Condo developer goes bust: Court ruling provides home buyers relief
They have priority claims ahead of other unsecured creditors.
Home buyers left in the lurch after a developer went bust will now have priority claims to their incomplete homes, ahead of other unsecured creditors like contractors.
The High Court has ruled that the claims of buyers of the incomplete Sycamore Tree condominium will rank above those of the other unsecured creditors, including contractors who are owed money by the project's developer, Astoria Development. Astoria is also linked to the developer of another stalled condo development, the 70-unit Laurel Tree project in Hillview Terrace.
The "precedent setting case" made it clear that existing statutory provisions, such as those in the Housing and Development Act, recognise the equitable property rights that purchasers of uncompleted properties have, said lawyer John Sze, who is representing most of Sycamore Tree's purchasers.
"We've never really had a case where we are pitting purchasers directly against other unsecured creditors," said Mr Sze of law firm Joseph Tan Jude Benny.
In a chamber hearing last month, Judicial Commissioner Mavis Chionh said the claims of the purchasers rank above the claims of general unsecured creditors. She thus allowed an application by Astoria's receivers and managers, represented by Rajah and Tann lawyers Lee Eng Beng and Chow Jie Ying, to complete the project and pass the units to their owners, subject to certain conditions, said Mr Sze.
KPMG Services took over the Sycamore Tree project, a mixed-use development of 96 residential units and 17 shop units, as receivers appointed by United Overseas Bank (UOB) - the project's paramount mortgagee.
But an unsecured creditor, Jay Machinery, which makes and rents construction equipment, filed a winding-up application in August last year against Astoria. It is owed $1.3 million by the developer.
Apart from Jay Machinery, Astoria also owed its de facto main contractor G1 Construction and related companies several millions.
Under insolvency law, the appointed liquidator could have sold the firm's assets and paid all the unsecured creditors equally, including home buyers, according to the proportion of debts due to them.
The application was filed to ensure that the development could continue with its construction, so that it can be handed over to the buyers.
Another factor that has complicated the situation is the little money left in the development's project account, said Mr Sze.
"If all the project monies were deemed sufficient to complete the project, the contractors or suppliers would not need to worry about being paid," said Mr Sze.
The Straits Times understands the Controller of Housing is still investigating the project accounts of Sycamore Tree and Laurel Tree for any regulatory breaches.
UOB has offered to cover the additional costs expected to be incurred from the completion of the projects, the bank said in a statement last year. But the buyers must agree to not claim their liquidated damages - compensation that developers must pay for delays - against their remaining scheduled payments for the development.
The approval of the application comes as a relief to worried buyers, who have been waiting for their condo units for more than three years. Both Sycamore Tree and Laurel Tree were meant to obtain a temporary occupation permit by December 2016.
Sycamore Tree buyer Constance Lim, 49, said the purchasers are currently waiting to work out the revised details with the receivers.
"There's still a way to go for the project," said Ms Lim, who is representing some 97 unit owners.
The worry now is that buyers cannot come to a consensus on the revised sales and purchase agreement with the receivers, she added.
"We are just not planning our lives around (the condo) any more."
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