Real Estate Practice (Sale of Residential Property) PDF

REAL ESTATE PRACTICE Sale of a private residential property with legal title issued Copyright © 2024, Singapore Institute of Legal Education Focus Sale Private residential property Separate legal title issued Owned by a single...

REAL ESTATE PRACTICE Sale of a private residential property with legal title issued Copyright © 2024, Singapore Institute of Legal Education Focus Sale Private residential property Separate legal title issued Owned by a single registered proprietor Focus Sale Private residential property Leased to a tenant Mortgaged to Separate legal title issued a bank Charged to the CPF Board Vendor – registered proprietor Factors that Vendor should consider Amount CPF money Seller Other fees payable to to be Stamp Duty the bank refunded (if any) Redemption Capital sum Whether the Legal fees amount in withdrawn to transaction payable to respect of the finance attracts SSD – solicitor loan purchase would sale be Penalties, eg for Accrued within a Commission redeeming interest i.e. prescribed time payable to real before expiry of interest that from Vendor’s estate agent “lock-in” period would have purchase? been earned What if the sale proceeds are not enough to repay the bank and CPF Board? Who has the first charge on the property? The Bank or CPF Board? In 2002, rules were introduced to give banks the first charge for properties bought on or after 1 September 2002. If such property is sold, bank has first claim and CPF money is paid with what remains. What if the sale proceeds are not enough to repay the bank and CPF Board? Who has the first charge on the property? The Bank or CPF Board? However, the bank has first claim only on the Therefore, the vendor In 2002, rules were introduced to give banks outstanding housing the could lose part or all first charge for properties bought on loan and interest but not on penalty or after his CPF 1money if the sale proceeds are September 2002. charges. insufficient. If such property is sold, bank has first claim and CPF money is paid with what remains. CPF Board requires the following before legal completion Valuation report on the property to show how the sale price compares against the valuation Copies of the bank’s initial and final redemption statements to ascertain if there are penalty charges Confirmation from the Vendor that he is not a relative of the Purchaser Example of a case where there is a shortfall in sale price and the bank has first charge $600,000 = outstanding Facts housing loan $6,000 = penalty charge Sale price $1,000,000 Amount owing to the $606,000 bank Amount to be refunded $500,000 to CPF Board On legal completion Vendor must Sale proceeds come up with of $1,000,000 $6,000 Refund to Outstanding Penalty charge of Vendor’s CPF housing loan of $6,000 $400,000 $600,000 Actual CPF used = $500,000 Seller Stamp Duty? Loss of CPF = $100,000 Other fees? Example of a case where there is a shortfall Seller in sale price and CPF Board has first charge Stamp On legal completion: Duty & other Vendor must fees? Sale proceeds come up with of $1,000,000 $106,000 If V can’t raise the shortfall, he can apply to reverse the bank & CPFB charge Refund in full to Towards Shortfall in Vendor’s CPF outstanding housing housing loan $500,000 loan $500,000 $106,000 How to secure a Purchaser? The Vendor could do it himself Or engage a real estate agent In most cases, the sale is handled by a real estate agent Who prepares the contract for sale? It is usually the Vendor, or his solicitor Where the Vendor engages a real estate agent, the agent commonly produces a “standard” printed form of contract – the Vendor should be careful of unfavourable terms in such contracts Types of Contract Type 1 Option to Purchase Type 2 Sale and Purchase Agreement Option to Purchase Pays 1% option fee Purchaser Vendor Signs and grants Option to Purchase To proceed Purchaser signs the Acceptance Copy attached to Option to Purchase and delivers it, together with the deposit, to the Vendor’s solicitors before the expiry date, usually 14 days from the date of the Option to Purchase. Option to Purchase Pays 1% option fee Purchaser Vendor Signs and grants Option to Purchase Elects not to proceed When the Option lapses, there is no breach of contract P not liable to compensate V not liable to compensate Allows option V P to lapse P’s only loss is option fee V can resell property Note: Option fee can be more than 1% and option period can be more than 14 days if both parties agree. Agreement for Sale and Purchase Sale & Purchase Purchaser Agreement Vendor Agreement for Sale and Purchase both sign the S&P Purchaser Agreement Vendor P is bound to buy V is bound to sell P pays deposit to V If P does not proceed, P will Similarly for V be in breach of contract and liable to compensate V Terms of the contract Terms Remarks 1. Description of the property Full address. Lot area not required. 2. Sale price To be stated in Singapore Dollars If yes, terms must state whether 3. Whether deposit is to be monies are to be deposited into held by Vendor’s solicitors as the V’s solicitors’ Conveyancing stakeholders pending legal Account or SAL’s Conveyancing completion Money Service account. Terms of the contract Terms Remarks There are 17 conditions, but if any 4. Subject to the Law Society’s is contrary to conditions in Conditions of Sale 2020 contract, then the conditions in the contract will prevail. Condition 5.1 On Completion , the Vendor must deliver the Property in the same state and condition as it was at the date of the option or the date of the contract, whichever is earlier, (save for fair wear and tear) unless otherwise agreed by the parties. Terms of the contract Terms Remarks There are 17 conditions, but if any 4. Subject to the Law Society’s is contrary to conditions in Conditions of Sale 2020 contract, then the conditions in the contract will prevail. Condition 10.1 The Vendor represents and warrants to the Purchaser that the Vendor has not carried out any unauthorised additions or alterations to the Property. Terms of the contract Terms Remarks There are 17 conditions, but if any 4. Subject to the Law Society’s is contrary to conditions in Conditions of Sale 2020 contract, then the conditions in the contract will prevail. Condition 13(b) “risk remains with the Vendor and shall pass to the Purchaser upon Completion or upon the Purchaser taking possession of the Property, whichever is earlier” Terms of the contract Terms Remarks Proviso to deal with early 5. Sale is subject to tenancy termination by tenant. This would list the furniture and appliances that V might have provided to the tenant. In the 6. Sale includes items in absence of such clause, P can inventory list insist that V removes all furniture and appliances at V’s cost after tenancy expires and tenant has vacated. Terms of the contract Terms Remarks 7. Subject to receiving satisfactory replies to legal requisitions from the usual governmental authorities: P can rescind Building & Construction Authority contract if any Inland Revenue Authority of Singapore reply is Land Transport Authority – Cross-Border Railways unsatisfactory Land Transport Authority – Rapid Transit System Land Transport Authority – Street Works National Environment Agency – Sanitation and Compliance Division Public Utilities Board Urban Redevelopment Authority Terms of the contract Terms Remarks P deemed to have full notice of actual state and condition of 8. Sold on “as is where is” property as regards access, repair, basis state of condition, light and other respects. 9. Condition to negate any oral Useful for erroneous verbal representations, warranties, assurances or statements made promises made by V by V  “This Option to Purchase (or Sale and Purchase Agreement as the case Terms of the contract may be) (which supersedes and cancels in all respects all previous representations, warranties, agreements and undertakings whether such Terms be written or oral made between the Remarks Vendor and the Purchaser with respect to the Property) embodies the entire understanding of all the P deemed to have full notice of terms and conditions agreed upon between the Vendor and the Purchaser as to the subject matter of this actual Option to state and Purchase (or condition Sale and of Purchase 8. Sold on “as is where is” Agreement as the case may be) property and thereasare regards no access,terms promises repair, basis stateexpress conditions or obligations oral or written, of condition, lightother or implied and other than those contained herein.” respects. 9. Condition to negate any oral representations, warranties, promises made by V Non-merger clause “Notwithstanding the completion of the sale and purchase of the Property, the terms and conditions of this contract shall remain in full force and effect insofar as the same are not fulfilled and shall not merge in the assurance of the Property to the Purchaser or upon the registration of such assurance.” Non-merger clause is unfavourable to V Example BCA’s reply to legal requisition states no fines After legal completion, BCA follows up to inform of error – outstanding fine of $50,000 If non-merger clause is absent, V is not liable for $50,000 because notice of it came after completion. Position of V after conclusion of contract V becomes a trustee of the property V has a fiduciary duty to consult P regarding the property Eg. If property is the subject of a proposed enbloc sale prior to legal completion, and V received notice of EOGM on proposed enbloc sale, then V must consult P and vote according to P’s wishes. Capacities and number of solicitors 1. Acting 2. Acting 4. Acting 3. Acting 5. Acting for for for the for Vendor for CPFB Vendor Vendor Bank To deal with To deal with To deal with To deal with To deal with Purchaser’s the bank’s CPFB’s Vendor’s the Vendor’s solicitor solicitor in solicitor in solicitor in the solicitor in the the redemption of the redemption discharge of the bank’s discharge of of the CPFB’s mortgage CPFB’s bank’s charge charge mortgage  Duties of the Vendor’s solicitors 1. Serve notices of redemption to the Bank and CPF Board 2. Obtain from Vendor: a. Cheque for the Seller Stamp Duty (if required) for delivery to IRAS within 14 days of concluding the contract and obtain the stamp duty certificate b. Copies of current property tax bill and maintenance fee invoice c. Copy of the Tenancy Agreement together with the stamp duty certificate 3. Conduct title search on the property and bankruptcy search on the Vendor  Duties of the Vendor’s solicitors 4. (a) Utilising the information in the title search, to prepare the draft Digital Total Discharge of Mortgage (“TDM”) and the draft Digital Application to Notify Total Discharge of CPF Charge (“ANDC”) for approval by the Bank’s solicitors and CPF Board’s solicitors. (b) Transfer the approved digital TDM and digital ANDC to the Bank’s solicitors and CPF Board’s solicitors for them to procure execution of the documents. 5. Obtain title deed from the Bank’s solicitors on undertaking to return it to the Bank without demand if the sale is aborted.  Duties of the Vendor’s solicitors 6. Forward title deed to Purchaser’s solicitor for inspection on Purchaser’s solicitor’s undertaking to return it without demand if the sale is aborted Note: Please note that the Singapore Land Authority has a recent arrangement with the CPF Board and many mortgagee banks to safekeep the title deeds for properties charged and mortgaged to them on their behalf. In such a case, there will be no physical title deed for inspection. Instead, the Bank’s solicitor will prepare and the Banks will sign an Authorisation Form – Suppressed Title to allow the Purchaser’s solicitor to deal with the electronic Title Deed on legal completion. Duties of the Vendor’s solicitors 7. Receive draft Transfer from Purchaser’s solicitor, approve draft, then receive engrossed Transfer for Vendor’s execution Duties of the Vendor’s solicitors 8. Prepare: a. IRAS Seller’s Stamp Duty Declaration Form for Vendor to declare if he is liable for Seller’s Stamp Duty; b. Letter of Confirmation for the Vendor to declare if he is a non- resident Property Trader. If so, 15% of the sale price will be withheld by the Purchaser’s solicitors for payment of any withholding tax. c. Letter of Authority to authorise any payment from sale proceeds to 3rd parties (eg solicitor’s fees & real estate agent’s commission) Duties of the Vendor’s solicitors 9. Obtain initial redemption statement from the Bank’s solicitor and the final redemption statement from CPF Board’s solicitor 10. Prepare the completion account and mode of payment, and forward them to P’s solicitor at least 7 Business Days before legal completion Duties of the Vendor’s solicitors 11. Attend Vendor to: a. witness V’s execution of the Transfer, IRAS Seller Stamp Duty Declaration Form, Letter of Confirmation & Letter of Authority b. Obtain the original Tenancy Agreement and stamp duty certificate, any spare keys, access cards etc relating to the property c. explain the completion account and inform him of the amount due to him on completion 12. Prepare all documents required for completion and attend completion  Duties of the Vendor’s solicitors 13. After completion: a. Deliver the cashier’s orders for the sale proceeds to the Vendor b. E-file Notice of Transfer with IRAS to inform them of the change of ownership c. Notify the Tenant to inform him of the change of ownership [The Notice to the Management Corporation on the change of ownership is prepared by V, endorsed by P and handed by P to the MC] e. Inform the Bank and CPF Board’s solicitors of the registration particulars of the TDM and ANDC when the information is received Duties of the Bank’s solicitors 1. Reviewing and approving the draft TDM prepared by the Vendor’s solicitor 2. Forward the TDM to the Bank for execution 3. Obtain the initial and final redemption statements from the Bank and forward them to the Vendor’s solicitor 4. Obtain the title deed (if it is not under the Paperless Title Deed scheme) and forward it to the Vendor’s solicitor  Duties of the Bank’s solicitors 5. Prepare all documents required for completion and attend completion 6. Obtain the cashier’s orders for the redemption monies and deliver them to the Bank before 10am on the next working day. Grant electronic access of the electronic version of the TDM to the Purchaser’s solicitors for registration within three working days from completion. 7. Obtain the notice of final registration of the TDM from the Vendor’s solicitor and inform the Bank Duties of CPF Board’s solicitors 1. Reviewing and approving the ANDC prepared by the Vendor’s solicitor. 2. Digitally sign the ANDC on behalf of the CPF Board 3. Obtain the redemption statement from CPF Board and forward it to the Vendor’s solicitor  Duties of CPF Board’s solicitors 4. Prepare all documents required for completion and attend completion 5. Obtain the cashier’s orders for the monies to be refunded to the Vendor’s CPF account, and deliver them to CPF Board by the close of the next working day. Grant electronic access of the electronic version of the ANDC to the Purchaser’s solicitors for registration within three working days from completion. 6. Obtain the notice of final registration of the ANDC from the Vendor’s solicitor and inform CPF Board 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. 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