Enhancements to the COVID-19 (Temporary Measures) Act to Cover Two New Contracts and Prohibit Unilateral Increase of Charges
13 May 2020 Posted in Press releases
- 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. These relief measures, which took effect from 20 April 2020, will last for six months in the first instance ("relief period").
- The Ministry of Law ("MinLaw") has considered feedback received, and will enhance the relief afforded by the Act in two ways. First, two new contracts will be covered under the Act. These are (i) options to purchase ("OTPs"); and (ii) sale and purchase agreements ("S&P Agreements") or agreements for lease ("AFLs") for residential property. Only OTPs and S&P Agreements / AFLs between housing developers (both private housing developers and the Housing & Development Board) and buyers will be covered. Second, additional actions relating to the unilateral increase of charges will be prohibited under the Act. These changes will be implemented by new subsidiary legislation that take effect on 13 May 2020.
A. Inclusion of two additional contracts
- Since the Act commenced, 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 25 March 2020, with contractual performance due on or after 1 February 2020.
- We encourage the intending buyer/buyer to seek an extension as needed from the developer in the first instance.1
- If the intending buyer/buyer and developer are unable to agree on the terms of the extension, or if negotiations with the developer are not possible, the intending buyer/buyer may serve a Notification for Relief ("NFR") on the developer to enjoy relief under the Act.
- Relief applies where a contracting party is unable to perform a contractual obligation ("the non-performing party") due to COVID-19. The buyer must serve a NFR on the developer in the prescribed form, before relief under the Act applies.
a. 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.
b. 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.
- The conditions and framework for how disputes are to be resolved under the Act will apply. We encourage parties to discuss and reach a mutual agreement. If the parties are unable to reach a compromise even after the NFR is served, either party to an OTP or S&P Agreement / AFL may make an Application for an Assessor’s Determination. 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.
B. Prohibition of unilateral increase of interest rates, charges, and other types of actions
- Since the Act commenced, MinLaw has received queries and 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 permitted 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 Schedule to 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:
a. Increase of any charges or interest rate payable under the contract unless certain conditions are satisfied.2
b. Imposition of new charges under the contract without the further agreement of the non-performing party.
c. Requiring any part of a security deposit given pursuant to the contract to be replaced by the non-performing party except with the further agreement of the non-performing party.
MINISTRY OF LAW
13 MAY 2020
1. If the OTP is granted by HDB, the intending buyer may approach HDB to seek an extension of the OTP. For Executive Condominiums, the intending buyer may approach the developer directly. For OTPs granted by a licensed private housing developer, the intending buyer may write to the Controller of Housing and approach the developer. For OTPs that are granted by non-licensed private housing developers, the intending buyer may approach the developer directly to seek an extension of the OTP. ↩
2. These conditions include: (a) the increase in charges or interest rate is specified in the contract; (b) the increase in charges or interest rate is calculated by reference to a formula (e.g. a reference rate) in the contract. Additional increases are not allowed without the further agreement of the non-performing party. ↩
Last updated on 13 May 2020