CP Extension: Phased Development?

Recent regulations brought out to extend construction period was a welcome development in many respects. Among other things, it introduced the concept of phased development – that is to say – it gave the opportunity to resort developers to provide phases of development and extend their construction periods only to match those development phases.

However, on a detailed examination of the regulations, it is unlikely that these regulations could provide the benefit of phased development to all forms of tourist developments or developers.

Examples of Development

Example 1: There is a lagoon. An island needs to be created. Vegetation needs to be put in place. Back of house and front of house facilities need to established. The entire facility is to be established. An inspection ought to occur, and an operating license ought to be issued. Let’s call this type of development as a vertical development.

Example 2: There is already a development of one natural or created island as a resort. There are other islands in the same lagoon that belong to the same developer and form part of the same leasehold. Or perhaps, there is permission to create islands out of the surrounding lagoon in addition to the existing island. In this scenario, the existing island or near complete island may be built and resort facilities established to commission the property as a licensed tourist resort. However, the owners may want to delay the development of the next island(s) forming part of the same lease and spread them across several years. . Let’s call this type of development as a horizontal development.

Rules favor Vertical or Horizontal Development?

If the recent regulations are read carefully, there is inconsistency over the language used. That has confused the messaging provided to the intending applicants / resort developers. Some clauses suggest that any island can be developed in phases if the owner so wishes – be it horizontal or vertical. However, there are other provisions which collide with that message and insist that each extension of the construction permit must ultimately result in the opening of the resort or part thereof.

Since in a vertical development, a singular resort cannot be commissioned in installments (except perhaps when additional rooms are built on an existing resort in operation), the benefit of the regulations is not fully achievable as the construction permit extension must result in the opening of the resort or part of it. If someone starts from scratch to develop a resort from a lagoon, there is no option but to complete the entire development and open at least some rooms for guests to not violate the conditions of construction permit extension approval. The owner could only add rooms in the scenario post opening – which again is a dreadful scenario given guest complaints and demands for compensation.

Therefore, it is safe to say that the regulations by and large permit construction period extension if developers want to extend the construction period to develop the island in phases horizontally – that is to spread the development on the same island or on nearby islands. The regulations can seldom be used to benefit vertical developments.

In the interest of providing greater clarity to the new regime, the relevant authorities may perhaps consider revisiting the contradictions within the regulations and articulating more clearly the ambit of phased development that they had in mind against which background these policy initiatives were incorporated into the regulations.

Note: the Regulations referred above is cited as the Regulations on Construction Period Extension and Deferment of Lease Rent introduced on 2 July 2019.