The ongoing negotiations between the receivers and the buyers of the unfinished Laurel Tree and Sycamore Tree residential projects is a “private matter”, the Urban Redevelopment Authority (URA) said.
URA said it was informed by the receivers – three partners of KPMG led by Bob Yap – in Feb 2019 that they had been appointed to take over management of the projects from the developers.
“The terms and conditions for a receiver to complete the project is a private matter to be negotiated between the parties involved,” a URA spokesman said in reply to queries from The Business Times on the protection home buyers have in the event a developer goes belly up.
“Notwithstanding, we reached out to the appointed receivers to urge the receivers to take into consideration the purchasers’ concerns and to complete the projects which are in advanced construction stage,” the spokesman said, adding that the receivers have been told to provide buyers with prompt and relevant updates and information on the projects.
Astoria Development was the developer behind Sycamore Tree, a five-storey block in Joo Chiat with 96 residential units and 17 shops. Lerida Pte Ltd was the developer of Laurel Tree, a 70-unit condo in Hillview Terrace. Both developers are linked to Tan Hock Keng, a former known property player and one of the “Geylang Kings” before the Asian Financial Crisis wiped out his property portfolio.
The two freehold projects were supposed to have received their Temporary Occupancy Permit (TOP) in 2016.
To make matters worse, not only are the developments unfinished, the project accounts – where buyers’ payments are meant to be safeguarded when they buy from licensed developers – are empty.
In Singapore, the monies received by a licensed developer are governed by the Housing Developers (Project Account) rules, which stipulate the very restricted terms and conditions under which a paramount mortgagee may release the funds in the project account. Withdrawal of funds allowed under the rules include for the purpose of paying construction costs, architect’s fees and property tax for the housing project.
A developer has to open a project account to ensure that buyers’ monies collected and any loans disbursed for the construction of the building project are deposited into the project account and used specifically for the housing project.
“The financial institution, with whom the project account is maintained, is required to ensure that any withdrawal of funds from the project account is in compliance with the rules and supported by relevant documentation,” the URA spokesman said.
URA would not comment if there is a need to tighten the project account rules as the Controller of Housing (COH) is examining the project accounts of both Laurel Tree and Sycamore Tree developments to ascertain if there are any breaches of the statutory rules regulating the operations of the project accounts. Any breach of the regulations governing the operations of the project accounts is an offence, and offenders may be fined up to S$50,000 and/or imprisoned up to 1 year upon conviction.
On why the COH did not step in when the developers missed the Dec 29, 2016 TOP, or anytime within the last two years, the URA spokesman said: “The COH received feedback from some purchasers in 2017 and 2018 regarding the delay in the completion of the projects. We explained to the purchasers their contractual rights under the Sale and Purchase Agreement, which they can pursue with the developer. We also reached out to the developers and asked that they update the purchasers on the progress of the projects.”
To-date, the Housing Developers (Control & Licensing) Act serves to safeguard the interests of buyers of uncompleted private residential properties by ensuring proper sales process and fair contract terms by the developers.
Justin Yip, Partner, Restructuring and Insolvency, at Withers KhattarWong, said buyers will have contractual rights against the developer based on the sale and purchase agreement, such as to claim liquidated damages for the developer’s failure to fulfil the timelines committed to.
“Given however that a developer under receivership is typically insolvent and buyers rank as unsecured creditors, the recoverability of such claims may be limited,” Mr Yip said.
“Buyers may be better off holding on to their proprietary rights and wait for the development to complete, rather than to rescind the agreement with the developer and pursue an unsecured claim against an insolvent entity,” he said.