Saturday, 18 August 2007

Date of Vacant Possession - Maintaining an Estate when It No Longer Belongs to You

In response to an owner's dilemma over developers moving in to build a showflat after completion, the URA and Building and Construction Authority replied in the ST Forum on 17 August. You can find the full text in CondoSingapore here. I've talked about it previously here and here. Because the land legally belongs to the developer after completion, owners or tenants staying there are doing so at the 'goodwill' of the developer, often rent free. However, subject to the SPA, some owners are required to pay maintenance fees and continue to service the sinking fund, if they wish to stay till the date of vacant possession (VP). As Mr Han Yong Hoe (Director, Development Control URA) and Mr Ong Chan Leng (Director, Special Functions Division BCA) pointed out in their reply, owners/tenants staying in the estate after completion are "privately agreed upon between the developers and the residents". They further pointed out: "The developers and stakeholders of the project are directly responsible for safety at the worksite and they should take the necessary safety precautions to protect workers and the residents."

Now I want to show you two bits of legal text from a massive HUDC estate that was sold recently. The first is from the Tender document, and after negotiations, the second forms the Sale and Purchase Agreement which was signed by the SC and the developer:

Text 1:
The Purchaser hereby covenants that from the Completion Date, they will ensure that all the common property comprised in the Property is kept and will keep the same in good repair and tenantable condition and the services provided by the Management Corporation to the Property shall not be disrupted and the level of maintenance services shall not be affected until delivery of vacant possession of all Units and that the Managing Agents employed for the management of the Property at the Completion Date shall not be dismissed or terminated without just cause or reason prior to this date.

What it means is that the developer agrees to keep "in GOOD REPAIR and TENANTABLE condition" the estate, and that the services provided by the MC (security, electricity, cleaning services etc) shall "NOT BE DISRUPTED" nor its "LEVEL of maintenance services" affected until VP. Sounds reasonable right? It means the developer has duty of care to ensure that the estate is as it is, in a "state of good and serviceable repair" similar in spirit to the duties of the MC as defined in the BMSMA (Article 29(1)), irregardless of how many people are staying there.

Now after negotiations, look what happened to that clause (which is now part of the SPA):-

Text 2:
After completion and pending the delivery of vacant possession of all the Units by the Owners to the Purchaser, the Purchaser shall maintain the Property at a reasonable level (including maintenance of reasonable security services for the Property).

The vague term "reasonable" has replaced the much more defined duties of the developer in Text 1 which indicates no disruption, service level to be maintained etc. So what would "reasonable" mean? If there is only 1 owner staying in a 20 story block, does that mean the entire block can have its electricity cut except for that floor, and only 1 lift operational, perhaps between certain hours only? Or if half the estate is empty, that the security may be reasonably reduced, including simply cordoning off that estate and abandoning it? What about if your flat has an external pipe that is leaking badly and causing the floor to be flooded, would you be able to alert the developer to get it repaired?

What counts as "reasonable"? Why was Text 1 replaced by a vague Text 2? Who insisted on the change (Purchaser? SC?)? What form of recourse OUTSIDE of the developer is there for owners and tenants staying there after completion, should the developer ignore repeated complaints? Is the estate even insured? After all, the MC would have dissolved by then, there wouldn't be a managing agent to contact, but yet at the same time, some estates still require owners to pay maintenance charges.

A commenter in the ST Forum said that residents and tenants should be thankful that the developer allowed them to stay 'rent free'. Firstly, there are very valid reasons for staying there - owners may not have the cash capital to purchaser a replacement home until completion (when they get their proceeds), and only then start looking around for a new home. It's not their choice to stay in an estate that may deteriorate if no checks are made on developers.

Secondly, let me use this analogy:- A landlord rents out the flat to you, but comes in daily from 9 to 5 without your permission as a tenant, to renovate parts of your flat while your kids are around. The landlord also allows people to walk in and out of your flat unchecked. The landlord also points out that the leaking roof will not be repaired since it's not reasonable to repair; he's going to tear down the entire place in a few months time. He gives you masking tape and says "Put up with it". He tells you, never mind, rent is free but you pay need to pay utilities, and maintenance fund. He says, "this is reasonable wat, you getting to stay here rent free".

Will you get upset?

Do you even know what your rights are, after completion?

1 comment:

Anonymous said...

Dr. Minority,

You have certainly comb the documents with a fine tooth comb, I have not gone through them yet.

Beyond the written fine print of contract is the common law of duty and care that comes into play. To explain in laymen's terms as to the extent of fiduciary duty and care owed by Developers, SC , Owners visa-viz tenants, residents in enbloc sale in the interim period between signing of agreement and vacant possession..the body of law that covers each party's responsibilities, duties and the care that is needed in protecting the premises to maintain it as a secure place for all , will be decided specifically in each case.

The general rule of thumb would be who is the real owner in possession at each stage and what are his responsibilities and duties? Has he discharged them reasonably?. Who is the victim, a trespasser, a licensee ,a tenant, a resident, general public? Was there negligence involved in whatever they do? Was it a direct act of negligence that has caused the injury?

Insurers would be the first people to ask those valid questions if they are being pursued to compensate. So check those forgotten insurance fine print and you will be shocked how little you are insured against or even none at all!

So as a caution, it is wise that all residents management committee (whether they have legally discharged their responsibility or not ) ought to be vigilant and together with the SC demand that developers observe the rights under the contract irregardless of the vacant possession date. Developers in the meantime will need to observe all the duty of care expected of them in their race to start digging! Be considerate, your pot of gold can wait!

When treading in grey murky waters of the law, just remember to wear your own life buoy/safety helmet and save yourself from unforeseen damages whatever your position . Prevention against contention is pure common sense.