IF you are looking for a ready, more secure and less speculative type of property, you would probably look at the secondary market first rather than those that are still under construction offered by housing developers. While the costs of entry are higher in the secondary market compared to buying from housing developers (for a start, immediate payment of stamp duty on transaction rather than issuance of the title later), the legal documents and processes are different as well.
Individual property sellers of completed properties are not subject to the legal regime that regulates housing developments. There is no statutory prescribed format of agreement and the parties are free to negotiate the terms and conditions of the Sale and Purchase Agreement (SPA) subject to certain commercial norms, banking practices and the applicable process of ownership transaction.
1. Title issuance
Typically, in transacting secondary property, the first question would be whether there is any title to the subject property or not. The more accurate version of the question is whether the title of the subject property has been issued at the time of transaction.
If the separate individual/strata title has been issued for the subject property, the instrument of transferring ownership would be the MOT (memorandum of transfer) to be processed by the relevant Land Office. The securitisation for the bank in consideration of the loan given will be the registration of the charge on the title.
If the separate individual/strata title has not yet been issued for the subject property, the transfer of ownership will be by way of a deed of assignment to be recorded with the developer pending the title issuance later. The securitisation for the bank in consideration of the loan given will be another deed of assignment but in favour of the bank.
In both instances, there will be stamp duty payable to the government to recognise the transfer of ownership.
It is also important to note that some banks have policies against lending for properties that have yet to be issued separate titles over a certain period of time.
2. Title tenure
Another frequently asked question by the buyer is whether the subject property is freehold or leasehold. The answer to this question is not only critical in assessing the value of the subject property but relevant for the policy consideration of many banks and financial institutions. Some banks have the policy of not lending if the balance tenure of the leasehold property is shorter than a certain number of years.
Furthermore, dealing with leasehold property is most often subject to consent of the State Authority, thus its transaction will require more time to complete.
The buyer should also be aware of the process and requirements in extending the leasehold period and accept the fact that it is ultimately a matter at the discretion of the authorities.
3. Joint inspection before and after
Inspection of the subject property is crucial in making the purchase decision but not many would bother to do a second round of inspection. Be prudent enough to do one more round of joint inspection during the completion of the transaction for the purpose of handing over of vacant possession. It is an important step to ensure that all remaining issues on the condition of the subject property can be dealt with between the parties.
If you inspect a furnished unit before the purchase, you must not forget that you are actually buying an unfurnished unit and you should be concerned with its condition after all the furnishings have been removed.
If you are purchasing a furnished unit, you should be concerned whether you are taking delivery of all the furniture and furnishings you expect to be included in the subject property when you take over possession.
Compiling a comprehensive list of furniture and fittings that form part of the purchase while consulting your lawyer on the practical meaning of “as is where is” are all important to prevent unnecessary dispute.
4. Realistic expectation of completion date
As a rule of thumb, a transaction on the secondary market needs about three to four months to complete, taking into consideration the loan arrangements.
“3+1” is a common term used to describe the first three months of interest-free transaction period followed by the automatic one month extension thereafter with a prescribed contractual interest.
Firstly, “3+1” is not a math equation but a simplified understanding of the transaction time subject to the wordings of the SPA.
“3+1” only starts ticking if the contract is unconditional. If it is subject to certain consent, it may take a longer time before the commencement of the “3+1” as time is needed to procure these consents.
“3+1” can also be suspended and then resumed the way the “injury time” period is added at the end of football matches. The parties are allocated a fixed time frame to deliver and perform certain contractual obligations and the delay or the extra time required to comply will be added back in favour of the other party.
5. Post-completion updating of ownership record
Most parties will be happily moving on after a transaction is completed upon full payment of the purchase, taking over of possession and formalisation of the transfer of ownership. After all that, it is easy to forget that the new owner would also need to update other relevant ownership records.
These include the name change for quit rent, assessment, management office and all utility providers. Updating these records can prevent any ownership disputes from arising.
Chris Tan is a lawyer, author, speaker and keen observer of real estate locally and abroad. Mainly, he is the founder and now Managing Partner of Chur Associates. If you have questions that you would like to pose to Chris, click here.
Disclaimer: The information here does not constitute legal advice, please seek professional legal advice for your specific needs.