3 July, 2015
In April 2013, Parliament passed the Housing Developers (Control and Licensing) (Amendment) Bill to improve and update safeguards for buyers of uncompleted private residential properties. The amendments were also aimed at enhancing market transparency by providing more comprehensive and timelier information to prospective purchasers of private residential properties. The Housing Developers (Control and Licensing) (Amendment) Act 2013 (“Amendment Act”) came into operation on 25 May 2015.
Two rules were issued to implement the Amendment Act: (i) the Housing Developers (Amendment) Rules 2015 (“Amendment Rules”); and (ii) the Housing Developers (Show Unit) Rules 2015 (“Show Unit Rules”) (collectively, “New Rules”). They come into force in two stages: on 25 May 2015 and 20 July 2015. This Update provides the key features of the Amendment Act and the New Rules.
Changes Effected By The Amendment Act
Issuance Of No-Sale And Sale Licences: Requirements And Conditions
The Amendment Rules set out the paid-up capital, security and deposit requirements for the issuance of a No-Sale Licence as well as a Sale Licence.
In order for a housing developer to be granted a No-Sale Licence, it must have a paid-up capital of at least SGD 100k, or must have had lodged with the Controller of Housing (“Controller”) a deposit or security of SGD 100k. The issuance of a No-Sale Licence is subject to the condition that the developer cannot grant any option to purchase (“OTP”) or enter into any agreement for the sale of any unit in the housing development without the approval of the Controller.
A Sale Licence will be granted to a developer company with a paid-up capital of at least SGD 1m, or a company, an individual, a group of persons, a partnership, a society or a limited liability partnership that has lodged with the Controller a deposit or security of S$1,000,000. The issuance of a Sale Licence is subject to the condition that the developer should not enter into any OTP or enter into any agreement of sale in the housing development unless plans for building works are approved by the Commissioner of Building Control.
New Licensing Requirements
The Amendment Act has also provided for new application forms that must be submitted to obtain a developer’s licence. Several conditions which were not present in the old law are now imposed in the licenses. These include the following:
- Declaration in relation to PRPs – The application for a developer’s licence must declare that: (i) its Persons of Responsible Positions (“PRPs”) have not been convicted of an offence involving fraud or dishonesty in the last 5 years; and (ii) the PRPs are not terrorists or terrorist entities. PRPs are the director, principal executive and secretary of a company, or partners, managers of a partnership.Changes to PRPs – Any change to the persons who are PRPs must be notified to the Controller within 14 days of the change.
- Validity of licences – A developer’s licence will remain in force until the developer has obtained the Controller’s approval to delicence the project. An application to delicence can be submitted upon the issuance of Certificate of Statutory Completion (CSC) and certificates of title or subsidiary strata certificates of title for all units in the housing project.
- Reportorial Requirement – Developers must submit detailed transaction information to the Controller every week. These include sales volumes and transacted prices of individual units in the building projects, and the value of any benefits extended to buyers. The transaction information result must be submitted within 5 days of each preceding week.
- Auditing requirement – Developers now do not have to publish their audited balance sheet and profit and loss account in the Gazette. Instead, they must make available to the public for 24 months, a copy of the audited accounts and auditor’s report at its registered office or principal place of business, during office hours or on its website. A copy of the audited accounts and auditor’s report can now be submitted to the Controller within 6 months, instead of 3 months, after close of financial year.
The above changes came into operation on 25 May 2015.
Changes Brought About By The Amendment Rules
Options To Purchase And Sale & Purchase Agreements
The Option to Purchase and Sale & Purchase Agreement (“S&P Agreement”) forms have also been amended. The key changes to the forms include the following:
- inclusion of a new clause and schedule in the OTP and S&P Agreement to set out the benefits granted to purchasers, e.g. absorption of legal fees, furniture vouchers, stamp duty rebates, etc which are not deducted upfront from or reflected in the purchase price of the property
- inclusion of a new clause in the S&P Agreement that gives sub-purchasers who purchase a property after title has been transferred to the purchasers but the defects liability period has not expired, rights to the defects liability period and stakeholding money held by the Singapore Academy of Law
- amendment of the S&P Agreement requiring the developer to deliver a Notice of Vacant Possession upon delivery of vacant possession and specify in the Notice of Vacant Possession, the date on which vacant possession of the property is delivered to the Purchaser.
- inclusion of an additional item on “ceiling” in the Specifications which requires the developer to state the floor to ceiling height of the unit. If there are variations to the ceiling height in different areas of the unit, the various heights must be clearly stated.
- removal of reference to “Wardrobes” and “Cabinets” in the Notes to Specifications on “Layout/Location of Wardrobes, Cabinets, Fan Coil Units, Electrical Points, Television Points, Telecommunication Points, Audio Intercom System, Door Swing Positions and Plaster Ceiling Boards”
The amendments to the forms will take effect on 20 July 2015 to provide developers sufficient time to comply with the changes.
New Requirements Under The Show Unit Rules
Accurate Depiction Of Housing Units Offered For Sale
The Show Unit Rules were introduced to ensure that show units provided by developers are accurate depictions of housing units offered for sale. They must be built “exactly in accordance with the approved building plan” for the depicted unit, including floor spaces, balcony, bay window, air-conditioner ledge, planter box, PES and other spaces that form the unit. Show units must also have the same floor area as the depicted unit.
In the event that any part of the show unit are omitted, the location, thickness and width of that part must be marked and indicated on the floor with solid lines, and a written notice displayed prominently to explain this.
If there are differences between the materials, finishes, fittings, equipment, installations or appliances provided in the show unit and those to be provided in the depicted unit, these differences must be clearly described and stated in a prominently displayed notice.
Subsequent Changes To Approved Building Plans
If the Commissioner of Building Control approves any change to the approved building plan for a depicted unit after the show unit has been built and made available for viewing by prospective purchasers, the developer must, within 3 working days after the date of approval:
- display prominently next to the original scaled floor plan of the show unit, a drawn-to-scale floor plan of the depicted unit based on the amended approved building plan;
- state in the drawn-to-scale floor plan of the depicted unit referred to above, the approval number and date of the amended approved building plan;
- display prominently at the entrance of the show unit, copy of the amended approved building plan;
- display prominently at the entrance of the show unit, a detailed list and description of the differences between the show unit and a copy of the amended approved building plan for the depicted unit.
Partial Show Unit
A partial show unit cannot be made available for viewing by any purchaser or prospective purchaser unless prior written approval has been obtained from the Controller, who may impose conditions as he considers fit.
If permission is given to make available for viewing a partial show flat, the developer, before doing so, must ensure that it will comply with and lodge with the Controller a written declaration that the Controller’s conditions have been and will continue to be complied with. The developer must also ensure that the partial show unit as erected and set up satisfies all the requirements of the Show Unit Rules in respect of the parts of the depicted unit that are displayed at the partial show unit.
Misrepresentation
In the erection, furnishing (including placement of furniture), interior design, decoration, setting up and display of a show unit and its contents, the developer must ensure that it does not misrepresent any aspect of the depicted unit and its contents. The developer must also ensure that it does not misrepresent anything that may be done or allowed in the building project, show unit or depicted unit which is contraryto any written law, condition, restriction or requirement imposed by any relevant authority in the grant of any permission or approval to construct the building project.
Model Of Building Project
The model of a building project must show and include all building communal facilities including clubhouse, swimming pool, garden, barbeque pit, guard house, electrical substation and bin centre as approved by the relevant authorities for the building project in accordance with the approved building plan. In addition, the building project model must be constructed to scale; the scale used must also be shown. The building plan approval number and the approval date must be shown next to the model.
The Show Unit Rules will come into force on 20 July 2015 to give developers ample time to comply with the new requirements.
Comments
Generally, the changes brought about by the New Rules will be welcomed by consumers who have lobbied for greater transparency and a more structured approach by the Controller towards the treatment of information given by developers marketing their projects. As the changes also come at a time when the property market is experiencing a slowdown, developers would have this opportunity to consolidate processes and work in close collaboration with their Qualified Persons to ensure greater accuracy in the information that is availed to would-be-purchasers which will enable developers to deliver their projects on completion with higher levels of satisfaction to the purchasers.
For further information, please contact:
Margaret Chin, Partner, Rajah & Tann
margaret.chin@rajahtann.com
Elsa Chai, Partner, Rajah & Tann
elsa.chai@rajahtann.com
