OPTION TO PURCHASE AND SALE AND PURCHASE AGREEMENT FOR “UNCOMPLETED” PROPERTIES OR PROPERTIES

Date: 14/12/2020, 10am-1pm

CPD Course

Fortis Law, Patrick Tan

Cobroke agent to the buyers

To ensure your interest to be protected, I would like to represent you on a FOC basis

Buy in trust to son has no protection to the parents, it's a gift

Mortgagee is the bank, the persons who provide loan and be a mortgagee

99/1 only in BUC

buy than subsale 1%

1 person buy first (usually no financial capability) than subsale 1% to get a co-owner

Sell 1% to buyer, He paid ABSD only pay on the 1%, tenancy in common

2nd buyer more financing power

start the subsale ASAP before the 1st progressive payment comes in

Requires developer approval

cannot get bank loan

usually for financial and ABSD reason

The person who buy 1% can also get loan of 75%

Side question, In a HDB resale, if the seller decided to pull out from the deal with no good reason, and the seller refuse to pay commission to the agent stating that the deal is not completed, does the seller's agent have any case to claim the commission from seller?

Can the developer re-issue after the govt stepped in?

Buying in Trust have to pay in full

Custody right vs Care and Control

Knowing who you are representing

Agents is not allow to give kickback to clients in BUC

Developer team agents

Cobroke agent

Whose agent are you in a cobroke case (BUC)

Are you a buyer agent?

Are you developer agent?

Are you developer agent's agent?

- You are buyer's agent

If you want to sue, there must be a relation in a contract

You must be the effective course of the transaction

What is the amount to pay to buy this option?

Resale

- Resale is 1%,

- Forfeit all 1%

BUC is 5%, booking fee to buy an OTP (2 + 3 weeks)

- Forfeit 25% (1.25%) of 5% when buyer to not to exercise (sign the SPA)

- the OTP and SPA cannot be amended an the Option period cannot be changed or negotiated

- there is such thing as unlicened developer (below 4 units), that doesn't mean there are illegal developers

- 15% pay within weeks to the vendor, within 8 weeks from the date of option

- SD within 14 days signed 3 copies of SPA

- No assignment (cannot and/or nominee, no one know the eventual buyer)

Assuming you are not buying or selling yourself

Can you represent nobody but yourself? Represent money?

Cannot, you have to be an agent of somebody

Do not put yourself in a conflict of interest situation

You can market your own property, but you need to disclose that you are the seller and you are the marketing agent

Know your client

Know your properties

- Spent at least $5 to purchase the ownership search

- Don't rely on what the owner tell you

- Get a BCA approved plan if you market landed property

OPTION TO PURCHASE AND SALE AND PURCHASE AGREEMENT FOR

“UNCOMPLETED” PROPERTIES OR PROPERTIES UNDER CONSTRUCTION 6

 What is the difference between the OTP (that we discussed above) and SPA?

 Contract between the seller and buyer for the sale and purchase of a property

(under construction).

 Licensed housing developers are required to use the standard form SPA and

OTP (found in the Housing Developers Rules) which sets out terms relating to

matters such as:

 Share value

 Progress payments

 Sub-sale

 Obligations of developer and buyer

 Is there such a thing as an “unlicensed” developer?

Sale & Purchase Agreement & OTP

Criteria for issue of Housing Developer’s Sale / No-Sale Licence (Circular No:

URA/2016 dated 1 March 2016)

 Developers who are developing more than 4 units.

 For Sale licence, minimum paid-up capital or deposit of S$1m to S$4m,

depending on project size. For example, more than 400 units = S$4m.

>50units = S$1m.

 For No-Sale licence, minimum paid-up capital S$100,000.

 Applicant has in the past 5 years completed a licensed residential project, a

reasonably sized non-residential project, or a reasonably sized residential or

non-residential project overseas.

In a BUC, there are 2 contracts, OTP (booking fee 5%) and SPA

Within 2 weeks, 3 copies of the SPA will be generated

For completed properties, stamp duty must be paid within 14 days exercised of the OTP

- Can, but subject to CPF approval, pay cash first then reimburse later from CPF

- You can apply to CPF to pay direct if the LO is signed, OTP, SPA is signed, all the necessary document done and signed

Sale & Purchase Agreement & OTP

Important terms in the OTP accompanying the SPA

(1) Details of the Developer and Developer’s licence must be stated clearly.

 Option date.

 Name of Developer / Vendor.

 Address of registered office.

 Developer’s licence No.

 Intending Purchasers’ details, NRIC, address.

 Property and address of property.

 Details of property such as tenure, encumbrances, land area, floor area,

number of units in the project, purchase price, unit purchase price psm,

booking fee (instead of Option Fee), date of approval of building plans,

vacant possession date etc.

Important terms in the OTP accompanying the SPA

(2) OTP

In consideration of the Booking Fee (how many %?) paid by way of

cheque/cashier’s order no. [ ] crossed “Account Payee only” and drawn

in favour____of/by telegraphic transfer to [name of Vendor’s project

account opened with bank or finance company] which the Vendor has

received from ____the Intending Purchaser, the Vendor grants the

Intending Purchaser the option____of purchasing the Property at the

Purchase Price.

 Note the difference in procedures compared to the OTP for completed private

properties.

Important terms in the OTP accompanying the SPA

(3) Obligations of developer

 Vendor / Developer will send by hand or registered post to the Intending

Purchaser of his/her lawyers within 14 days after the Option date the original

or copies of the property title deeds and (usually) 3 execution copies of the

SPA.

 SPA will be in prescribed form under the Housing Developers Rules

(Cap. 130, R 1).

Important terms in the OTP accompanying the SPA

(4) Expiry of OTP

 3 weeks after the date of delivery to the Intending Purchaser or his/her lawyers.

 Note the difference with the OTP for completed private properties.

Important terms in the OTP accompanying the SPA

(5) Exercise of OTP

 Sign all execution copies of the SPA and return them to the Vendor / Developer

or its lawyers.

 Vendor / Developer will within 14 days after receiving the signed SPA, sign the

SPA and return 1 signed copy of the SPA to the Intending Purchaser or his/her

lawyers.

 Pay Vendor / Developer [ ] being 20% of the Purchase Price less than

Booking Fee, on the exercise of the OTP / within 8 weeks after the date of this

OTP.

Important terms in the OTP accompanying the SPA

(5) Non-exercise of OTP

 If non-exercise, Vendor / Developer will refund to the Intending Purchaser 75%

of the Booking Fee (75% of the 5%) within 4 weeks after the OTP expiry or

within 4 weeks after the date of receipt of the written notice from the Intending

Purchaser stating that he/she does not wish to exercise OTP.

 Upon refund, Intending Purchaser or his/her lawyers to return to the Vendor /

Developer the original or copes of the property title deeds together with all the

execution copies of the SPA.

Important terms in the OTP accompanying the SPA

(6) Assignment

 Intending Purchaser not allowed to assign or transfer the OTP.

 OTP is personal to the Intending Purchaser.

Important terms in the OTP accompanying the SPA

(7) Information on Strata Unit

 Share value allotted to the property and Intending Purchaser’s share of

maintenance charges for the common property to be clearly stated.

Important terms in the OTP accompanying the SPA

(8) Sale to Foreign Purchasers

 Applies to non Singapore Citizen or non-approved purchaser under the RPA

(Cap. 274).

 Sale is subject to approval being obtained from the Controller of Residential

Property.

 Application to be made within 3 weeks after the date of exercising the OTP.

 To notify Vendor / Developer of application result within 2 weeks of receipt.

 If approval is not obtained within 12 weeks after the date of exercising the OTP,

OTP becomes null and void. Full refund without interest within 4 weeks after

receipt of evidence of refusal of application. Or refund less 25% of Booking

Fee if no evidence of refusal.

Important terms in the SPA

(1) Payment schedule

Sale & Purchase Agreement & OTP

Within 8 weeks immediately after Option date: 20% inclusive of Booking Fee

Foundation work: 10%

Reinforced concrete framework of the unit

completed:

10%

Partition walls of unit completed 5%

Ceiling of unit completed: 5%

Door sub-frames/window frames, electrical

wiring, internal plastering and plumbing of unit

Important terms in the SPA

(1) Payment schedule

 Last 15% - between Vendor and SAL as stakeholder

 All payments to be made to project account

Important terms in the SPA

(2) Notice of deductions

 If Purchaser intends to make deductions from the 5% held by SAL, he/she must

serve on SAL and the Vendor in writing a notice of deductions (Form 3) at least

7 working days before the Final Payment Date, regardless whether the 5% has

been paid to SAL.

 If Vendor disputes all or any part of the deductions in Form 3, Vendor may

serve on SAL a notice stating the amount of deductions in dispute and the

amount not in dispute, if any (Form 3A).

Important terms in the SPA

(3) Late payment of instalments

 Purchaser shall pay interest on the unpaid amount to Vendor until the unpaid

amount is paid or the expiration of the repudiation notice, whichever occurs

first.

 Interest is calculated on a daily basis at 2% per annum above the basic rate.

Important terms in the SPA

(4) Repudiation by Purchaser

 If any instalment or amount and interest remains unpaid for more than 14 days

after the expiry of the relevant period or the date, Vendor can treat the SPA as

repudiated by the Purchaser.

 But Vendor must first give Purchaser 21 days’ notice in writing of Vendor’s

intention to treat the SPA as being repudiated.

 Once repudiated, Vendor can re-enter and repossess unit if already delivered;

Important terms in the SPA

(4) Repudiation by Purchaser

 Resell or otherwise dispose the unit;

 Recover the instalments, amounts and interest, property tax, maintenance

charges etc;

 Forfeit and keep 20% of the Purchase Price from the instalments previously

paid by the Purchaser and recover any shortfall if instalments are insufficient to

cover the said 20%.

Important terms in the SPA

(4) Repudiation by Purchaser

 After deducting the amounts above, Vendor must refund balance of those

instalments not more than 21 days after the annulment of the SPA or where

vacant possession of unit has been returned / recovered by Vendor.

Important terms in the SPA

(5) Vendor’s obligations

 Build the unit and common property ASAP and in good and workmanlike

manner according to specifications and plans.

 Obtain all necessary consents and approvals from relevant authorities.

 Obtain SSCT for the unit.

Important terms in the SPA

(6) Title surveys

 Vendor must conduct or cause to be conducted all necessary title surveys for

subdivision and for preparation of strata certified plans for unit.

 As for the expenses for surveys and preparation of strata certified plans,

Vendor shall contribute 50% and Purchaser a proportion of the balance 50%

which is equal to the proportion the share value allotted to the unit bears to the

aggregate share value for the entire project.

Important terms in the SPA

(7) Delivery of possession

 Delivery date must be clearly stated (vacant possession date).

 Before delivery, Vendor must ensure unit is completed and fit for occupation.

 Vendor must deliver Notice of Vacant Possession for unit which must contain

the date on which vacant possession of unit is delivered to Purchaser and

Homeowner User Manual.

Important terms in the SPA

(7) Delivery of possession

 May be liable for LD if vacant possession of unit not delivered by Vacant

Possession Date. LD calculated on a daily basis at 10% per annum on the total

sum of all the instalments paid by Purchaser towards the Purchase Price,

payable commencing on the start date until vacant possession of unit is

delivered to Purchaser.

Important terms in the SPA

(8) Maintenance charges

 Purchaser shall pay to Vendor maintenance charges for common property

starting on the date the Vendor actually delivers vacant possession of unit to

Purchaser; or the 15th day after the Purchaser receives the TOP or CSC,

whichever is earlier.

 Maintenance charges for the first 6 months and GST are to be paid in advance

in one lump sum, and are subsequently to be paid quarterly in advance.

 Shall continue to be payable to the Vendor until MC takes over from Vendor the

function of maintaining the project.

Important terms in the SPA

(9) CSC

 Vendor at its own costs to procure the issue of CSC of unit for Purchaser.

 After delivery of vacant possession but before CSC issued, Vendor and his

workmen have right to make alterations and additions to unit as may be

required by authorities and Purchaser agrees to grant them access at

reasonable times.

Important terms in the SPA

(10) Completion

 Vendor must give Notice to Complete to Purchaser and state date clearly or 3

years after the date of delivery of vacant possession of unit, whichever is

earlier.

 Completion must take place 14 days after Purchaser or his/her lawyers

receives the Notice to Complete.

Important terms in the SPA

(10) Completion

 On completion, Vendor must execute a proper conveyance to Purchaser of unit

and deliver a duplicate SSCT.

 If Vendor fails to give Notice to Complete by the stipulated date, must pay LD to

Purchaser at 10% per annum on the total instalments paid towards the

Purchase Price.

Important terms in the SPA

(11) Defects Liability Period

 Vendor must make good at his own costs any defect in the unit or the common

property which becomes apparent within the DLP i.e. 12 months after the date

of actual delivery of vacant possession of unit or 15th day after the Purchaser or

his/her lawyers receives the TOP or CSC, whichever earlier.

 Vendor must make good defects within 1 month from Purchaser’s notice, failing

which Purchaser may notify Vendor in writing of the estimated costs of carrying

out his/her own rectification works as indicated in a quotation and the

Purchaser’s intention to rectify by his/her own contractors if the Vendor fails to

carry out those works within 14 days immediately after the date of the notice

(final 14 days).

Important terms in the SPA

(11) Defects Liability Period

 If Vendor still fails to rectify despite the notice, Purchaser has the right to

proceed with his/her own rectification and to recover from the Vendor the costs

of those rectification works and deduct the same from the sum held by the SAL

as stakeholder.

Important terms in the SPA

(12) The First Schedule – Specifications of the Building

 Check carefully and ensure Purchaser fully understands the unit that he/she is

buying.

Conclusion

 What are the different types of contracts related to “completed” real estate

transactions?

 What are the implications for not understanding these contracts?

 What are some of the common legal pitfalls related to these contracts?

 Misrepresentation.

 Confusion between the different types of contracts such as Offer to

Purchase and Option to Purchase.

 The terms of the contracts were incorrect and/or fail to reflect parties’

intention correctly.

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COURSE TITLE:

Know Your Sale And Purchase Agreements For Uncompleted Properties To Close More Deals

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14 Dec 2020

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Sunday, 13 December 2020