Background
- The COVID-19 pandemic has posed
challenges to developers on timely completion of development
projects.
- On 8 April 2020, the government announced a series of relief measures, one of
which is to allow an extension of the building covenant
("BC") period1 specified under the land
grant at nil premium for up to six calendar months
("Measure").
- On 29 April 2020, the Lands Department ("LandsD") issued Practice Note No. 4/2020 to provide details on the implementation of the Measure.
Who can Benefit?
- The Measure applies to all types of developments with unfulfilled BCs as at 8 April 2020, including those already expired or previously extended, but not to land grants executed after 8 April 2020 nor to those developments the BCs of which are not imposed by the LandsD (e.g. orders for compulsory sale issued by Lands Tribunal).
How to Benefit?
BCs not expired as at 1
April 2020 (including those previously extended) |
BCs already expired as at 1
April 2020 |
||
6-month extension from date of expiry |
Nil premium |
6-month extension from 1 April 2020 |
Nil premium |
Period beyond 6-month extension |
Subject to premium payment at prevailing rate |
Period beyond 1 October 2020 |
Subject to premium payment at prevailing rate |
- If a further extension is later applied for, the six-month period extended (at nil premium) under the Measure is disregarded for premium assessment purposes.
How to Apply?
- Developers may submit applications
for approval to LandsD up to 31 October 2020. Late applications
will not be entertained.
- For fresh applications, developers
may use the sample application letters set out at Appendix I of the Practice Note.
- For existing applications LandsD is
currently processing, developers must notify LandsD in writing to
indicate the period of extension they are applying for under the
Measure.
- Premiums already paid for any
extensions previously granted would not be
refunded.
- The government has sole and absolute discretion to consider the applicability of the Measure to each individual case.
Practical Implications
- For a developer who has
not commenced strata title sale of units in a
development under the consent scheme, it should consult its
authorised person in adjusting the proposed sale programme, taking
into account the extension that may be granted under the
Measure.
- For a developer who has already sold units in a development under the consent scheme, it is contractually bound by the relevant agreements for sale and purchase to complete the development by the estimated material date (in case of residential units) or by the estimated completion date (in case of non-residential units), subject to an extension of time (if any) as may be granted by the authorised person on such grounds permissible under the relevant agreements for sale and purchase.
1 This is the period imposed on a developer within which it is required to complete the development of the relevant lot in accordance with the conditions of the land grant.
Originally published Mayer Brown, May 2020
Visit us at www.mayerbrown.com
Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2020. The Mayer Brown Practices. All rights reserved.
This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.