Introduction
As part of efforts to enhance the workmanship quality of housing projects and deter housing developers from delivering projects with defects to home buyers, the Building and Construction Authority and the Urban Redevelopment Authority have introduced a new set of measures against severe errant developer behaviour.
The new measures put in place the following frameworks for errant developers:
- Disqualification from participating in land sales for sites with residential components; and
- Suspension of sales on future unlaunched projects.
This Update provides an overview of the new frameworks, including the scope of the penalties and the relevant criteria and factors.
Land Sales Disqualification Framework
- Disqualification criteria: Housing developers who deliver housing projects with severe regulatory non-compliances affecting safety, or who demonstrate recalcitrant behaviour by having consecutive projects with major defects.
- Scope of disqualification: Disqualification from participating in land sales for sites with residential components. Once a party is disqualified, land sale bids submitted by that party will not be considered.
- Duration of disqualification: Up to five years. Where a party is subject to disqualification for one or more housing projects, the periods may apply concurrently and/or consecutively.
- Application of disqualification: Disqualification may apply to errant housing developers and relevant parties, including directors and substantial shareholders, as well as companies which have the errant developer, director or substantial shareholder as their director or substantial shareholder.
Sales Suspension Framework
- Suspension criteria: Housing developers who deliver housing projects with severe regulatory non-compliances affecting safety and/or housing projects with major defects.
- Scope of suspension: A no-sale licence condition will be imposed on the housing developer’s future unlaunched projects.
- Duration of suspension: Up to five years. Where a party is subject to suspension periods for one or more housing projects, the periods may apply concurrently and/or consecutively.
- Application of suspension: Suspension may apply to errant housing developers and relevant parties, including directors and substantial shareholders, as well as companies which have the errant developer, director or substantial shareholder as their director or substantial shareholder.
Relevant Factors
In assessing whether to impose land sales disqualification or sales suspension, as well as in determining the appropriate duration of the penalty, the following factors (among others) will be taken into consideration based on the specific circumstances of each case:
- The number and severity of regulatory non-compliances and/or major defects in a housing project that are attributable to the developer, in relation to the scale of the project;
- The time taken for the developer to rectify the regulatory non-compliances and/or major defects;
- The extent of impact of the regulatory non-compliances and/or major defects on home buyers, including whether safety and/or liveability is affected;
- Any relevant aggravating or extenuating circumstances faced by the developer; and
- In respect of relevant parties, the extent of control of such parties over the errant developer.
A potential errant developer, its directors, substantial shareholders and their respective directors will be given early warnings and opportunities to make representations or rectifications, prior to the determination and notification of any penalties.
Concluding Words
Under the newly-introduced measures, errant housing developers, as well as their directors and other “relevant parties”, may be subject to onerous penalties for failure to comply with regulations and for major defects in housing projects. Such penalties may impact operations for a significant period of up to five years. The category of “relevant parties” is defined very broadly, and includes even substantial shareholders, directors of substantial shareholders, as well as companies which have the errant developer, director or substantial shareholder as their director or substantial shareholder. This is aligned with the intent of the newly-introduced measures having a deterrent effect on any wrongdoing.
Developers should thus ensure they do not fall foul of these regulatory measures. Where early warnings are received, developers should promptly seek advice on achieving compliance, as well as on making representations and rectifications, so as to avoid potential penalties.
For further queries, please feel free to contact our team on this page.
For regional Construction matters, please see Rajah & Tann Asia’s Regional Construction, Infrastructure & Projects Practice. For regional Real Estate matters, please see Rajah & Tann Asia’s Regional Real Estate Practice for more information.
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