SALE AND PURCHASE
Real estate ownership
Forms of real estate ownership
A Land in Singapore generally comprises Government-owned land and privately-owned freehold land. For the former, leasehold interests in the land may be granted to individuals, corporations or other entities. Leases can also be issued by freehold private land owners.
There are generally no legal restrictions on the ownership of commercial properties in Singapore.
Foreign ownership of residential property is regulated to a large extent
Industrial properties are more regulated, particularly Government-leased properties (e.g. JTC or URA properties, where the relevant Government agency will need to approve any lease or transfer of a lease in accordance with policy-driven regulations). Foreign ownership of residential property is regulated to a large extent, including the express restrictions set out in the Residential Property Act (Cap. 274). Broadly, foreign persons or entities require Government approval to acquire landed residential property, although they may purchase a flat or unit within a residential development without similar restrictions.
Major property legislation
The Conveyancing and Law of Property Act (Cap. 61) is the main property legislation which regulates the ownership, transfer, leasing and mortgaging of properties in Singapore. In addition, other property-related legislation includes:
- The Land Titles Act (Cap. 157) which regulates the registration of titles to land;
- The Land Titles (Strata) Act (Cap. 158) which regulates the strata subdivision of land and the collective sale of property;
- The Building Maintenance and Strata Management Act (Cap. 30C) which regulates the proper maintenance and management of strata-subdivided buildings in Singapore;
- The Housing Developers (Control and Licensing) Act (Cap. 130) and its Rules which regulate developers of a residential project with more than four units; and
- The Sale of Commercial Properties Act (Cap. 281) and its Rules which regulate the developers of a non-residential project with more than four units.
The system of land registration in Singapore is by title registration, adopted from the Torrens system of land registration. This means that entry into the land-register confers an indefeasible title to the registered proprietor, subject to any subsisting registered encumbrances or interests. Conveyance instruments such as Transfer and Mortgage are stamped (where applicable) and registered electronically before the certificates of title are updated and re-issued by the Singapore Land Authority (SLA).
The land-register is the public register of title. Public searches may be conducted (subject to payment of fees) on the title to find out the ownership particulars of each property and any encumbrances registered against the property such as mortgages, legal charges and restrictions.
The land-register is maintained by the Registrar of Titles. The register can be accessed online at the Integrated Land Information Service .
The following documents are registrable in the land-register:
- Legal charges;
- Court orders affecting land interests;
- Registrable leases; and
- Any other instruments affecting land interests.
Transfer of real estate ownership
A combination of contract and land law legislation and legal principles govern property transactions in Singapore.
After preliminary negotiations occur and both contracting parties settle on a price, a purchase option agreement is commonly drafted and issued by the vendor to the purchaser in exchange for an option fee (typically 1% of the purchase price). If the purchaser wishes to proceed with the transaction, he must exercise the option within the option period (typically two weeks) and in accordance with the terms of the purchase option agreement, failing which, the option will lapse and the option fee may be forfeited to the vendor.
Once the option has been duly exercised by the purchaser, the purchase option agreement becomes a binding sale contract, and its terms will govern the transaction, including the remedies available to each party for breach or rescission.
Alternatively, contracting parties can negotiate and enter into a Sale and Purchase Agreement (SPA).
In both scenarios, an initial deposit is usually paid by the purchaser upon exercise of the option or the signing of the SPA, and such deposit is commonly stakeheld by the vendor's solicitors pending completion of the sale, for the purchaser's protection.
On the date of completion, the purchaser will pay the balance of the purchase price to the vendor in exchange for all existing title deeds and access items (e.g. keys) to the property. If the property is subject to any existing encumbrances, the vendor must also hand over the necessary discharges to the purchaser.
Following completion, the relevant instruments including discharges, transfer, mortgages and/or charges will be lodged. Upon final registration, updated title deeds will be issued by the land registry.
Direct (i.e. asset transfer) vs indirect (i.e. share transfer) transfer of real estate
Asset transfers can take the form of a direct transfer of ownership of the property itself or indirectly through the transfer of shares of the property holding company.
Property holding company share transfers may be the preferred means of acquiring non-residential assets as the stamp duty payable on the transfer of shares (currently 0.2% of the company's net asset value or the transfer price) is significantly lower than that payable on an asset transfer (currently around 3%). Furthermore, a share transfer means that there is no need to assign or novate underlying leases or asset management contracts, although care should be taken with regard to any change of control restrictions.
However, where residential properties or shares in companies holding residential properties are transferred, the transaction may be subject to additional stamp duties (Please click here).
Considerations for foreign ownership of non-residential real estate
Apart from any head lease covenants or specifically regulated industries, there are generally no restrictions imposed on entities and individuals seeking to own or lease non-residential real estate (including shares in companies holding non-residential properties) in Singapore, and foreigners are allowed to directly purchase non-residential real estate assets.