Construction sector given more time and other help to share burden across value chain

NEW proposed measures, including a universal four-month extension of time for construction contracts, aim to provide support so that no single part of the built-environment sector "has to bear a disproportionate share of the burden brought about by the pandemic", said Minister for National Development Desmond Lee in Parliament on Tuesday.

The reprieve reduces the burden on contractors. Developers will also be granted a similar extension, and property purchasers can seek some reimbursement of costs incurred due to delays.

These new measures should not be seen in isolation, but as part of a series of interventions and trade-offs "affecting, but at the same time also supporting buyers, developers, consultants, builders, sub-contractors and suppliers", said Mr Lee in the debate at the Second Reading of the Covid-19 (Temporary Measures) (Amendment No 3) Bill in Parliament.

The universal extension of time of four months will be provided for construction contracts. This time period takes into account the two-month stoppage of construction works from April 7 till June 1 - the "circuit-breaker" period - as well as a further two months of delays, given that worker dormitories were declared fully cleared only in early August.

This extension reduces the administrative burden for contractors so that they can focus on restarting and ramping up work quickly and safely, said Mr Lee. Contractors who seek an extension can negotiate with developers or rely on contract provisions, or serve a Notification for Relief on the developer to disregard liquidated damages payable under the contract due to delays.

The Bill also provides for the co-sharing of additional costs arising from project delays, across the value chain from developers to contractors to sub-contractors.

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With delays, contractors may need to rent machinery such as tower cranes for a longer period. The Bill will enable such contractors or sub-contractors to claim part of these costs from clients through regular progress payment claims. "This will ensure contracting parties co-share a fair amount of these additional costs," said Mr Lee.

If disputes arise, contractors can apply for adjudication under the existing Building and Construction Industry Security of Payment Act. The appointed adjudicator will determine whether the relief applies, and if it does, will then determine the amount to be co-shared.

As for developers which have faced construction delays, the Ministry of National Development (MND) has been encouraging those which cannot meet original dates of delivery to first discuss with purchasers and come to a mutually agreeable arrangement.

Those that cannot reach such an agreement may serve a notice for an extension of the delivery date by up to four months, in line with the extension of time for construction.

If they need relief of more than four months, they will have to seek an assessor's determination of the length of construction delay materially due to Covid-19.

"Let me assure this House that as we provide relief to developers, we recognise that purchasers face challenges on their end as well," said the minister.

The Bill thus also supports purchasers "who have had to incur out-of-pocket costs due to the delay in delivery of the unit". This includes those who have had to rent accommodation or find alternative premises during the period of delay.

They may seek reimbursement from the developer for these actual costs, up to a cap of 70 per cent of the original liquidated damages that would have been payable for the delay, based on the terms in the purchase agreement.

For Housing Board flats, purchasers can similarly claim up to 70 per cent of the prescribed liquidated damages, which will be aligned with the formula stated in the Housing Developers Rules for private residential properties.

"This allows for co-sharing of such costs between the developer and purchaser," said Mr Lee. If there are disputes, parties can seek an assessor's determination.

"Stakeholders of the built-environment sector continue to face significant financial and possible legal burden due to Covid-19," he concluded. The new measures aim "to share the burden among the stakeholders, while providing relief, to allow us to get through the crisis together".