REP 3 - Contract Preparation and Conclusion

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Questions and Answers

What is a common requirement when a purchaser decides to exercise an option to purchase?

Pay a 1% option fee to the vendor directly

Obtain financing approval before proceeding

Sign a memorandum of understanding

Pay a 4% deposit to the vendor or their solicitor (correct)

What happens if the purchaser does not exercise their option within the specified period?

The option fee is refunded to the purchaser

The vendor retains the 1% option fee (correct)

The option is extended by another week

The contract automatically converts to a sale agreement

Which of the following is NOT a typical method for concluding a contract?

Tender

Exchange of correspondence

Initial public offering (correct)

Public auction

What role do solicitors play in the option to purchase process?

They review and amend the agreement as required Signup and view all the answers

What aspect of prepared contracts may pose a risk to the purchaser during a viewing?

They may contain unfavorable clauses Signup and view all the answers

Which of the following statements about the option fee is true?

It secures the right to purchase the property within a specified period Signup and view all the answers

In the option to purchase scenario, when is the 1% option fee typically paid?

Before the vendor signs the initial option Signup and view all the answers

What best describes an option to purchase?

A unilateral option allowing the purchaser to decide Signup and view all the answers

Which of the following actions is NOT indicated as a way to conclude a contract?

Via electronic mail correspondence Signup and view all the answers

What is the primary purpose of conducting searches on the vendor at the time of completing a sale and purchase agreement?

To ensure the vendor holds legal title to the property. Signup and view all the answers

Which clause is crucial for a purchaser intending to occupy the property themselves?

The vacant possession clause. Signup and view all the answers

What are legal requisitions primarily concerned with in a sale and purchase agreement?

Identifying any outstanding legal obligations on the vendor. Signup and view all the answers

The law society's conditions of sale serve what purpose in a contract?

They ensure fairness and clarity for both parties in the sale. Signup and view all the answers

What does purchasing a property on an as-is, where-is basis imply for the buyer?

The buyer is responsible for all property repairs after purchase. Signup and view all the answers

If a purchaser receives unsatisfactory replies to legal requisitions, what can they do?

Rescind the purchase agreement. Signup and view all the answers

What type of search would be conducted if the vendor of the property is an individual?

Bankruptcy search. Signup and view all the answers

What major term in a sale and purchase agreement relates to ownership claims on the property?

Title clause. Signup and view all the answers

What happens if the property has outstanding property tax at the time of sale?

The purchaser may become liable for previous tax obligations. Signup and view all the answers

Which of the following is NOT typically a focus area for searches conducted on the vendor?

Criminal background checks. Signup and view all the answers

Which condition addresses the procedure regarding service of notice to complete?

Condition 7.4 Signup and view all the answers

What is the timeframe for paying stamp duty on the contract?

Within 14 days Signup and view all the answers

What does a caveat protect the purchaser against?

Conflicting claims Signup and view all the answers

In which situation is a purchaser's solicitor liable to withhold tax?

If the vendor is a property trader Signup and view all the answers

Who is accountable for the Goods and Services Tax under the Law Society's conditions of sale?

The vendor Signup and view all the answers

What is the impact of lodging a caveat after the contract is signed?

It provides third-party notification Signup and view all the answers

What type of properties is Goods and Services Tax applicable to?

Only commercial properties Signup and view all the answers

What constitutes a failure for the seller regarding stamp duty according to condition 7.4?

He fails to pay the due stamp duty Signup and view all the answers

What is the main purpose of charging interest for late completion?

To compensate the seller for delays Signup and view all the answers

Which section of the Income Tax Act refers to withholding tax where the vendor is a non-resident property trader?

Section 10.1a Signup and view all the answers

Study Notes

Contract Preparation and Conclusion

Contracts are concluded in various ways, including options to purchase, sale and purchase agreements, correspondence, prescribed agreements (Housing Developers Control and Licensing Act, Sale of Commercial Properties Act), auctions, and put-in-call options.
Oral contracts can be evidenced by written memoranda.
The vendor solicitor drafts a purchase agreement, the buyer's solicitor reviews and amends it, and both parties negotiate terms.
Once agreed, the vendor signs the option, and the buyer pays a 1% option fee. The buyer has two weeks to exercise the option by signing an acceptance copy and paying an additional 4% or to the vendor or vendor's solicitor.
If the buyer doesn't exercise the option, the seller retains the 1% fee and can resell the property.
Housing agents often prepare ready-made options for buyers, aiming to gain a 1% fee to expedite the deal.
Sale and purchase agreements specify crucial details like property and price, good title free from encumbrances, vacant possession or tenancy, and "as-is" conditions.
Legal requisitions are important questions addressed to relevant government agencies, ensuring no outstanding notices affect the property.
Completion usually takes 8–10 weeks after exercising an option or signing the agreement.
Bankruptcy, company winding-up and judicial management, and title searches are conducted during this period.
The completion date is significant as the sale is concluded and all payments are made.

Essential Contract Terms

Major Contract Terms: Property description, price, title, encumbrances, vacant possession/tenancy, "as-is" condition, access, repair, drainage, and area are key agreement clauses.
Legal Requisitions: Crucial questions by the buyer's solicitor addressed to various government agencies to ensure no outstanding notices affect the property.

Timelines and Procedures

Completion: The period for the sale agreement's completion usually takes 8-10 weeks.
Searches: Thorough searches for bankruptcy, company status, and title defects are crucial during that period.
Caveats: Purchasers lodge caveats to protect their interests, informing third parties of their claim and preventing conflicting claims to the property. This is often done upon signing the purchase agreement or exercising an option.

Taxation and Duties

Stamp Duty: Calculated on the contract within 14 days upon either exercising an option or signing agreement.
Withholding Tax: Applied to vendors not residing in Singapore, assessed as property traders (Section 10.1a) of the Income Tax Act.
Goods and Services Tax (GST): Chargeable on sales or leases of non-residential properties.

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Description

Explore the various methods of concluding contracts in real estate, including purchase agreements and oral contracts. Learn about the roles of solicitors and housing agents in drafting and negotiating terms, as well as the implications of option fees. This quiz will enhance your understanding of contract formation and completion in property transactions.