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The Security of Payment Act (“SOPA”) is designed to improve cash flow for the construction industry. An often overlooked aspect of SOPA is its statutory limitation periods, which dictate the time limits within which claims can be made under SOPA.

The SOPA was amended in 2019 (“2019 Amendments”) and applies to contracts entered into on or after 15 December 2019 (“New Contracts”). The 2019 Amendments introduced new statutory limitation periods for claims under SOPA.

At the same time, the Security of Payment Act 2004 (“SOPA 2004”) in force prior to the 2019 Amendments continues to apply for contracts entered into before 15 December 2019 (“Old Contracts”). As 2025 beckons, an important milestone looms for these Old Contracts: the expiration of the statutory limitation periods. Unless substantial construction works were carried out after December 2019, most of the claims under these Old Contracts will be expiring by the end of December 2025.

This article serves as a reminder for claimants who are experiencing difficulties resolving their payment claim disputes to either act swiftly in asserting their claims under SOPA or achieve a settlement of their disputes before the expiration of their claims.

Understanding the Statutory Limitation Periods

Prior to the 2019 Amendments, claimants were allowed to serve payment claims within six years from the date construction work was last carried out or goods or services were supplied. As made clear in the transitional provisions to the 2019 Amendments, this straightforward rule continues to apply to all contracts entered into before 15 December 2019 (i.e. the Old Contracts).

In contrast, the 2019 Amendments introduced a nuanced statutory limitation period for the New Contracts. Claims for construction works under these New Contracts shall be served not later than 30 months from the latest of the following events:

• The date construction work was last carried out, or goods/services were last supplied.
• The issuance of a certificate certifying the completion of works under the contract.
• The issuance of the last temporary occupation permit ("TOP") at the time the claim is served.

In proposing a new statutory limitation period, the Ministry of National Development considered viewpoints from different stakeholders in the construction industry, and ultimately decided that a limitation period of 30 months was “a reasonable period taking into account the time to settle final payment claims and the defects liability period, which typically ranges from 12 to 18 months.”

While ostensibly providing a shorter time period of 30 months, one contrarian view may be that the 2019 Amendments actually provides a more realistic timeline to accommodate complex projects where certifications or TOP may take longer to finalise. The 2019 Amendments also aligns with the realities of multi-phase developments, where the issuance of critical documents often occurs long after physical work concludes.

2025: A Crucial Year for Old Contracts

Unless substantial construction works were carried out after December 2019, most of the claims under the Old Contracts will be expiring by the end of December 2025.

Understandably, many of the Old Contracts involve projects that would have been affected or delayed by the Covid-19 pandemic, resulting in payment claim disputes that are difficult to resolve even after years of negotiations.

Against this backdrop, claimants with Old Contracts need to be mindful that any claims for construction work must have its corresponding payment claim served within the six-year statutory limitation period to remain valid under the SOP Act 2004. Failure to do so may leave claimants without expeditious recourse to statutory adjudication for claiming these construction works.

In such a scenario, claimants can only resort to litigation or arbitration to claim for these construction works. These dispute resolution mechanisms, while still viable, are typically slower and more expensive, potentially undermining the financial position of smaller players in the industry.

Furthermore, it is likely that claimants who have missed the six-year statutory limitation period under the SOP 2004 are also time-barred in litigation or arbitration proceedings for the same claim, as the statutory limitation period under the Limitation Act is six years from the date on which the cause of action accrued..

Practical Steps for Claimants with Old Contracts

To navigate these statutory timelines effectively, claimants with Old Contracts should consider the following:

• Review Project Records

Claimants should conduct a thorough review of their contracts, payment schedules, and project records to identify potential claims that may be nearing the six-year statutory limitation period. Ensuring that documentation is complete and accurate is crucial to substantiating these claims, especially in situations where the work may have been completed several years ago.

• Serve Payment Claims Promptly

Claimants should act immediately to serve payment claims and if necessary commence adjudication proceedings to claim for construction works that are nearing the expiry of the statutory limitation period. Consulting legal advisors familiar with SOPA can help ensure compliance with the relevant procedural requirements.

• Communicate with Counterparties

Ideally, open communication with counterparties can lead to negotiated resolutions and avoids the need for formal adjudication. Claimants facing the prospect in which most of their claims are nearing expiry of the statutory limitation period may need to accept that their bargaining power has been diminished. At the same time, the pending expiry of the statutory limitation period may serve as an impetus to achieve a settlement of part or all of these claims.

New Contracts: Looking Ahead

While the statutory limitation period for Old Contracts takes up greater urgency, claimants with New Contracts must also be mindful of the statutory limitation period provided in the 2019 Amendments.

The 30-month statutory limitation period requires meticulous record-keeping on the part of the claimants. Claimants should monitor project milestones that may trigger the start of the statutory limitation period. If the issuance of the certificate of completion or TOP for a project has been substantially delayed, claimants may also need to retain project documentation well beyond the completion of physical works, adding to administrative burdens.

Technology can play a pivotal role in ensuring compliance with the statutory limitation periods. Digital tools such as contract management software, project tracking systems, and automated alerts can help stakeholders monitor critical dates and ensure timely action. These tools are particularly valuable for larger projects involving multiple parties and extended timelines.

Conclusion

The construction industry has largely adapted to the 2019 Amendments. However, vestiges of the SOP 2004 remains – Claimants with Old Contracts need to be apprised of how they are operating under different statutory limitation periods from the previous regime, and of the impending expiry of their claims if they do not take proactive steps. 

Claimants with New Contracts should also act decisively to review their claims and ensure that payment claims are served within the respective statutory limitation periods.

Contributed by:

Eugene Lee – Associate, Nishimura & Asahi (Singapore) LLP

Derek Tay – Associate, Nishimura & Asahi (Singapore) LLP

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Nishimura & Asahi (Singapore) LLP. The information provided in this article is for general informational purposes only and should not be construed as legal advice or otherwise.