Enhancements to the COVID-19 (Temporary Measures) Act to Cover Options to Purchase and Sale and Purchase Agreements for Commercial and Industrial Properties
Oct 12, 2020
Part 2 of the COVID-19 (Temporary Measures) Act (“the Act”) provides temporary relief from stipulated types of legal action in relation to the inability to perform certain contracts as a result of COVID-19.
In May 2020, the Government included (i) Options-to-Purchase (“OTPs”) and (ii) Sale and Purchase Agreements (“S&P Agreements”) or Agreements for Lease (“AFL”) with housing developers under Part 2 of the Act.
The Ministry of National Development (“MND”) has considered feedback from purchasers and developers, and will be extending the relief to OTPs and S&P Agreements for commercial and industrial properties to ensure parity in treatment. Only OTPs and S&P Agreements between developers and purchasers will be covered. These changes came into effect on 9 October 2020.
The relief period for the following relief under Part 2 of the Act is intended to expire on 31 December 2020.
Inclusion of additional contracts
OTPs and S&P Agreements for commercial and industrial properties will be included in the list of scheduled contracts covered by the Act. Like other contracts covered under the Act, these contracts must have been entered into before 25 March 2020, with contractual performance due on or after 1 February 2020.
The purchaser may serve a Notification for Relief (“NFR”) on the developer to enjoy relief under the Act.
(a) OTP. The developer will be prohibited from withholding or forfeiting any part of the booking fee paid under the OTP during the relief period.
(b) S&P Agreement. The developer will be prohibited from terminating the agreement on the basis of the purchaser’s non-payment.
The developer may also serve an NFR on purchasers, to seek temporary protection from being sued during the relief period, if it is unable to perform any contractual obligation due to COVID-19.
Parties are encouraged to discuss and reach a mutual agreement. If the parties are unable to reach an agreement even after the NFR is served, either party to an OTP or S&P Agreement may make an Application for an Assessor’s Determination.1 The Assessor will consider both parties’ arguments, and will seek to achieve an outcome that is just and equitable in the circumstances.
Further details on the processes under the Act can be found at: http://www.mlaw.gov.sg/covid19-relief.
Prohibition of unilateral increase of interest rates, charges, and other types of actions
Additionally, once an NFR has been served, the developer will not be permitted to unilaterally increase interest rates or impose new charges on delayed payments beyond what is provided for in the S&P Agreement. Further, late payment interest or charges under S&P Agreements will also be capped at an amount equal to 5% per annum of simple interest. These reliefs apply during the relief period. Similar reliefs also apply to certain other types of contracts set out in the Schedule of the Act.
1 For OTPs, Applications for an Assessor’s Determination may be submitted by 28 February 2021. For S&P Agreements, Applications for an Assessor’s Determination must be submitted by 31 December 2020.