The Seaview condo saga: What the rulings mean for property buyers

It almost escaped notice, tucked into a small corner of the Straits Times. But in March this year, an important ruling was made regarding The Seaview condo. Property buyers – be they home owners or investors, seem to have missed the significance of it:

What’s going on at The Seaview condo?

We wrote an earlier article about numerous defects at The Seaview condo. Residents had a range of complaints, from choked toilets and sinks, to swimming pools that would lacerate skin and require stitches. A part of the roof, on one of the condo towers, also collapsed onto poolside area during a storm.

This prompted residents of the The Seaview condo to attempt to sue four parties, for damages totalling $32 million:

• Mer Vue Developments, a subsidiary of Wheelock Properties (the developer)
• Tiong Aik Construction (the main contractor)
• RSP Architects Planners & Engineers (the architect)
• Squire Mech (the electrical engineers)

Three of the parties, Mer Vue Developments, Tiong Aik Construction, and RSP Architects Planners & Engineers, claimed that the fault did not lie with them. They blamed the independent contractors hired to work on the development.

This irked residents, who pointed out that the aforementioned parties should still be responsible; they were not the ones who chose the independent contractors. The developer, main contractor, architect, etc. were the ones responsible for picking them.

In March 2016 however, the High Court rules that it was feasible for the three parties to use the independent contractors defence – which basically means they could not be held liable for the damages.

What does this mean for property buyers?

There are a number of critical lessons that can be learned here. These are:

• Developers will have to work harder to get your trust
• The amount you can recoup can be very limited
• The people doing the work may not be the ones you’ve met
• Even for completed units, there are some signs to watch for

1. Developers will have to work harder to get your trust

This ruling is a double-edged sword for developers. While it does mean they are better protected, it also establishes ground rules that raise suspicion. Buyers now know that it’s hard to hold developers accountable – should they attempt to sue, the developer can simply push the blame onto one of the many sub-contractors.

This awareness could have a dire impact on the sale of under-development units.

Developers already give substantive “early bird” discounts to entice buyers to move in early; and with time limits imposed by the Additional Buyers Stamp Duty (ABSD) for developers, garnering enough trust to sell under-development units is important.

But with developers being well armoured against lawsuits, will property buyers dare?

Newer developers, who do not have a track record, may find this legal protection to be more hindrance than help. Their lack of immediate credentials will not put increasingly wary buyers at ease.

2. The amount you can recoup can be very limited

First, note that there isn’t much money in suing a sub-contractor. These are often Small to Medium Enterprises (SMEs), and some may be mom-and-pop companies who are already struggling in a difficult economy. It’s almost impossible that they will be able to cough up several million dollars to compensate you.

Second, there is some possibility that the sub-contractor might, in turn, blame another sub-contractor. And as you go further down the chain, the amount of money that you can recoup becomes less and less.

Even if you do successfully pursue the case, do not count on fixing all the financial damage you might incur.

3. The people doing the work may not be the ones you’ve met

When we buy from a developer, we’re often drawn in from a solid track record, a glossy brochure, or a nice show flat. But now, buyers need to be aware that these same people use other contractors to do the work. This means quality can vary.

Most developers are meticulous to a fault, and will safeguard their reputation by picking contractors they’ve used for years. But every now and then, they might experiment with a new one.

Perhaps a good question to ask in showrooms now is “Will you be using the same sub-contractors?” when a new development is compared to previous successes.

Trying to evaluate each sub-contractor will, unfortunately, be beyond the means of most regular buyers.

4. Even for completed units, there are some signs to watch for

The people who can sue, in this case, are restricted to the ones who purchased the units directly from the developer (new sales). We note that in The Seaview condo, this now accounts for just a small minority of the residents.

The ones who bought their units from previous tenants cannot even sue. They’ll have to live with the existing situation.

The fact that they are the majority also suggests a large number of tenants got lucky, and were able to offload this property on them. We don’t know how the various problems were concealed, but it does mean we need to watch for signs even when buying completed units.

It’s always a good idea to check online, for issues such as court battles with developers. Alternatively, trawl forums for complaints – property buyers are usually quite loud, with regard to defects.

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