately two months) from taking delivery of the site from contractors to prepare for delivery of possession of units to the purchasers.

Notes:

1. Section 39H(1)(a) to (d) and (2) of the Act.
2. Section 39I(1) and (2) of the Act.
3. Section 39I(3), (4), (5) and (6) of the Act.
4. Section 39I(6) and 39L(1)(a) of the Act.
5. Section 39O(1)(a) of the Act.
6. Section 39J of the Act.
7. Section 39I(7) of the Act.
8. Section 39K of the Act.
9. Section 39G of the Act on definition of “qualifying costs”.
10. Section 39K(4)(a) and 39O(1)(b) of the Act.
11. Section 39O(1)(b) of the Act.
12. Section 39K(5) of the Act.
13. Though it is noted that the prescribed form of the sale and purchase agreements under the HDR and Sale of Commercial Properties Rules (SCPR) allows purchasers to deduct liquidated damages payable therein from the Purchase Price, and a similar right should be accorded to the purchasers for situations where an extension within the 122-days period applies (see respectively clause 12.9 of Form 5 of HDR, clause 13.9 of Form 4 of HDR and clause 13.6 of Form D of SCPR). Purchasers should not make any deductions from the purchase price without the developer’s agreement to the Qualifying Costs, or an Assessor’s Determination, whichever is applicable.
14. See clause 12.5 of Form 5 of HDR and clause 13.5 of Form 4 of HDR.
15. Section 39P of the Act. 

This article is correct as at 6 November 2020. Part 8C of the COVID-19 (Temporary Measures) Act 2020 has as at 24 May 2021 not yet come into operation. Amendments to this article to take into account the COVID 19 (Temporary Measures) (Amendment No. 2) Bill 2021 can be accessed here.