Common Terms in Sale & Purchase Agreements

You may now have a better understanding of the whole process of buying a house after reading about the conveyancing process. You put down your option fee, happily waiting for your chance to sign off on your new housing purchase. Some days later, you then receive a stack of dauntingly thick and wordy documents for your signing. Fret not, for in this article, we will guide you through the salient terms which you should take note of in your Sale and Purchase Agreement for the purchase of your EC (Executive Condominium) or Condominium unit in a building that is still under construction.

Standard form contracts

In Singapore, all contracts for the sale and purchase of houses by licensed housing developers are governed by the Housing Developers (Control and Licensing) Act. All the Option to Purchase (OTP) and Sale and Purchase Agreements which you are required to sign are standard form contracts found in the Housing Developers Rules. All changes and amendments to the standard form found in the Rules have to be approved by the Controller of Housing before they can be validly issued to purchasers. Below is a list of common terms explained:

Tenure (Clause 2)

This is self-explanatory but take note that your 99 year or 999 year lease starts not from the time you purchase or take over possession, but from whenever the developer was granted the land. This means that when you are signing the agreement, a year or even a few years of your tenure might have  already passed.

Payment Schedule (Clause 5)

For a building under construction (BUC) purchase, payment is made as and when certain stages of works have been completed on the building. At the outset, you will be making payment for the first 20% of the purchase price (including option fee and deposit), which is payable within 8 weeks of the date of the OTP. Subsequently, upon the completion of each stage of construction as certified by their architects, the developer will send a notice to your lawyers to inform  them that payment is due. Your lawyers will then arrange for payments to be made by either drawing down on your bank loan, CPF funds, or instructing you to provide a cashiers’ order, depending on your source of funds.

If you are buying an EC under the deferred payment scheme, then the second stage of payment (ie. after the first 20%) will only be upon issuance of the Temporary Occupation Permit (TOP), where 65% of the purchase price will be payable.

Upon receipt of the developer’s notice, payment is to be made within 14 days. If not, you will incur late payment interest (Clause 6). This will generally only be of concern if you are using cash for such payments.

However, do note that in the case of older projects where the TOP has already been issued, the developer may ask for payment up to the stage of construction at that time. This means that once the OTP  has been exercised, the purchaser may be required to pay 65% of the purchase price, which must be paid in two weeks. Do also note that the developer is not under any obligation to grant any interest-free extensions, and therefore it would be prudent to ensure that any such agreements concerning these extensions are included in the Sale and Purchase Agreement.

You will realise that payment of the final 15% is slightly different from the rest. Part of the money will go to the Singapore Academy of Law (SAL) to hold as stakeholder. If there are no defects or you are not making any claims against this money held by the SAL, it will be paid out to the developer after the completion of the 12-month defects liability period. This money serves as security for the due performance by the developer of their obligations to you in rectifying defects under clause 17.  For using this stakeholding service, an admin fee is payable by the developer.

Repudiation (Clause 7)

Non-payment of purchase price or interest can also lead to the developer treating the agreement as repudiated by you. The agreement will be treated as annulled if the amounts owing are still unpaid after the developer gives 21 days’ written notice.

Upon annulment, the developer may forfeit and keep 20% of the amounts you have paid, in addition to recovering interest, property tax, maintenance charges, legal costs and all other amounts owing and unpaid.

Delivery of vacant possession (Clause 12)

Clause 12 states the latest date on which the developer should deliver vacant possession of your unit. Should they fail to do so, the developer will have to pay liquidated damages at the rate of 10% per annum on the portions of the purchase price already paid (clause 12.7).

Upon taking over possession, 3 things become payable. These are:

1. Maintenance fees (clause 13)
2. Property tax (clause 19)
3. Title survey fees (clause 11)

Your lawyers will inform you of the amount payable as well as who to issue the respective cheques to when the time comes.

Defects liability period (Clause 17)

Upon TOP, the 12-month defects liability period begins. During these 12 months, the developer is responsible for any defects that become apparent. This is what you should do if you find any defects:

1. Notify the developer of the defects – the developer should rectify it within one month of receiving your notification.
2. If not rectified after one month, you can approach your own contractor for a price quotation. Give the developer written notice of your intention to carry out rectification works using your own contractor. Also, provide the developer with the quotation which you obtained.
3. If the developer fails to carry out rectification works within 14 days after receiving your written notice with quotation, you may get your own contractors to carry out the works.
4. Costs incurred by you in carrying out the rectification works can be claimed from the sum held by the SAL as stakeholder.

Building specifications and amenities (First Schedule)

The First Schedule states the amenities and building specifications. Almost all Sale and Purchase Agreements will describe the material to be used in very generic terms. Regardless of what brand or colour or quality of furniture, doors and  other amenities you might have seen in the showflat, it is the description in this First Schedule that is legally binding. That means that what you eventually get may not be exactly the same as what you saw.

Note E to the Specifications also specifically states that “the brand, colour and model as specified for all materials, fittings, equipment, finishes, installations and appliances to be supplied shall be provided subject to the Architect’s selection and market availability”.

Transaction particulars (Fourth Schedule)

Do check that the transaction particulars reflected here are accurate. Check that the purchase price, option fee paid, and most importantly, the unit number, are correct.

It is recommended that you consult an experienced lawyer if you have any queries.