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Thread: Options for buyers when developers go bust and projects are unfinished

  1. #1
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    Default Options for buyers when developers go bust and projects are unfinished

    [b]Options for buyers when developers go bust and projects are unfinished[/b]

    Tue, May 07, 2019


    IT IS a rare case of a Singapore developer going bust, leaving the residential projects unfinished.

    But for some 183 people, their worst nightmare came true when developers of the 70-unit freehold condominium at Laurel Tree along Hillview Terrace and the 96 residential units and 17 shops in the Sycamore Tree project in Joo Chiat went belly up, leaving the projects uncompleted.

    Receivers told buyers of Sycamore Tree development that United Overseas Bank (UOB) would drop the requirement for premium top-ups but on condition that buyers waive their rights to claim liquidated damages, which are compensation that developers must pay buyers for delays - against their progress payments. Based on the sale and purchase agreement, the developer will have to pay liquidated damages of 10 per cent per annum of what buyers have to pay.

    The Business Times asked Tan Ching Chern, partner at Withers KhattarWong LLP, to explain the implications if buyers were to accept this waiver request.

    Ms Tan said since the temporary occupation permit (TOP) was expected in Dec 29, 2016, the developer is late for both the service of the TOP Notice and the Notice to Complete (usually pegged at three years from the contractual TOP deadline).

    "As such, the receiver should be asking for the waiver of both categories of late interest under the sale and purchase agreement,'' Ms Tan explained.

    Under usual circumstances where the developer remains solvent, the buyers are contractually entitled to claim late interest of up to 10 per cent per annum of what the buyers had paid into the developer's project account for the period of the developer's delay in serving on the buyers the TOP Notice and the Notice to Complete respectively. Such late interest would come from the developer's profits or own funds.

    However, in this situation where the developers are insolvent, it is unlikely that there is any money available to pay the buyers any late interest.

    "While this option will not entitle the buyer to be compensated for the delays (since they would be waiving their right to any late interest), the main benefit of this option is that it would allow each buyer to still enjoy the benefit of the money that the buyer has already paid into the project account and the buyer would only have to pay the rest of the contractual purchase price to obtain the unit the buyer had contracted to buy - that is. no additional financial outlay towards this unit,'' Ms Tan said.

    This is "a less costly option" for the buyer than having to "top-up" to contribute to complete construction because any such "top-up" would have to be paid using the buyer's own funds (since the CPF lump sum withdrawal and mortgage loan would only cover the previously approved portions of the contractual purchase price and not any additional "top-up" sums).

    "The effect is that the buyer's next mortgage loan release towards the purchase price would only be processed by the buyer's own mortgagee after the full "top-up" has been paid by the buyer using the buyer's own cash,'' Ms Tan said.

    She further advised: "For the avoidance of doubt, buyers should seek clarification from the receivers that in exchange for their waiver of the late interest, the receivers will be contractually bound to fulfil all terms of the original sale and purchase agreement - that is, not merely delivering vacant possession of the unit, but also delivering the Certificate of Statutory Completion (CSC) and separate legal title to the unit, as well as, providing the benefit of the 12-month defect liability."

    The CSC and separate legal title are required for the buyer to be able to sell the fully completed unit to a purchaser in due course.

    On what happens when the project is completed and buyers need to make claims, Ms Tan said: "During the 12-month defect liability period, the buyer can rely on the terms of the sale and purchase agreement, where buyers have the right to have defects rectified and the right to withhold up to 5 per cent of the purchase price, in the event that the receivers (stepping into the developer's shoes in the sale and purchase agreement) have failed to fulfil the developer's contractual obligations to rectify defects in accordance with the sale and purchase agreement."

    The lawyer said since the developer is insolvent, it would not be advisable for the buyers to expect to recover any money from suing the developer.

    The other option offered by receivers was to allow the receivers to sell the land and repay the outstanding loans owed by the developer to its paramount mortgagee, which is UOB.

    But Ms Tan noted that with late interest continuing to accrue on the outstanding mortgage loans, it is unlikely that there will be any money left after paying UOB.

    "Since suing the developer for damages would simply be a case of throwing more good money after the bad, the effect of this option is that the buyers will lose all the money that they have paid into the project account to-date and be unable to recover any damages,'' Ms Tan said.

    "Realistically, this option is only expected to benefit the developer's paramount mortgagee,'' she added.

  2. #2
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    Default Re: Options for buyers when developers go bust and projects are unfinished

    In such cases the where the developers are unable or delayed to finish the projects, the buyers reserve their rights to claim the liquated damages along with the respective compensation against their progress payments for the delay. Which is 10% per annum based on the sale and purchase agreement.
    Now if the developer remains solvent then only the buyers can claim the amount that the buyers had paid into the developer's project account, along with the compensation amount of 10% per annum for the period of the developer's delay. These late interests should be paid from the developers own funds or profits. But in case the developers became insolvent then no money for late interest can be paid to the buyers.
    [url]https://propertyweb.sg/[/url]

  3. #3
    Ultimate Underdog

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Contact bro Arcachon who will buy over from you.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  4. #4
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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Quote Originally Posted by Kelonguni View Post
    Contact bro Arcachon who will buy over from you.
    When property investment goes bust, whose problem the buyer or the agent.

    There are a lot of small boys mentality in property investor, they will put the blame on everyone except themselves.

    Do I made a mistake, sure I do and I learn and move forward.

    Contact me and I look at your problem whether you should sell or hold.

    Many in the forum, if you are here long enough, will know they don't share much other than showing their small boys mentality.

    I believe in sharing and asking, you can never make everyone happy end of the day if you are happy who cares.

    Let this be a lesson learn and everyone remind each other.

    Happy Father Day.

    Pardon my England if you cannot understand too bad.

  5. #5
    Ultimate Underdog

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Happy Fatherís Day bro.

    Most times I donít share because itís easily misconstrued as being selfish.

    I did share that LH or FH is not the most crucial factor.

    Quote Originally Posted by Arcachon View Post
    When property investment goes bust, whose problem the buyer or the agent.

    There are a lot of small boys mentality in property investor, they will put the blame on everyone except themselves.

    Do I made a mistake, sure I do and I learn and move forward.

    Contact me and I look at your problem whether you should sell or hold.

    Many in the forum, if you are here long enough, will know they don't share much other than showing their small boys mentality.

    I believe in sharing and asking, you can never make everyone happy end of the day if you are happy who cares.

    Let this be a lesson learn and everyone remind each other.

    Happy Father Day.

    Pardon my England if you cannot understand too bad.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  6. #6
    Queen

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Once comission is in the agents' pocket, don't expect him to bother about you anymore.

    In the showflat, he will say everything is good.. developer good, location good, price good.

    When something goes wrong, sorry not his problem anymore. At most offer you some useless advice but don't expect him to cough out the commission to support you.

    Worst still, he already block your hp number when deal is done...

  7. #7
    Ultimate Underdog

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Thatís not fair. My agents so far are quite good, still send me cards on my birthdays.

    Of course, if bought a defective one, itís hard to make anyone happy, especially the buyer.

    Quote Originally Posted by annetyu View Post
    Once comission is in the agents' pocket, don't expect him to bother about you anymore.

    In the showflat, he will say everything is good.. developer good, location good, price good.

    When something goes wrong, sorry not his problem anymore. At most offer you some useless advice but don't expect him to cough out the commission to support you.

    Worst still, he already block your hp number when deal is done...
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  8. #8
    Queen

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Quote Originally Posted by Kelonguni View Post
    Thatís not fair. My agents so far are quite good, still send me cards on my birthdays.

    Of course, if bought a defective one, itís hard to make anyone happy, especially the buyer.
    What do you think are the agents' ulterior motive for sending you birthday cards? You should well know... his HP no. is sure to be on the card.

  9. #9
    Ultimate Underdog

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Just to let you know it is after sales service.

    So quite different from what you say it is like.

    Anyway, agent also need to earn a living.

    Quote Originally Posted by annetyu View Post
    What do you think are the agents' ulterior motive for sending you birthday cards? You should well know... his HP no. is sure to be on the card.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  10. #10
    Queen

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    Default Re: Options for buyers when developers go bust and projects are unfinished

    Quote Originally Posted by Kelonguni View Post
    Just to let you know it is after sales service.

    So quite different from what you say it is like.

    Anyway, agent also need to earn a living.
    No doubt there are good agents around who act in the best interests of their client.

    But definitely not the agents lurking around in this forum, esp agent "A".

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