Legal relief extended to those buying or leasing properties from developers during Covid-19 outbreak
By Tessa Oh
The Covid-19 (Temporary Measures) Act will now cover option-to-purchase agreements, sale and purchase agreements or agreements for the lease of residential properties.
SINGAPORE — An Act to provide temporary relief for individuals who are unable to fulfil legal contracts owing to the Covid-19 outbreak has been extended to include contracts involving the purchase and leasing of properties.
The Act provides temporary legal relief to parties who are unable to perform contractual obligations and already covers contracts such as loans by banks and finance companies to local small- and medium-sized enterprises, construction contracts, supply contracts, and event or tourism-related contracts.
With the extension, the Covid-19 (Temporary Measures) Act also covers option-to-purchase agreements, sale and purchase agreements or agreements for the lease of residential properties.
These changes took effect on Wednesday (May 13), the Ministry of Law (MinLaw) said in a statement.
An option-to-purchase agreement is granted by a housing developer to a buyer for the purchase of a residential property. It is generally provided for the payment of a certain portion of the purchase price when the agreement is exercised.
A sale and purchase agreement or an agreement for the lease of residential properties is granted by a housing developer to a buyer for the sale and purchase of a residential property.
Read also: Unable to fulfil a contract during the Covid-19 crisis? Here’s how a new law may grant a break
The new inclusion to the Act, however, covers only agreements between housing developers — both for private housing and Housing and Development Board flats — and buyers, and not between two individuals.
Like other contracts covered by the Act, these contracts must have been entered into before March 25, with contractual performance due on or after Feb 1 this year.
In its statement on Wednesday, MinLaw said it received feedback that some buyers who entered into such agreements are facing difficulties making payment because of the Covid-19 outbreak.
Read also: Covid-19: New law to give people relief from contracts not a move taken lightly, says Shanmugam
As a result, they stand to lose their booking fees or deposits.
While MinLaw said it encourages buyers to seek an extension from the housing developer before seeking other means, it added that if the buyers and developers are unable to agree on the terms of the extension, or if negotiations are not possible, the buyer can serve a Notification for Relief on the developer to enjoy relief under the Act.
The relief applies where a contracting party is unable to perform a contractual obligation owing to Covid-19.
The buyer must serve a Notification for Relief on the developer in the following forms before the relief under the Act applies:
In the case of an option-to-purchase agreement, the developer will be prohibited from withholding or forfeiting any part of the booking fee paid under the agreement during the relief period
For sale and purchase agreements or agreements for the lease of residential properties, the developer will be prohibited from terminating the agreement on the basis of the buyer’s inability to pay
A housing developer may also serve a Notification for Relief to seek temporary protection from being sued during the relief period if it is unable to perform any contractual obligations because of Covid-19, said MinLaw.
MinLaw added that the conditions and frameworks for how disputes will be resolved under the Act will apply.
If the parties are unable to reach a compromise even after the Notification for Relief is served, developers and buyers can make an application for an Assessor’s Determination, it said.
The assessor will then consider both parties’ arguments and seek to reach an outcome that is beneficial to both parties, said MinLaw.
‘UNILATERAL INCREASE OF CHARGES’ PROHIBITED
Additional prohibitions relating to the “unilateral increase of charges” have also been included in the Act, MinLaw announced.
The ministry said it has received queries and feedback that some parties are seeking to impose additional interest and charges for late payment that are not provided for in their contracts, even though a Notification for Relief had been served.
The Act gives affected non-performing parties temporary relief from making payments, among other things.
In such situations, landlords are not permitted to unilaterally increase interest rates or impose new charges on delayed payment so as to prevent or discourage parties from seeking the relief provided for by the Act.
Therefore, the subsidiary legislation has been gazetted to prohibit the following actions during the relief period upon service of a Notification for Relief:
Increase of any charges or interest rates payable under the contract unless certain conditions are satisfied
Imposition of new charges under the contract without the further agreement of the non-performing party
Requiring any part of a security deposit given in accordance with the contract to be replaced by the non-performing party, except with further agreement of the non-performing party
TIMELY PAYMENT NOT AN ISSUE SO FAR, SAY DEVELOPERS, AGENTS
Property developers and agents interviewed by TODAY said they have not encountered buyers who have run into problems making timely payment.
This is because the buyers have already received relief from loan repayments from banks. Many would have taken these loans to finance their property payments, they said.
Mr Terence Soon, 35, a property agent with real estate agency Huttons Asia, said that those who have not taken a loan have mostly chosen to appeal to the developers and arranged for payment to be postponed. Most developers have been understanding, he said.
Agreeing, property developer EL Development’s managing director Lim Yew Soon said that even without the expansion of the Act, most property developers would choose to “forgive and forget” buyers who default on payments, as they understood the financial strains Covid-19 has placed on individuals.
Said Mr Lim: “All along, most developers would not be so contractual, such that the moment a buyer misses the due date to make payment, they will forfeit the deposit and annul the sale and purchase agreement.
“This is very rare in the industry and most developers will reach a compromise (with the buyer).”
Property analyst Ong Kah Seng said he does not expect the Act to be used excessively, since most private condominium buyers would want to hold on to their properties.
“Buyers are usually very sincere in buying the property they like. They do not waste time on going into placing a deposit for the property and hope to be refunded when they cannot fulfil the option-to-purchase agreement or sale and purchase agreement,” Mr Ong said.
In response to TODAY’s queries, the Real Estate Developers’ Association of Singapore (Redas) said it shares the Government’s view that contracting parties face considerable constraints on many fronts.
“(The Act) will help to provide relief to affected genuine buyers from financial commitments, and protection as well as time to reach an amiable settlement with developers in good faith,” the association said.
“Redas understands the Government’s effort to avoid conflicts and disputes between contracting parties in these challenging times. Developers will work out amiable arrangements with their purchasers, depending on the merit of each case.”