Homebuyers get 6 months to review new purchase
Covid-19 Act will now also cover purchase option, S&P agreement or agreement to lease for housing property.
Homebuyers facing buyers' remorse will have six months to mull over whether they should go ahead with their purchase as they are now also given cover under the temporary relief measures from legal action as a result of Covid-19.
On Wednesday, the Ministry of Law (MinLaw) said that the Covid-19 (Temporary Measures) Act which provides temporary relief to those unable to fulfil contractual obligations as a result of Covid-19 will now also cover options to purchase (OTPs), sale and purchase (S&P) agreements or agreements for lease (AFLs) for residential property.
These relief measures, which took effect from April 20, 2020, will last for six months.
MinLaw said that only OTPs and S&P agreements/AFLs between housing developers - both private housing developers and the Housing & Development Board (HDB) - and buyers will be covered.
The relief "protects people who had entered into an agreement to buy residential properties from developers but have found themselves unable to proceed due to hardship caused by the pandemic", said Jennifer Chia, TSMP Law Corp partner.
"Effectively it's giving buyers six months to think about it," added Ms Chia.
Normally it takes eight weeks to complete a purchase.
These changes will be implemented by new subsidiary legislation that takes effect on May 13, 2020, said MinLaw.
Since the Act started, MinLaw has received feedback that some buyers who have entered into OTPs or S&P agreements/AFLs are facing difficulties making payments because of Covid-19, and stand to lose their booking fees or deposits as a result.
An OTP is granted by a housing developer to an intending buyer for the purchase of residential property. OTPs generally provide for the payment of a certain portion of the purchase price when the OTP is exercised. An S&P agreement/AFL is granted by a housing developer to a buyer for the sale and purchase of residential property.
MinLaw is including these two contracts in the list of contracts covered by the Act, to provide relief in such situations. Like other contracts covered by the Act, these contracts must have been entered into before March 25, 2020, with contractual performance due on or after Feb 1, 2020.
If the buyer and developer are unable to agree on the terms of the extension, or if negotiations with the developer are not possible, the buyer can serve a Notification for Relief (NFR) on the developer to enjoy relief under the Act.
After you get relief, you should also take the chance to re-examine your ability to make the necessary payments, said MinLaw. "If you still intend to purchase the property, you should negotiate an extension of the OTP or a new payment schedule with the developer," it added.
According to property analyst Ong Kah Seng, the relief lets buyers return the unit in a clear transparent process.
Even in normal times, there are always the possibility of either parties unable to go through entire transactions process and buyers risk losing their deposits, he said.
"It provides a clearer way for buyers to exit and how developers can efficiently receive back that returned unit - that can ultimately still be sold if competitive pricing is adopted amid the recession," Mr Ong noted, adding: "Any property sale transaction that is a rushed process often risk buyer's remorse or seller regretting, and the entire resale deal may not eventually be completed easily - hence, properties bought during bullish property market times like H2 2019 and prior to the Covid-19 pandemic can risk some forms of buyers' remorse."
Prices of private residential properties rose 2.7 per cent in 2019, following a 7.9 per cent increase in 2018. Mr Ong said that there were some concerns of overheating towards the end of 2019 and early this year and that could have prompted some buyers to rush in.
MinLaw said that it encourages buyers to get an extension from the developer before applying for relief.
If the OTP is granted by HDB, the buyer may approach HDB to seek an extension of the OTP. For executive condominiums, the buyer may approach the developer directly. For OTPs granted by a licensed private housing developer, the buyer may write to the Controller of Housing and approach the developer.
For OTPs that are granted by non-licensed private housing developers, the buyer may approach the developer directly to seek an extension of the OTP.
In the case of an OTP, the developer will then be prohibited from withholding or forfeiting any part of the booking fee paid under the OTP during the relief period.
In the case of an S&P agreement/AFL, the developer will then be prohibited from terminating the agreement on the basis of the buyer's non-payment.
A housing developer may also serve an NFR, to seek temporary protection from being sued during the relief period, if it is unable to perform any contractual obligation due to Covid-19.
According to MinLaw, it has received 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 an NFR has been served. Among other things, the Act gives affected non-performing parties temporary relief from making payments.
In such a situation, landlords are not allowed to unilaterally increase interest rates or impose new charges on delayed payment, in order to prevent or discourage parties from seeking the relief granted under the Act. The same prohibition applies to the other types of contracts set out in the Act.
To avoid any doubt, subsidiary legislation has been gazetted to prohibit the following actions for the duration of the relief period, upon service of an NFR: Increase of any charges or interest rate 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 the further agreement of the non-performing party.
Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.
Developers will work out 'amicable arrangements' with buyers: Redas
Developers will work out "amicable arrangements" with "genuine home buyers" affected by disruptions resulting from the Covid-19 pandemic, the Real Estate Developers' Association of Singapore (Redas) said yesterday.
The association was responding to the Ministry of Law's announcement that provisions under the Covid-19 (Temporary Measures) Act have been expanded to cover the purchase and lease of homes.
"The enhanced Act will help to provide relief to affected genuine buyers from financial commitments (as well as) time to reach a settlement with developers in good faith," Redas said. "Developers will work out amicable arrangements with their purchasers depending on the merits of each case."
The Ministry of Law said it encouraged buyers to seek an extension as needed from the developer, failing which the buyer may then apply for temporary relief against the developer.
Due to the circuit breaker measures, some financing or legal procedures could have been delayed, noted Ms Christine Sun, head of research and consultancy at OrangeTee & Tie. "In the past, even if developers were willing to give more time to buyers, they may not be able to do so because of certain guidelines set by the Controller of Housing. Buyers now have more assurance that they can complete these procedures without being penalised," she said.
If parties are unable to agree on the terms of the extension, the buyer may serve a notification for relief (NFR) on the developer. This will temporarily stop the developer from forfeiting booking fees or terminating contracts with buyers, said the Ministry of Law.
An assessor can be called upon if no compromise is reached.
A housing developer may also serve an NFR to seek temporary protection from being sued during the relief period, if it is unable to perform any contractual obligation due to Covid-19.
But Rajah & Tann senior partner Norman Ho said the protection is limited. "This temporary relief will not protect developers from being sued by buyers for not meeting contractual obligations that fall outside the relief period, even if their inability is due to Covid-19-induced delays in construction and manpower shortages."
Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.