Building law and regulation in Singapore during Covid-19

1. Is there construction-relevant COVID-19 regulation? 

The government has passed the COVID-19 (Temporary Measures) Act (the “Act”). The Act recognizes that the supply chain disruptions and manpower shortages have undermined the ability of businesses to fulfil their contractual obligations. As such, it would be unfair to hold them strictly liable for their failure to do so. 

  • The Act will apply to obligations to be performed on or after 1 February 2020 arising from contracts entered into before 25 March 2020. The measures are in place from 20 April 2020 to 19 October 2020 (the “Prescribed Period”).
  • The Act provides temporary relief for the inability to perform contractual obligations by way of service of a notification of relief to other parties to the contract. A Body of Assessors will be appointed under the Act to resolve disputes arising from the application of the Act (“Assessor’s Determination”). They will decide if the inability to perform contractual obligations was due to COVID-19 and will have powers to grant relief that is just and equitable in the circumstances.
  •  The Act increases the monetary thresholds and time limits for bankruptcy and insolvency. This will help stable businesses stave off the threat of insolvency proceedings. Enforcement of security over immovable property and movable property used for the purposes of business or trade will also be restricted. 
  • There are specific provisions in the Act that apply to obligations arising from construction or supply contracts, such as prohibitions on calling and/or extending a performance bond, imposing liquidated damages under the contract, and defences for breach of contract. 

Further to the Act, the COVID-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations 2020 was passed on 20 April 2020. Parties seeking relief from their contractual obligations must file a Notification for Relief 1 https://www.mlaw.gov.sg/files/Form-1.pdf  before the end of the Prescribed Period for service on: 

  • The other party or parties to the contract, and the guarantor or surety for the subject obligation and the issuer of a related performance bond (if applicable).
  • If parties are unable to come to an agreement, an applicant who has been served the Notification for Relief can apply for an Assessor’s Determination. 2 https://www.mlaw.gov.sg/covid19-relief/application-for-assessor The outcome of the Assessor’s Determination is final, with no appeals. 

In line with the government’s Circuit Breaker 3 The government has implemented a “Circuit Breaker” period from 7 April 2020 to 4 May 2020 to stop the spread of the virus. During the Circuit Breaker, only essential services such as food & beverage outlets, food suppliers such as supermarkets and grocery stores and certain retail outlets such as pharmacies are allowed to remain open. There has also been a closure of most workplace premises, save for entities that are deemed to provide essential services and/or are crucial to the global supply chain. , the Building and Construction Authority (“BCA”) has issued an Advisory dated 3 April 2020 informing contractors that all building works as defined under the Building Control Act, except for works that are deemed essential, are required to cease with effect from 7 April to 4 May 2020 (“Stop Work Period”).

2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only)

BCA

The BCA has on 8 April 2020 issued a Circular regarding a one-off advance payment for public sector contracts affected by the suspension of activities at workplaces due to Covid-19. To mitigate the undesirable impact on cashflow during the Stop Work Period, Government Procuring Entities 4 I.e. Ministries, statutory boards and organs of state  will make a one-off advance payment, on an ex-gratia basis, to the main contractors for affected public sector projects during the Stop Work Period. 

In general, the amount of advance payment would be computed based on 50% of the average monthly amount of certified progress payments in past 3 months received by the main contractor, capped at 2.5% of contract sum or $5 million, whichever is lower.

The main contractors and downstream sub-contractors are expected to apportion and pass down the portion of the advance payment due to their sub-contractors. 

Budget

At the time of writing, the Government has announced a Unity Budget (Feb 2020), Resilience Budget (Mar 2020) and Solidarity Budget (April 2020). While the subsidies and government support are not specifically targeted at the construction industry, there are various schemes to help construction companies to cope with cash flow and credit issues.

In terms of cash flow and business costs:

  • Companies will be granted an automatic deferment of income tax payment for 3 months. No application will be required. 
  • All government fees and charges will also be frozen for 1 year, from 1 April 2020 to 31 March 2021.
  • The government has implemented a Job Support Scheme (JSS) to support employers in helping them retain their local employees (Singaporeans and Permanent Residents). In the latest Solidarity Budget, the Government will subsidize 75% of the first $4,600 of gross monthly wage of all employees who are Singaporeans or permanent residents. 
  • The monthly foreign worker levy due in April 2020 will be waived. The government will also provide employers with a foreign worker levy rebate of $750 for each work permit or S pass holder, based on previous levies paid in 2020.
  • The property tax rebate has been enhanced in the Resilience Budget and Solidarity Budget, by raising the amount and covering more types of properties. Non-residential properties benefit from a tax rebate of up to 100%. The Act also seeks to ensure pass-through of property tax rebates from property owners to tenants. 

Financing schemes will be further enhanced to facilitate access to credit.

  • To support businesses’ trade financing needs, the Enterprise Financing Scheme 5 The EFS is a financing scheme provided by Enterprise Singapore, a Singapore statutory board. The EFS-Trade Loan serves to finance trade needs, such as inventory / stock financing, factoring, bill of invoice or AR discounting. More information can be found at https://www.enterprisesg.gov.sg/financial-assistance/loans-and-insurance/loans-and-insurance/enterprise-financing-scheme/overview  (“EFS”) – Trade Loan will be enhanced, with the maximum loan quantum being increased from $5 million to $10 million, and an increase in the government’s risk-share to 90%, up from 80%.
  • Subsidies to businesses for loan insurance premiums will be increased from 50% to 80%, under the Loan Insurance Scheme (“LIS”). 6 Under the LIS, loans are insured by commercial insurers which co-share loan default with PFIs in the event of insolvency.
  • The Temporary Bridging Loan Programme 7 The TBLP provides access to working capital for business needs. Eligible enterprises may borrow from PFIs under this scheme, and the government will provide 90% risk-share on these loans  (“TBLP”) will be expanded to all enterprises, and the maximum supported loan will be increased from $1 million to $5 million.
  • Small and Medium Enterprises (“SMEs”) 8 To check if a company qualifies as an SME in Singapore, please see https://grantportal.enterprisesg.gov.sg/spring/Pages/SME_Eligibility_Check.aspx  that require support beyond the TBLP can continue to tap on the EFS – SME Working Capital Loan . The maximum loan quantum for this will be further enhanced, from $600,000 to $1 million.
  • The government will work with Participating Financial Institutions (“PFIs”) 10 The list of PFIs can be found at https://www.enterprisesg.gov.sg/financial-assistance/loans-and-insurance/loans-and-insurance/enterprise-financing-scheme/sme-working-capital/apply to defer capital payments for one year on the EFS-Working Capital Loan 9 This scheme aims to finance the operational cash flow needs of SMEs, over and above the TBLP and the TBLP loans if requested by businesses, subject to assessment by Participating Financial Institutions.
  • In addition to financing schemes above, $20 billion of loan capital will be set aside this budget. This is intended to help to support good companies with strong capabilities, and catalyse private sector loan capital.

In Singapore, a general principle relating to force majeure clauses is that the principal purpose of a force majeure clause is to contractually allocate the risks between the contracting parties with regard to the occurrence of future events in specific circumstances, all of which are stipulated within the clause itself. Essentially, the governing legal principle in the context of the construction and interpretation of force majeure clauses is that the precise construction of the clause is paramount, as it would define the precise scope and ambit of the clause itself.

Two standard form contracts most commonly used in the Singapore construction industry are the Singapore Institute of Architects’ (“SIA”) and the Public Sector Standard Conditions of Contract (“PSSCOC”). Both contracts allow for the extension of the contract period, subject to compliance with notice provisions, by such further periods as may reasonably reflect any delay in completion which, notwithstanding due diligence and the taking of all reasonable steps, has been caused by force majeure.

Force majeure is not a term defined in the SIA or the PSSCOC standard form contracts. However, the Court of Appeal has noted that, by their very nature and function, force majeure clauses would in the ordinary course of events be triggered only whether there was a radical external event that supervened and that was not due to the fault of either of the contracting parties.

In this regard, regulations which an employer of labour could not reasonably have foreseen at the date of the contract are a default criteria for extension of time under both the SIA and the PSSCOC standard form contracts. Meanwhile, as explained below, under both the SIA and PSSCOC standard form contracts a variation necessitated by compliance with law may give rise to price and time entitlements.

4. Does the Epidemic give rise to termination rights to either party?

Neither the SIA nor the PSSCOC standard form contracts contain provisions which could result in termination specifically due to the virus, but employers may at any time give contractors written notice of termination.

5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

As explained previously, regulations which an employer of labour could not reasonably have foreseen at the date of the contract are a default criteria for extension of time under both the SIA and PSSCOC standard form contracts, but this is not a matter entitling a contractor to payment of money as of right under the SIA standard form contract.

However, the SIA and PSSCOC standard form contracts do provide that contractors shall comply with any written law applicable, and shall before making any variation from the works necessitated by such compliance give a written notice specifying and giving the reasons for such variation.

Under the SIA standard form contract, if within 7 days of having given the said written notice the contractor does not receive any direction or instruction in regard to the matters therein specified it shall proceed with the work and any variation thereby necessitated shall be deemed to be ordered by a written instruction (which may entail a price adjustment, and if appropriate an extension of time).

The PSSCOC standard form contract merely adds the requirement that any variation necessitated as aforesaid must not have been reasonably foreseen by an experienced contractor at the time of submission of the tender.

6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?

The Act has been passed on 7 April 2020. However, there is a possibility of further enhancements and extensions to the scope of the Act due to the evolving nature of the situation. Clients are encouraged to seek legal advice on the latest developments.

Portrait ofLynette Chew
Lynette Chew
Partner
Singapore
Portrait ofKelvin Aw
Kelvin Aw
Partner
Singapore