SINGLE-PROJECT DEVELOPMENT COMPANIES ---THE RATIONALE AND IMPLICATIONS

Abstract

‘Single-project company' appears to be a business phenomenon. However, the real estate development industry is characterised by the prevalence of single-project development companies. As a company is a separate legal entity, its liability is limited to the amount of capital committed. Developers seem to be able to voluntarily liquidate any single-project development company or let it lapse into dormancy without any difficulties. This study will firstly attempt to look into the reasons behind the proliferation of these companies. The issues of developer's liabilities and purchaser protection at both the construction and post-construction stages of property development will then be examined, taking cognisance of this phenomenon. It is felt that property purchasers are reasonably well protected at the pre-completion stage. Residential property buyers are granted additional safeguard by the implementation of the Project Account Scheme. However, there seems to be a lack of control over developers at the post-completion stage. It is reckoned that the incorporation of single-project development companies may be a necessary corporate strategy for various reasons. Greater protection should, however, be afforded to property buyers as purchasing a property usually represents the largest once-in-a-lifetime investment for most people.