Completion Accounts Lecture Notes PDF

00:01 Welcome. This lecture is about completion accounts, what types there are and how to compute them. Our case scenario for today is a vendor who owns a condominium property who is subject to a CPF charge, a mortgage and a tenancy. Now he\'s going to be selling to a purchaser who has his own fund...

00:01 Welcome. This lecture is about completion accounts, what types there are and how to compute them. Our case scenario for today is a vendor who owns a condominium property who is subject to a CPF charge, a mortgage and a tenancy. Now he\'s going to be selling to a purchaser who has his own funds using his CPF monies and a mortgage loan to finance the purchase. So let\'s begin. 00:29 What is a completion account? Now, according to Chuanjie in France Furniture Private Limited and Goods Property Land Development Private Limited, a completion account is an account rendered by vendor solicitors to purchaser solicitors to inform purchaser of the amount payable on completion. So this is basically to find out what is due on completion. 00:57 We have three major types of completion accounts. Now, the first is vendor solicitors to the purchaser solicitors. Now, this is to establish the amount of money is payable by the purchaser to the vendor on completion. The second type of completion accounts that we have is the vendor solicitors to his own client, the vendor. Now, this is because the vendor wants to know how much monies do I have at the end of my completion? 01:27 And the third type is the purchaser solicitors to the purchasers. And that is regarding the amount payable by the purchaser to finance the purchase. All right, so let\'s begin with the very, very first one, which is vendor solicitor to the purchaser solicitors. Now, we\'re going to need a whole host of information. So where do we start? Now, the first thing that we need is the completion date. We need to know when is completion. 01:55 so we can tabulate certain refunds, apportionments of property tax, maintenance, and tenancy. The next thing that we need to know is the sale price. For this example, it is \$1 million. The third thing that we need to know is how much money has been paid so far. The purchasers would obviously have paid an option money and a deposit. These usually come up to about 5% of the sale price. 02:25 In our example, he has paid ten thousand dollars for the option monies and forty thousand dollars for the stakeholder monies. Next, we need to know how much rental per month is being paid. What\'s the rental deposit being held by the vendors and also the rental period when the rental is due. So in this case, it is the 1st of August to the 31st of August. Next, 02:54 We need to know the property tax. How much is he paying per month? In this example, it\'s \$200 per month. And we also need to know how long and how much for. How much has he paid for the year? For this example, he has paid for the whole year. Next, we need to know the maintenance charges. How much is it per month? For this example, \$150. And in this case, 03:23 He has paid the maintenance from the 1st of July to the 30th of September. Next, we need to know how much he owes his CPF account, plus how much he owes his bank. In this example, he owes \$600,000 to the CPF and \$300,000 to the bank. 03:46 Armed with this information, we can begin to do the account. So we put one million dollars as the sale price. We now have to consider the amount of monies to be deducted from this price because of monies having been paid or rental deposits that needs to be transferred. First, he has paid the ten thousand dollars of the option monies or one percent. Next, the purchaser has already deposited 04:16 with the vendor solicitors for holding as stakeholders. The vendor has to transfer the rental deposit over to the purchaser after completion. So here goes the \$2,000 from the vendor to the purchaser by deducting from the sale price. Likewise, with the rental proceed, the vendor is no longer the owner of the property on 19th August. So all rental proceeds that he received from 19th August 04:46 to the 31st of August will also be apportioned over to the purchaser. All that will be calculated together to be the sum of \$52,838.71, leaving a balance of \$947,161.29 to be paid over. But that\'s not the end. We have to add on a refund. 05:16 of property tax and maintenance because the vendor has already paid the property tax all the way to the end of the year and the maintenance to the end of September. He is entitled to a refund from the 19th of August to the end of the year for the property tax and for the maintenance from 19th of August to 30th of September. So with those two refunds added together, our purchaser has to pay the vendor on completion. 05:45 \$948,258.06. So how do we actually compute that refund of maintenance property tax and rental proceeds? Well, we\'ll do it this way. This slide displays the relevant dates to factor into our calculation. For rental proceeds, we\'ll take the factor of \$2,000, which is the monthly 06:13 Now we just need to divide this by 31 days of August and multiply it by 13 days from 19th August to 31st August. Doing this, we get the amount eight hundred and thirty eight dollars seventy one cents. Now we\'re going to do the same thing for property tax and add a step. We\'re going to have to split this into two. Now, first, same as before, we decide the factor of August, we\'re going to use two hundred dollars. We\'re going to divide that by 31 days. 06:43 and then times it by 13 days, same as we did before. But this time, we\'re gonna add in \$200 times four months. Now the additional four months being September, October, November, and December. Now for the maintenance, we are only gonna be calculating on August and September. So as with the examples before, we\'re gonna take the factor \$150 divided by the 31 days of August times the 13 days. 07:13 remaining and we\'re going to add in \$150 for September. Doing this, you compute your refunds. Now, what if the month involved is like February? Twenty nine days kind of February. So if you do have a month like that, you just need to remember that the factor you use, you\'ll need to divide it by 29 days. So just watch out if the days are not exactly 31 days. 07:41 just divided by the number of days in that specific month. So after you\'ve computed, the vendors now have to tell the purchasers how to pay the \$948,250.06. Well, you still have to remember the vendor owes his CPF account \$600,000 and he owes his bank \$300,000. And the rest, the rest he can have. 08:11 So from your \$948,000 figure, you have to ask the purchaser to open three cashier\'s orders. The first for \$600,000 in favor of the CDF board. The second, \$300,000 in favor of XYZ Bank, which is the bank. And the remainder, \$48,258.06 to be in favor of the vendor. 08:40 Now, these are the cashier\'s orders that have to be prepared by the purchaser. The next completion accounts we\'ll be doing is vendor solicitors to the vendor. This account will tell the vendors what monies to expect on legal completion. Now, what is the information we require? Well, it\'s exactly the same as what we went through for vendor solicitor to purchaser solicitor. But to add on, we just need two more bits of information. 09:11 which is how much the vendor is paying commission to his agent and how much legal fees he\'s paying to his lawyers because there are cases where the vendors do actually instruct the vendor solicitors to deduct these monies from the sale proceeds so that he doesn\'t have to waste time writing checks. 09:32 So how do we go through this? Now for the vendor solicitors to the vendor\'s account, we reproduce the entire completion account that was actually stated in the previous vendor solicitors to purchaser solicitors. Now we have to add on the stakeholders monies of \$40,000 to that amount. Why do we do that? Well, because don\'t forget, in the accomplishment account between the vendor solicitors to the purchaser solicitors, 10:02 we deducted the sum of \$40,000. That money is in the vendor solicitor\'s possession. So we have to give it back to the sellers. So now we added on to the \$948,000 amount, which gives us \$988,000. So what do we take out from here? We\'re going to take out all the monies that the vendor has to pay all his expenses, as well as what he owes the bank. 10:31 and what he owes CPF. So that\'s gonna be, we\'re gonna take out \$600,000 to pay his CPF account. We will take out \$300,000 that he owes to his bank. \$10,000 is going to his agent, \$2,500 to his lawyer. So all in, \$912,500 will be deducted and he only walks home. 10:57 with \$75,758.06. Now, where is this money coming from? Now, if you can recall where the mode of payment, we had the cashers order of \$48,000 plus to the vendor. That is a bit short. We are now actually short \$27,500. Where is that money gonna come from? Now, if you remember the \$40,000, 11:27 that\'s in the vendor solicitors. Right. So that\'s where that twenty seven thousand five hundred will come from, because forty thousand dollars you deduct ten thousand to pay the agent. We have thirty thousand dollars left now from the thirty thousand dollars. We deduct two thousand five hundred to pay the lawyers. We have twenty seven five hundred. So the vendor will receive a cashers order for forty eight over a thousand plus. And that twenty seven thousand dollar check, which is coming out from the vendor solicitors. 11:56 conveyancing account. So that\'s where he will get his money. Okay. So next we\'re going to look at an alternative method of doing a vendor solicitors account to the vendor. Now this other method, it can be a simpler method and may make more sense to some people. Now if we start again with the sale price of a million dollars and we add on the refund of the property tags, we add on the maintenance, sinking fund charges refund, we\'ll have a figure that\'s over \$1 million. The next thing we do, 12:26 we deduct everything out of this figure. What do we deduct? The option monies that was paid directly to the vendor, it\'s in his pocket, so he doesn\'t have it anymore. So we have to deduct that. We have to deduct the rental deposit he has to pay over to the buyer. Next, we have to deduct the rental proceeds. So also remember 19th of August to 31st August, yes. So we\'ll have to deduct what he owes his CPF account. We have to deduct what he owes his bank. 12:53 payment to the commission, to the agent, payment to the lawyers, all of that deducted, you still get the same amount, \$75,758.06. Okay, so next, we\'ll go on to see how we do the Purchaser Solicitor to the Purchaser\'s completion account. Now, this is to inform the purchaser how much money he\'s got to look out for to complete his purchase. Now, what information do we require? 13:22 The same information that was in the vendor solicitors to the purchaser solicitors account, excluding the monies that need to be paid to the CPF board and bank. We\'ve reproduced those. Next, we need to know how much legal fees the purchaser has to pay, which in our example is \$3,500. How much monies he has in his CPF account to utilize, which in our example, \$200,000. 13:47 the mortgage loan from the bank, which he\'s able to secure, which is \$650,000. And he also managed to secure a legal subsidy from the bank of \$3,500. So armed with all this information, we will now compute our completion account. So we reproduce everything. We will get this figure of \$940,258.6 from the previous account. 14:17 Now to this, we\'re going to add the legal fees that he has to pay, which is three thousand five hundred, which will give us a figure of nine hundred and fifty one thousand seven hundred and fifty eight dollars. Six cents. This is the amount of money the purchaser must prepare to complete this purchase. Now, where is all this money coming from? Now, if you look at it, one, he\'s got two hundred thousand dollars from his CPF. 14:44 He\'s got a bank loan of six hundred and fifty thousand dollars. He\'s got a legal subsidy of three thousand five hundred dollars. So effectively he has financing of eight hundred and fifty three thousand five hundred dollars. So if we take the nine hundred and fifty one over a thousand figure and minus that off, the cash that the purchaser has to find to complete this purchase is ninety eight thousand two hundred and fifty eight dollars. 15:13 and six cents. So where does all the purchaser\'s money go? Well, let\'s look at it this way. First his option money is of ten thousand dollars. Now that\'s going to go straight to the vendor\'s pocket. So there goes ten thousand dollars. Now he\'s also paid forty thousand dollars as deposit into the vendor\'s conveyancing account, which is held by stakeholders. Where does that money go? Well, that\'s 15:43 \$27,500 of it going to the vendor, being his sale proceeds. \$10,000 to the commission agent and \$2,500 to the lawyer. Next, we look at his cash difference of \$98,258.06. Now remember, the vendor also had to pay part of his loan and the balance gives him the cash? Yes. 16:09 So \$50,000 from that money will go to the vendor\'s bank and the balance \$48,000 plus goes to the vendor. Now what about the purchaser\'s loan? Now he\'s obtained a \$650,000 loan. Well part of that money, \$250,000 will go to pay the vendor\'s bank. And the balance of \$400,000 goes back to the CPF account of the vendor. And lastly. 16:38 the CPF monies of \$200,000 from the purchaser. Where is that gonna go? Ironically, back to the CPF because it\'s going to refund the vendor\'s CPF account. And that\'s basically where all the different monies will be going. Now let\'s take a look at the stakeholder monies that was paid into the Conveyancing account. How do we get it out? Quite simply, the regime now says the vendor solicitors will have to raise a payout. 17:08 form in the EPI system, which is on the STAR\'s e-launchment platform. Now the vendors will go into the system, put in all the information, the three checks required to pay the vendor, to pay the commission agent, and to pay the lawyers. They also have to actually file into the system a statutory declaration authorizing payments to the lawyer and to the agent. Now, once all these are e-filed into the system, an email will be sent to the purchaser solicitors. 17:37 to verify whether these payments are approved. The purchaser solicitors will have to go into the system, pick up the form, read through the contents if they are satisfied with the information. They can\'t assign electronically and e-file it. Now, once that is done, the bank who is holding the monies will, on those instructions, issue the check for the vendors to collect legal completion. So that\'s actually how we get. 18:05 the money out from the conveyancing account of the stakeholder monies. Now, let\'s take a look at the cash difference. Remember the \$98,258.06. Where is all this money going? Now, we can\'t just give it to the lawyers. They have to deposit it into a conveyancing account, which is the business, the purchaser\'s business conveyancing account. So once it goes in there, how do we get it out? We\'re going to use the same method. We will now. 18:35 The purchaser will have to raise a form, a payout form, same in the EPI system. Now they\'ve asked for two cashier\'s orders, one in favor of the vendor and the other in favor of XYZ Bank. Now file that into the system, get the email sent to the vendor and the vendor solicitors will have a look. Yes, those are the checks we want. Cashier\'s orders they want. 19:01 So they will counter sign and approve the payment file into the system. And the purchaser solicitors bank will receive such an email, prepare the cashers orders and the purchaser solicitors will collect it on completion. So that\'s how the money comes out. Next, let\'s take a look at what happens to the CPF monies. Now, those as well, they\'re going to go to a special CPF board solicitors conveyancing account. 19:28 the \$200,000 will be deposited there. How do we get it out? Exactly the same way. Now the CPF board solicitors will have to raise a payout form to rent to ask for approval to issue a cashers order for \$200,000 in favor of the CPF board. Now the purchasers will receive an email about this request and they will counter sign it. And then the CPF board solicitors bank 19:56 will get the email to approve the payment and they will issue the cashers order and the CPF Board\'s lawyers will collect it on legal completion. That\'s how the monies actually go in and out of a conveyancing account. Now, what would happen if these monies were paid into the Singapore Academy of Law instead? Now, other than the CPF Board, all other types of conveyancing monies may be paid into the Singapore Academy of Law. 20:25 But paying in requires both parties to agree to appoint the Singapore Academy of Law to hold such monies. That\'s the only difference. Other than that, the payment out is exactly the same method as in a normal conveyancing account. Checks and cashers\' orders are to be collected at the Singapore Academy\'s office. CPF monies cannot be deposited in the Singapore Academy of Law. They have to be placed in special CPF boards. 20:54 Conveying account. B24 REP - Lecture 6 Completion Accounts - Types of Completion Accounts - 1\. Vendor's Solicitors to Purchaser's Solicitors (amount payable by Purchaser to Vendor) - 2\. Vendor's Solicitors to Vendor (receivable nett sale proceeds by Vendor) - 3\. Purchaser's Solicitors to Purchaser (amount required by Purchaser to finance purchase) - Stakeholder Monies Paid Into Vendor's Solicitors' Conveyancing A/c, how to Pay Out? - Cash Difference Paid Into Purchaser's Solicitors' Conveyancing A/c, how to Pay Out? - Purchaser's CPF Monies Paid Into CPF Board's Solicitors' Conveyancing A/c, how to Pay Out? - What if all of these monies were paid into the SAL? **[Deductions that are usually made from the Sale Proceeds]** 1) Monies owing to the Bank under a mortgage 2) Monies owing to CPF under a CPF charge 3) Legal Fees 4) Property Agent's Fees and Commission 5) Other third parties Category A payee = Commissioner of Stamp Duties and Commissioner of Income Tax. - Category B Payee = vendor, purchaser, assignor, assignee, lessor, lessee, licensor, licensee, landlord, tenant or existing mortgagee of the land which is the subject of the conveyancing transaction pursuant to which the conveyancing money is payable - Category C Payee = in relation to any conveyancing money, means any person to whom the conveyancing money is payable who is not a Category A payee or a Category B payee what happens on Completion in relation to property tax and maintenance fees; 1) Property Tax and Maintenance Fees are usually prepaid in advance by the Vendor, so after apportionment the Purchaser's share is "added" back in the Completion Account. 2) Completion Monies must be prepared by the Purchaser by way of cashier's orders. Cheques are not accepted. - Property Tax - Computation - Two types of property tax Also to note that for property tax, there are two different rates 1) owner-occupied rates 2) Non-owner occupied rates - Maintenance fees - Computation - 1\) Property Tax and Maintenance Fees are usually prepaid in advance by the Vendor, so after apportionment the Purchaser's share is "added" back in the Completion Account. 2) Completion Monies must be prepared by the Purchaser by way of cashier's orders. Cheques are not accepted.