Why Developer Defects Are the Off-Plan Property Buyers’ Worst Nightmare

By Property Soul (guest contributor)

Residents of Trivelis, an 888-unit Design, Build and Sell Scheme (DBSS) project in Clementi, are disappointed about the quality of their new flats.

Owners who collected keys to their new units since January complained about defective stove knobs, rusty dish racks, stain-prone kitchen countertops, poor quality laminate flooring, shattered shower glass panels, wardrobes without shelves, rusty lift doors and flooding corridors.

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What happened to Trivelis after TOP?

Ironically, ‘delivery of high-quality products’ is both the vision and the mission of the developer EL Development, though the long list of developer defects in Trivelis has proven otherwise. The end products are also a big contrast to ‘choice fittings’ and ‘quality floor finishes’ as stated in the project’s sales brochure.

This was not an individual case of one owner suing the developer for discrepancies of the actual unit from the sales brochure, but from the feedback of 300 emails from the residents.

EL Development finally agreed on May 14 that, besides arranging repairs and replacing defective items, it would look into giving residents a goodwill package (Straits Times, May 15, 2015, “DBSS flat owners at Trivelis may get goodwill package following slew of complaints”)

Background of the developer

EL Development is not new in the local property scene. The 9-year-old developer is behind a few small residential projects in the prime districts, including Stevens Suites, Parc Centennial, Rhapsody on Mount Elizabeth and Illuminaire on Devonshire. For mass market condominiums, there are Trivelis, Rosewood Suites, La Fiesta and SkySuites 17. Projects of industrial development include Nordix, Eldix and Jurong Food Hub.

With their higher price tags, flats built under the DBSS scheme are supposed to be better quality compared with Built-to Order or normal HDB flats. For Trivelis, the most expensive unit costs a hefty $800,000 which is comparable to buying a unit in a mass market condominium in the private market.

And it remains a mystery how the developer managed to pass the inspections and checks of the Housing Development Board to obtain the TOP (Temporary Occupation Permit).

The bargaining power of off-plan property buyers

If a buyer purchases a second hand property, to the seller, the buyer is the only purchase party. In this case, the bargaining power of the buyer is high. If the buyer finds any defect during flat viewing, he/she can specify in the offer to purchase to instruct the seller to rectify the problem before handover. If the seller fails to do so, the buyer has the right to seek compensation.

On the other hand, if a buyer purchases off-plan from a project under construction, to the developer, the buyer is only one of a few hundred purchase parties. In this case, the bargaining power of the buyer is low. If the buyer finds any defect after collecting the key, he/she can report to the developer and it is at the discretion of the latter how it wants to rectify the problem.

Although there is a one-year liability period after project TOP for developers to fix all the defects, in the past there are cases where the developer puts the blame on the contractors and conveniently pass the responsibility to them.

When developer defects become yours

For off-plan property buyers, they can only pray that there is no major developer defect when the developer hands over the new flats to them.

If unfortunately, they turn out to be developer defect victims like the Trivelis residents, they can only cross their fingers that the developer will take care of all the rectifying work so that they don’t have to dig into their own pocket.

For units bought for investment, owners may choose to fix the defects themselves rather than waiting for the developer to take actions. Time is money – the sooner they fix the problems, the sooner they can rent out their unit.

If the problem is minor, they may prefer not to talk to the media for fear of affecting the value of their property. Who will want to rent or buy a second-hand unit from a project like Trivelis?

Even if the owners decide to join together to sue the developer, at most the court will order the developer to fix the defects after they win the case. There won’t be any other form of compensation for the owners. It is also likely to end up to be a long battle that wastes time and money.

Protection for buyers of uncompleted projects

One reason why many first-time buyers like to purchase off-plan properties is the flexibility of the payment scheme. After putting down a deposit at the sales gallery, buyers only need to pay the down payment to exercise the option in 8 weeks’ time. After that, they can follow a payment plan according to the building progress of the project.

Without the pressure to fork out a big lump sum upfront, off-plan properties sound more flexible and affordable to home buyers. However, the biggest problem of buying off-plan properties is ‘what you see is not what you get’. Misunderstandings and misinterpretations often arise from pictures for artists’ impressions only and from the unnoticeable fine print.

Except the 12-month defect liability period, there is no law protecting the rights of home buyers when they find sub-standard fittings, furnishings, fixtures and building materials in their new homes. There is also no fine imposed on developers, builders and contractors when they have unsafe structures or fixtures in the project that may cause harm or accidents to residents in the development.

In that sense, the terms of buying resale units are much more favorable compared with buying off-plan properties.

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

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