- Corporate and commercial
Partner - London. United Kingdom
The COVID-19 pandemic remains, at the time of writing, an ongoing event which has brought about economic disruption on an alarming scale. Due to its unprecedented virulent and contagious nature, as well as its unforeseeability and potential for containment, the COVID-19 pandemic has, in many countries, precipitated hard stoppages (or else, severe limitations) ordered by governments to curb the spread of the disease.
Here, it was thought unconscionable by the government and many stakeholders in both private and public sector life, that individuals and businesses may yet be held liable for the unavoidable and unpredicted failures to perform contractual obligations if they were due to disruptions, or impossibilities of performance, directly caused by governmental measures ordered against the COVID-19 pandemic.
One such measure is the COVID-19 (Temporary Measures) Act 2020 (No.14 of 2020) (the COVID-19 Act). In this article, we highlight some of the targeted and temporary relief provided by the COVID-19 Act to the construction industry.
It is undeniable that construction works across the globe have faced disruptions due to the COVID-19 pandemic. In Singapore, due to the ‘lockdown’ measures and the emergence of infections amongst migrant workers living in dormitories, many projects have been hindered by delays, labour and supply shortages.
The COVID-19 Act addresses this concern by providing a universal extension of time of up to 122 days from and including the completion date for construction contracts. This will take into account delays that arose between 7 April 2020 and 6 August 2020, subject to any existing extension provided by the contract or otherwise agreed between the parties. This extension of time applies to both public and private sector construction projects.
However, the universal extension of time of up to 122 days will only apply to construction contracts that were entered into before 25 March 2020, remains in force on 2 November 2020 and as at 7 April 2020, not been certified as completed. Furthermore, contractors that actually carried out works during the period from 20 April 2020 to 30 June 2020 will not be entitled to this extension of time. The extended completion date will be treated as the new completion date for the purpose of the contract.
No application is required from the contractors to enjoy this relief. In this regard, the universal extension of time accords contractors more time to complete their projects and provides certainty and assurance to the industry.
Due to the delays and disruptions arising from the COVID-19 pandemic, contractors inevitably have had to bear additional costs such as equipment rental, site maintenance, storage of materials and even insurance premiums. The COVID-19 Act provides for co-sharing of these additional costs incurred by the contractor arising from the delay (as a result of the COVID-19 pandemic), except for items which have already been supported under existing support schemes.
The co-sharing percentage is 50% of the qualifying costs, subject to a monthly cap of 0.2% of the contract sum per month, and a total of 1.8% of the contract sum until 31 March 2021. However, the relief is not applicable to construction contracts that involve individual persons engaging contractors other than individual persons acting as a sole proprietor in the course of business. Likewise, the amendments only apply to construction contracts that are entered into before 25 March 2020, remains in force on 2 November 2020 and as at 7 April 2020, not been certified as completed. In order to claim for the co-sharing of these costs, contractors would need to make payment claims to their clients. In equal terms, this relief will apply to both public and private sector construction projects.
The co-sharing of costs measures provides much needed recourse in ensuring that no stakeholder has to bear an undue share of the financial burden caused by the pandemic.
It is in the interest of both the developer and buyer for the project to be completed in a timely manner, while ensuring compliance with the COVID-19 safety measures. Even though developers are required to provide extensions of time to contractors and to co-share the additional costs of delay, the developers still remain liable to deliver the units to buyers according to the contractual timelines set out in the sale and purchase agreement prior to the COVID-19 pandemic.
As such, the COVID-19 Act allows developers to seek for an extension of time on the date of delivery of possession of 122 days. The delivery date is on or after 1 February 2020, subject to the satisfaction of the requirements under the COVID-19 Act.
While the relief provided by the COVID-19 Act may be temporary, it provides much needed assistance to the construction industry in Singapore which continues to wrestle the effects of the COVID-19 pandemic.