Real Estate Practice: Preparing and Concluding Contracts PDF

Real Estate Practice Preparing and Concluding Contracts Focus How contracts are concluded Major terms of contract Law Society’s Conditions of Sale 2020 How to compute Stamp Duty on a contract Withholding tax and GST When and why to lodge a caveat Ways to conclude a contract Option...

Real Estate Practice Preparing and Concluding Contracts Focus How contracts are concluded Major terms of contract Law Society’s Conditions of Sale 2020 How to compute Stamp Duty on a contract Withholding tax and GST When and why to lodge a caveat Ways to conclude a contract Option to Purchase Sale and Purchase Agreement Exchange of Correspondence Prescribed Agreements under the Housing Developers (Control and Licensing) Act and Sale of Commercial Properties Act Tender Public Auction Put & Call Option Oral contracts evidenced by a memorandum in writing Concluding a contract by exercising an Option Vendor’s solicitors prepares draft Option. Purchaser’s solicitor reviews and amends draft. Parties negotiate and agree on terms. Vendor signs Option. Purchaser pays option money (usually 1% of purchase price) to the Vendor in exchange for the signed Option. Purchaser is usually given 2 weeks to exercise the option. Option is exercised by the Purchaser signing the acceptance copy and paying a further sum (usually 4% of the purchase price) to the Vendor (or Vendor’s solicitor’s conveyancing account usually if property is mortgaged). If the Purchaser does not exercise the option, the Vendor retains the option money and is free to put up the property for sale again. Danger of paying option money before seeking legal advice The Vendor is not obliged to amend any term once the signed Option has been exchanged for the option money, and the Purchaser has to live with the terms even if some are unfavourable towards him. Sale & Purchase Agreement Vendor’s solicitor prepares a draft Purchaser’s solicitor reviews and amends the draft if needed Parties negotiate terms Upon settling terms, the Sale & Purchase Agreement is signed Sale & Purchase Agreement Completion is usually within 8 to 10 weeks from the date of conclusion of the contract Searches are updated on the day contract is concluded Bankruptcy searches against individuals Company winding up and judicial management searches against companies Title search against the property Major terms Title must properly deduced free from encumbrances on completion Vacant possession or subject to tenancy  Major terms “as is where is” basis = buying with full notice as to - state and condition - access - repair - drainage - area and all other respects Legal requisitions - questions sent to various government departments Major terms Legal requisitions as Purchaser’s solicitors, it is crucial to define clearly what constitutes “unsatisfactory” replies to legal requisitions Law Society’s Conditions of Sale 2020 Law Soc Conditions of Sale 2020 apportionment of outgoings property tax levies rent late completion interest time is of the essence procedure of serving Notice to Complete Stamp duty Payable within 14 days of concluding the contract Calculation of Buyer’s Stamp Duty (BSD) BSD rates as of 15 February 2023 (IRAS | Buyer's Stamp Duty (BSD)) Note: BSD is rounded down to the nearest dollar. Seller’s stamp duty Cond 7.4 of the 2020 conditions provides for the purchaser’s lawyer to deduct from the monies due to the seller should the seller fail to pay seller’s stamp duty Withholding tax Withholding tax applies where: vendor is not resident in SG for income tax purposes vendor is assessed to be a property trader under s10(1)(a) Income Tax Act Section 45D makes the purchaser’s solicitor liable to withhold tax in such situations Goods and Service Tax GST is chargeable on sale or lease of non-residential properties where the vendor is a taxable person GST Act Second Schedule paragraph 4 GST Act Fourth Schedule Part I- Paragraph 2 GST Act Fourth Schedule Part III- Paragraphs 3(3) and 3(4) 7.2 of LSCS 2020 Where the Vendor is accountable for goods and services tax on the purchase price, the Purchaser shall pay all goods and services tax, if any is imposed by law and payable in respect of the sale of a Property under the Goods and Services Tax Act (Cap 117A). Why lodge a caveat? A caveat: serves as notice to third parties of the purchaser’s interest enables the purchaser to be notified of subsequent dealings prohibits registration of any other instrument claiming a conflicting interest; and gives priority if lodged early and there are conflicting claims Notice Copyright © 2024, Singapore Institute of Legal Education. All rights reserved. The Course materials are developed by the Singapore Institute of Legal Education, based on the content, syllabus, and guidance provided by the Chief and Principal Examiners and their teams. No direct or indirect reproduction, publication, communication to the public, adaptation or any other use (that is prohibited and/or proscribed by copyright laws) of the Course materials in whole or in part in any form or medium is allowed without the written permission of the Singapore Institute of Legal Education. 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