|A lot of us get so caught up in the excitement of buying a property that we forget the basic nitty-gritty details. It's more than just having a reliable agent. Getting a reliable banker and a good lawyer is key to a smooth property transaction, be it private or commercial. Trust us on this! This article details clearly what conveyancing lawyers do when a purchase is made.
For the Seller
The conveyancing lawyer takes instructions, prepares the Option To Purchase, ascertains if there is an outstanding mortgage and whether there is any penalty payable for early redemption under the mortgage, and whether there is a CPF charge, i.e. if CPF funds have been used.
Accordingly, when the Option is exercised the necessary notices to the bank for redemption (or sometimes knows as a total discharge of mortgage) and to the CPF Board for discharge of the CPF charge will be given. The Bank and the CPF Board will revert with the amounts payable to them although the exact amounts repayable have to be confirmed on the day of Completion.
The lawyer will also provide evidence to show that such outgoings such as the property tax, MCST charges and dues (if the property is a strata unit/condominium) are paid up-to-date. The seller may also give instructions for payment of the estate agent’s commission from the sale proceeds.
It is also necessary to ascertain if the sale is with vacant possession or subject to an existing tenancy in which case the security deposit would have to be transferred to the buyer on completion and due notice given to the tenant.
It is also prudent to ascertain if the sale is with furnishings, fixtures and furniture and it is good practice to draw up an inventory list to avoid any future misunderstanding.
On the day of Completion, the seller’s lawyer will see to it that all monies due and payable to the seller (and to whoever else based on his directions such as the estate agent, etc) are accounted for and the keys to the property are handed over although it is possible for the keys to be handed over earlier so that the buyer could make arrangements for the renovation works.
For the Buyer
The buyer’s solicitor does comparatively much more work. He will go through the Option and advise his client about the terms and conditions therein, e.g. whether the 4% of the sale price payable on Completion is to be released to the seller or held as stakeholder’s by the seller’s lawyers. New rules have now been introduced for such monies to be held under a separate account and there is presently a pilot project to fine-tune any administrative kinks.
The buyers (if two or more persons intend to own the property) will also be advised whether they should be tenants-in-common or joint tenants as there are serious and important consequences from this choice.
It is crucial that the Option contains clauses that would allow the buyer to get out of the contract, e.g. if approval from the Land Dealings Approval Unit (LDAU) is required for a foreigner buying landed property, if the property is substantially affected by future drainage, road widening plans, etc.
He will also conduct a title search on the property to ascertain if the seller is the true owner and if the property is jointly owned in which case, all the owners must sign the Option and consent to the sale. A search is also conducted on the seller(s) to make sure that they have the capacity to sell, i.e. they or any one of them is not an undischarged bankrupt.
The lawyer would also remind the buyer to sort out the financing details from the bank contained in an offer letter which would also set out the cap on the amount of CPF funds that may be used. The buyer would also be reminded to liaise with the CPF Board about the use of CPF funds for the purchase.
The buyer’s lawyer will also keep close tabs on the date by which the buyer must exercise the Option. On that day, the lawyer will see to it that the Option is properly exercised for a valid and binding contract for the purchase of the property to come into existence. This must be stamped within 14 days.
After the Option has been exercised, the buyer’s lawyer will send out what are known as “legal requisitions” which are simply enquiries or requests for information. These requests are absolutely crucial to ensure that the property would not be affected by future development plans, e.g. a chunk of the frontage may be taken away for road widening or a large drain may run right through the bedroom.
There are nine such requisitions sent to:
PUB (Water Reclamation Network) Department for sewage and drainage;
LTA (Survey and Lands Department) for MRT works;
LTA (Survey and Lands Department) for street works;
LTA for Road Line Plan;
Building Control Authority for alterations/additions made to the property;
National Environment Agency (Environmental Health Department) for any outstanding issues regarding mosquito breeding, drain chokage, etc;
National Environment Agency (Central Building Planning Unit) if the property is affected by the current drainage scheme;
Inland Revenue Authority for any outstanding property tax; and
URA to ascertain the master plan zoning, any decision on proposals to develop the site, etc.
If all the replies to the above legal requisitions are satisfactory, the sale can be proceeded with or else it may have to be aborted depending on the terms and conditions of the Option.
If the buyer is a foreigner, approval must also be sought from the Land Dealings Approval Unit (LDAU) if the property is landed property. As there are so many types of developments, it is always safer and prudent when in doubt to apply for the approval and LDAU would then say for sure if approval is required or not.
The buyer’s lawyer will also attend to the bank’s mortgage documents as well as the CPF Board’s charge. It is not uncommon for the buyer’s lawyer to also act for the mortgagee bank although some lawyers advise against it because if there is a problem, whose interest was the lawyer protecting, that of the bank or that of the buyer?
Prior to the Completion date, there may be a need for a final inspection of the property. Prior to the day of Completion, the buyer’s lawyer will also ensure that everything is ready for the Completion to proceed smoothly, e.g. the necessary searches are updated, cashier’s orders according to the mode of payment are ready, etc. At the pre-arranged time on the date of Completion, the money changes hands and in exchange the keys to the property are secured.
After Completion, the buyer’s lawyer will see to it that the necessary notices to the MCST (if it is a strata property) and the Property Tax Department of the IRAS are sent out.
What has been described is applicable for a completed property. For a property under construction, the buyer’s lawyer will forward progress payment notices to his client and upon issue of the TOP (Temporary Occupation Permit), facilitate the collection of keys upon payment of the necessary fees and charges. Upon statutory completion (i.e. after the final survey has been done), the lawyer will also attend to the issue of a separate subsidiary strata title (SSCT) for say, a condominium project.