Construction Defects: Rights of Buyers and Developers under the Housing Developers
Rules
Construction defects, whether in relation to condominium units or landed properties, have always
been a source for disputes between buyers of these private homes and their developers.
Increasingly, in a savvy and competitive market, buyers who have paid large amounts for housing
units in exclusive development projects have come to expect a lot more from the developers in terms
of the interior fittings and finishes, build quality, materials used and even construction methods
employed by the developers.
All these can be a source of dissatisfaction for fussy homeowners. Along with the increased
expectations of the finished product, buyers are also becoming more insistent that developers should
rectify what they perceive as construction defects.
All private housing projects with 5 or more separate residential units are required to adopt a standard
form Sale and Purchase Agreement (the "Agreement”) as prescribed by the Housing Developers
Rules.
Under the terms of the Agreement, payment of the purchase price is by way of progress payments
based on completion of certain defined stages of construction works. At the end of construction
works, upon the developer giving notice to the buyer to take vacant possession of the housing unit, a
period of 12 months called the defects liability period (DLP) starts to run.
The developer must make good at his own cost and expense any defect in the unit which becomes
apparent during this period. During this period also, 5% of the purchase price is held by the
Singapore Academy of Law (SAL) as stakeholder. At the end of the period, subject to the buyer’s
agreement and subject to any agreed deductions for rectification works, the 5% of the purchase price
will then be released by SAL to the developer.
If there is no agreement, the 5% will continue to be retained by SAL until the dispute is resolved;
which could some time take years. Many buyers have used this mechanism to compel the developer
to carry out further or rectification works on what they deem to be unsatisfactory or defective works.
What are the rights of the parties in a situation like this? Several issues bear consideration.
What is a defect for which a developer is obliged to make good at his own cost?
The meaning of a "defect" is defined in the Agreement together with the contractual provision
providing for the developer’s liability to make good the defect. "Defect" means any fault which is due
either to defective workmanship or materials or the building not having been constructed according to
specifications in the Agreement.
As long as the developer has delivered according to specifications and has carried out construction
work in accordance with standard industry practice, he is not liable to rectify even if it does not meet
with the buyer’s personal preferences.
When is a developer not liable to make good a defect?
The developer is not liable to make good a defect that occurs or becomes apparent only after the
expiry of the DLP. A developer is also not obliged to rectify a defect that is caused and/or contributed
by the buyers use, maintenance and keep of the property or renovation works carried out by the
buyers’ own contractors. It must be noted that even if the developer is not liable under the
contractual provision to make good, he can still be liable for damages under negligence in common
law.
What is the extent of the developer’s liability to make good a defect?
As long as the defect first becomes apparent during the 12 months DLP, the developer has a
continuing duty to make good. This extends even beyond the 12 months if he did not do a good job
the first time and further rectification works are required subsequently.
However, a distinction must be drawn between an existing defect notified during the DLP which
continues to remain defective despite attempts to rectify it and a defect of the exact same nature but
appearing in a different location in the house after the expiry of the DLP. The developer continues to
be liable in the first instance but is not liable in the second instance.
What happens if the developer fails to carry out rectification works or the works done are
inadequate to rectify the defect?
If the complaint relates to a defect as defined above, the buyer must give a notice of such defect to
the developer who must make good within 1 month. If the developer fails to do so, the buyer must
notify the developer of his intention after 14 days to carry the works by his own contractors and the
estimated cost of the works. Thereafter, if the developer fails to carry out the work, the buyer can
carry out the works and deduct the costs from the 5% stakeholder monies held by SAL.
In the case of UOL Development (Jurong West) Pte Ltd v Chan Chong Neng and Another [2003]
SGMC 38, the buyer lost a 6-year fight with the developer over the right to deduct stakeholder monies
in respect of rectification works. In this case, the buyer claimed that they were entitled to deduct from
the balance 5% stakeholder monies held by SAL the costs of rectifying all defects which became
apparent during the DLP and which the developer had failed or refused to rectify. The developer’s
case was that the alleged defects were caused and/or contributed by the buyer in the use,
maintenance and keep of the subject property.
The court held that the buyer must comply strictly with the mechanism for deduction of stakeholder
monies for rectification works under the Agreement in terms of the nature and time period of the
notices to be given to the developer. The court held that the buyer did not make known to the
developer most of the alleged defects within the DLP. Consequently, even if these defects were
proven by the buyer, the buyer can only claim for damages against the developer and not withhold
the stakeholder monies.
As for the defects made known to the developer within the DLP, the buyer is also not entitled to
withhold and deduct the stakeholding monies if the buyer did not cause the defects to be rectified by
his own contractor which is a requirement under the Agreement if the buyer wishes to deduct the cost
of rectification from the stakeholding monies. The developer’s claim was allowed and succeeded
even on the buyer’s appeal to the High Court.
Copyright © 2005 Colin Ng & Partners