FAQs for Situation A – Additional rental expenses for construction goods
Situation A – Where a person who rented goods used for construction work is or will be liable for additional rental expenses
A person who has rented goods for use in construction work may apply for relief if he is or will be liable to his supplier for additional rental expenses due to a delay or breach in a separate construction or supply (or related) contract. For example, a contractor may have rented goods (e.g.scaffolding material, hand drills) from a supplier to perform works under a construction contract that the contractor has with a third party. The contractor may be liable for additional rental expenses incurred as a result of returning the goods later than intended because construction works are delayed due to the COVID-19 situation. The contractor may apply for relief under Part 8 in respect of the additional rental expenses.
Click here for a summary of the relief in this situation.
Part 8 also applies to the situations below. Further details may be found in the FAQs that are linked below:
1. What is the criteria I must fulfil before I can make an application for relief under Part 8?
You (the applicant) must fulfil the criteria below:
- You must be a party to a contract for the rental of goods used for construction work (the “affected contract”)
- You must have entered into the affected contract before 25 March 2020
- The affected contract must be in force at any time between 1 February 2020 and 31 March 2021 (both dates inclusive)
- You are, or will be, liable for additional rental expenses because of a delay or breach in a separate construction or supply (or related) contract, and this delay or breach occurred between 1 February and 31 March 2021 (both dates inclusive) due to COVID-19 (Note: The parties to this contract need not be the same parties as the affected contract)
- You could not have avoided the additional rental expenses by taking reasonable steps
In addition, relief under Part 8 of the Act is not available if, in relation to the subject of your intended application –
- An adjudication application has been made under the Building and Construction Industry Security of Payment Act (“SOPA”) for a claim against you; or
- Court or arbitral proceedings have commenced against you.
2. What are “goods that are used for construction work”?
- “Goods” means plant or materials for use in connection with the carrying out of “construction work”. “Construction work” is defined in section 3 of SOPA. Examples include scaffolding material, and hand drills.
3. What kind of determinations can an Assessor make?
The Assessor may adjust:
- the date by which the goods are to be returned to the supplier of the goods; or
- rental rate payable for the duration that the renter holds possession of the goods.
4. Will the Assessor determine how much I must pay the supplier?
- The Assessor may adjust the date when the goods are to be returned, or the rental rate. The Assessor does not determine other matters.
- The final amount owed to the supplier may be dependent on other factors or clauses in the contract besides the rental rate or the return date. If there is a dispute on these other matters, the parties may have to resolve the matter in accordance with the dispute resolution clause in the contract or through legal proceedings.
5. How do I apply for relief under Part 8?
- You will need to submit an application to the Registrar. Further details, and the applicable forms, can be found here.
6. What is the latest date I can apply for relief under Part 8?
- Your application must be filed before 31 May 2021.
7. Can the other party commence proceedings against me while I apply for relief under Part 8?
A temporary moratorium will apply once you have served the application for relief (the “Application”) on the other party or parties to the affected contract. The moratorium will end on the earliest of the following:
- Your withdrawal of the Application
- The Registrar’s rejection of the Application
- The issuance of the Part 8 Determination
Under the moratorium, the other party or parties to the affected contract may not:
- Make a SOPA adjudication application; or
- Start court proceedings or arbitral proceedings,
against you in relation to:
- your obligation to return the goods by a date specified in the affected contract; or
- your obligation to pay moneys as rent to the supplier for the duration that you hold possession of the goods.
Please see section 37A of the Act for the full list of prohibited actions during the moratorium.
8. I was liable for additional rental expenses due to reasons unrelated to COVID-19. Can I apply for relief under Part 8?
- No. To qualify for relief under Part 8, your liability for additional rental expenses must be due to a delay or breach in a construction or supply (or related) contract, and that delay or breach must be due to COVID-19. Relief under Part 8 is not available if your liability for additional rental expenses arises due to other reasons.
9. Why am I precluded from applying for relief under Part 8 if the supplier has made an adjudication application under SOPA?
- This preclusion is intended to prevent parallel proceedings under Part 8 and SOPA.
- You are not disadvantaged by this preclusion. The SOPA adjudicator determining the adjudication application has the same powers to adjust contract terms as an Assessor under Part 8. This allows the SOPA adjudicator to take into account the effects of COVID-19 to reach a just and equitable outcome, which is similar to what the Part 8 Assessors are able to do.
10. My renter has applied for relief under Part 8 and served the Application on me. What do I do next?
You will need to submit a Response to the Registrar, and serve it on the Applicant (i.e., your renter). Further details can be found here.
11. I rely on my rental income to pay for my own expenses, such as hire-purchase instalments. I cannot afford to reduce the rent. What do I do?
You should explain your situation to the Assessor in your Response. The Assessor will seek to achieve an outcome that is just and equitable in the circumstances, and may take into account:
- The impact that any adjustment may have on another contract that you may have with a third party (e.g., a hire-purchase contract for the goods in question)
- Any loss suffered or benefit obtained by you in relation to the matter
Interaction with SOPA
Effect of the moratorium
Once the application for relief under Part 8 has been served on the other party to the contract (i.e., the supplier), the supplier may not lodge an adjudication application under SOPA in relation to:
- the renter’s obligation to return the goods by a specified date in the affected contract; or
- the renter’s obligation to pay moneys as rent to the supplier for the duration that the renter holds possession of the goods.
Please see FAQ 7 for more details on the moratorium, and when it ends.
12. What happens if a party commences or continues SOPA adjudication proceedings in breach of the moratorium?
It is an offence to commence or continue SOPA adjudication proceedings (or court or arbitral proceedings) without reasonable excuse, in breach of the moratorium.
The SMC (as the authorised nominating body) or the SOPA adjudicator should be informed that there is a prior Part 8 application. Any SOPA adjudication proceedings commenced in breach of the moratorium will be terminated by the SOPA adjudicator, if an adjudicator has already been appointed. If an adjudicator has not yet been appointed, SMC (as the authorised nominating body) will take no further action on the application.
13. Is a party precluded from commencing SOPA proceedings after a Part 8 Determination has been made?
- No, a party can still file an adjudication application under SOPA after a Part 8 Determination has been made.
- However, the SOPA adjudicator will consider only the contract as adjusted by the Part 8 Determination.
Impact of the Part 8 Determination on SOPA adjudication proceedings
The temporary moratorium discussed above ends once the Part 8 Determination has been made. Thereafter, the supplier may lodge an adjudication application under SOPA.
The SOPA adjudication application process will take into account the Part 8 Determination, which must be submitted together with the adjudication application. In particular:
The “contract” for the purposes of SOPA is the contract as adjusted by the Part 8 Determination.
Various timelines under SOPA are adjusted to take into account the moratorium under Part 8.
The SOPA adjudicator must disregard any submissions, documents or other information provided if it is inconsistent with the contract as adjusted by the Part 8 Determination.
Please see section 38B of the Act for further details.
SOPA adjudicators conferred similar powers as the Part 8 Assessors
SOPA adjudicators have been temporarily conferred with similar powers as the Part 8 Assessors to adjust prescribed obligations, rights and terms in contracts for which an adjudication application has already been made under section 13(1) of SOPA. This allows SOPA adjudicators to reach a just and equitable outcome that takes into account the unexpected effects brought about by COVID-19.
This will primarily have an impact on how disputes on construction goods rental contracts (i.e., Situation A) are currently adjudicated under the SOPA adjudication regime.
These amendments are temporary, and are not intended to have a permanent impact on the SOPA adjudication regime.
14. If an Assessor has made a determination and ordered an equitable adjustment of the contract under Part 8 of the Act, can a SOPA adjudicator order that the contract be further adjusted?
- No. Where an Assessor has adjusted the contract, the SOPA adjudicator or review adjudicator may not order a further adjustment.
15. Will the outcomes reached under Part 8 Determinations and SOPA adjudications be consistent?
- MinLaw has worked closely with MND and BCA to prepare guidelines and conduct briefings for Part 8 Assessors and SOPA adjudicators to ensure that they are well-equipped and familiar with the regime.