Knowledge Highlights 30 August 2021
On 1 July 2021, Part 8C of the Covid-19 (Temporary Measures) Act 2020 (“Part 8C”) and the Covid-19 (Temporary Measures) (Part 8C Relief) Regulations 2021 came into force. Part 8C provides support to developers who face construction delays due to Covid-19 and are unable to meet the committed delivery date of possession to purchasers (“delivery date”) in eligible sale and purchase agreements for residential, commercial or industrial property (“agreements”). Part 8C also allows purchasers affected by the delay to seek reimbursement from developers.
A summary of the Part 8C framework is set out below.
Extension of date of delivery of possession
Under Part 8C, developers who require relief may serve a notice on purchasers for an extension of the delivery date by up to 122 days, in line with the extension of time for construction projects. Developers requiring an extension of more than 122 days are required to apply for an assessor’s determination for the period of extension, which is equivalent to the length of construction delay materially caused by Covid-19.
For developers, Part 8C relief applies only where:
- the sale and purchase agreement was entered into between the developer and purchaser before 25 March 2020 or the option was granted before 25 March 2020;
- the agreement provides for a delivery date that is on or after 1 February 2020;
- the permit to carry out structural works was granted before 7 April 2020; and
- the Temporary Occupation Permit has not been issued as at 7 April 2020.
Part 8C does not apply if before 2 November 2020, court or arbitral proceedings have been commenced in relation to the developer’s failure to deliver possession by the original delivery date or any judgment, arbitral award, compromise or settlement has been entered into between the parties in relation to the developer’s failure to deliver possession by the original delivery date.
Extension of delivery date
Part 8C allows developers to extend the delivery date as follows:
- Extensions not exceeding 122 days: The developer must serve written notice on the purchaser to extend the delivery date by up to 122 days. The delivery date can be extended multiple times provided that the total extension period does not exceed 122 days.
- Extensions exceeding 122 days: For extensions exceeding 122 days, the developer must serve written notice on the purchaser on its intent to extend the delivery date and the proposed period of extension by seeking an assessor’s certification.
There is no moratorium in respect of an extension of the delivery date not exceeding 122 days. Where the purchaser is notified by the developer of its intention to extend the delivery date for a period exceeding 122 days, the purchaser is prohibited from taking certain actions during the moratorium period, including making any deduction from any instalment or payment due under the agreement for any damages or liquidated damages or other permitted costs in respect of the developer’s failure to deliver possession by the original delivery date or the extended delivery date, as the case may be.
Effect of extension of delivery date
The extended delivery date following the extension is treated as the delivery date provided by the affected agreement. Any liability for a failure to comply with the delivery date (without the extension) is extinguished, except in prescribed circumstances or to the extent prescribed.
The developer is only liable to the purchaser for the qualifying costs incurred by the purchaser in relation to those extensions, up to the prescribed amount. The developer is not liable for any other cost, expense, loss or other sum that the developer would, but for that extension, be liable to pay under any law or the affected agreement for failing to deliver possession of the unit or units in question on or before the delivery date.
Partial reimbursement for qualifying out-of-pocket costs incurred by purchasers
For projects where the developer has extended the delivery date, Part 8C allows purchasers to seek reimbursement from the developers for qualifying out-of-pocket costs incurred due to the delay in delivery of the unit, up to a cap of 70% of the liquidated damages originally payable under the agreement.
Purchasers of flats from the Housing and Development Board may similarly claim up to 70% of the liquidated damages based on a prescribed formula, which is aligned to that stated in the Housing Developers Rules for private housing. This approach allows for co-sharing of the delay costs between the developer and purchaser. An assessor’s determination may be sought if there is any dispute over the qualifying costs claimed by purchasers.
Application for determination by assessor in response to purchaser’s claim for reimbursement of qualifying costs
In the event of a dispute over the qualifying costs claimed by purchasers, the developer must make an application within 28 days after the date that the purchaser makes a claim, failing which the purchaser may take any of the prescribed actions in relation to the claim.
The assessor’s determination is binding on the parties and there is no appeal from the determination.
While there are no appeals from an assessor’s determination, an assessor may make subsequent determinations. The assessor or another assessor may either on his or her own motion or on the application of all or any of the persons to whom the assessor’s original determination relates, vary or replace the determination if:
- further information or documents are adduced which would have had a material influence on the original determination but which could not have with reasonable diligence been obtained for use at the proceedings before the assessor; and
- it is fair and just for a variation or replacement of the original determination to be made, taking into account (a) whether there has been any undue delay in the making of the application for a subsequent determination, and (b) whether any person has taken any action in reliance on the original determination.
The developer is apportioned 70% of the prescribed assessment fee (including fees for any subsequent determinations) while the purchaser(s) are jointly and severally liable for 30% of the assessment fee.
Where the purchaser makes a claim for reimbursement of qualifying costs, the purchaser may after the prescribed time:
- set off against any instalment or other payment payable by the purchaser to the developer, the amount that the developer is required to pay to the purchaser being (a) the amount claimed by the purchaser where the developer does not make an application for an assessor to determine the claim, (b) the amount of reimbursement determined by the assessor, and (c) the amount agreed between the purchaser and the developer whichever is applicable;
- take action to recover from the developer the amount as a debt due to the purchaser. The prescribed time here is: (i) where no application is made by the developer in relation to the claim, after the expiry of 28 days after the purchaser makes the claim; or (ii) 21 days after the registrar notifies the developer of the assessor’s determination in relation to the claim.
- Covid-19 (Temporary Measures) Act 2020
- Covid-19 (Temporary Measures) (Part 8C Relief) Regulations 2021
- URA Circular on Commencement of Part 8C of the Covid-19 (Temporary Measures) Act
- URA Guide for Developers
- URA Guide for Purchasers
In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at firstname.lastname@example.org.