Temporary relief measures to also cover purchases of new homes: MinLaw

PROPERTY buyers 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 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 (AFL) for residential property.

These relief measures, which took effect from April 20, 2020, will last for six months.

MinLaw said 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.

Additional actions relating to the unilateral increase of charges will also be prohibited under the Act.

These changes will be implemented by new subsidiary legislation that take effect on May 13, 2020.

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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.

MinLaw said it encourages the buyer to seek an extension as needed from the developer in the first instance.

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.

MinLaw also said 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.