SALE AND PURCHASE

Sale and purchase contract


General components of a sale contract

Property contracts can be made voidable for lack of certainty

Property contracts can be made voidable for lack of certainty if parties' intentions are not set out in clear and express terms.

The sale contract must contain the following:

Property contracts can be made voidable for lack of certainty if parties' intentions are not set out in clear and express terms.

The sale contract must contain the following:

  • Details of the parties;
  • Property address;
  • Price of the property; and
  • Date of completion.

It is also common to include the following terms:

  • Deposit. Timing for payment of the initial deposit (e.g. 1%) and the balance deposit (e.g. 4%);
  • Balance purchase price. Timing for payment of the balance purchase price;
  • Other payments. Payment of the vendor's agent's commission;
  • The Law Society of Singapore's Conditions of Sale. Unless the property transaction is complex, the form of the sale contract is fairly simple and brief, and it is common to supplement the same through the import of standard terms and conditions set out by the Law Society of Singapore by reference in the contract;
  • Condition of property. Whether the property is sold "as-is, where-is" or otherwise;
  • Possession. Whether the property is sold with vacant possession or subject to any existing tenancies;
  • Apportionment of rents and outgoings. Rents and other outgoings are apportioned between the purchaser and vendor up to and including the date of completion;
  • Escape clauses. Clauses which entitle either party to withdraw from the transaction under certain circumstances;
  • Good title. The title deeds must be delivered to the purchaser on completion free of any encumbrance;
  • Default; If the purchaser defaults, the deposit will be forfeited, and the vendor can rescind the agreement and resell the property. Any shortfall arising from such resale and expenses relating to it will be paid by the purchaser; If the vendor defaults, the purchaser can enforce specific performance of the agreement or claim for damages. The purchaser may be able to recover any loss suffered from buying another property and expenses relating to it from the vendor.
  • Proper assurance. On completion, the vendor must execute a Transfer to the purchaser to be registered with the land-register.

As for a typical share sale agreement, many of the above provisions (such as terms on apportionment of rents and outgoings, default and proper assurance) do not apply as the transaction relates to a transfer of title in the shares and there is no separate transfer of title in the property (which the company already owns). Instead, additional clauses dealing with the corporate aspects of the transaction are required.

Additional clauses dealing with the corporate aspects of the transaction are required

Transfer of occupational leases and income

If the property transaction is effected by a share transfer, there is no change in the registered proprietor and the benefit of any occupational leases and income remains the same.

If the property is sold as an asset transfer subject to a lease, a novation agreement should (where possible) also be entered into to replace the vendor with the purchaser as the new landlord, and to assume all the rights, obligations and liabilities under the subsisting lease.

Common rights, interests and encumbrances

Property interests include:

  • Legal interest in the form of either an estate in fee simple (i.e. freehold) or a leasehold estate;
  • Legal charge over land (e.g. mortgages or statutory charges);
  • Equitable interest derived from being the beneficiary of a trust, whether such a trust is intentionally created by a settlor, or arises by operation of the law in the form of a resulting or constructive trust;
  • Restrictions; and
  • Easements.

These rights are created by registering the relevant instruments at the land registry. Such registration operates as deemed notice to any third party. Unregistrable interests, such as trusts arising by operation of the law or leases for a term of less than seven years, are protected by common law rules.

Typical representations and warranties

Whether or not the vendor gives the warranties will depend on the bargaining power of the parties

There are no legal requirements for a vendor to give a purchaser any warranties. However, a purchaser will often require a vendor to provide warranties on the following matters:

  • The vendor has good title to the property;
  • That the vendor has not received any notices adverse to the vendor's interest in the property;
  • No third party has any right or interest whatsoever, whether legal or equitable, in the property;
  • The property is not adversely affected by any encumbrances of which the vendor is aware or could have ascertained on reasonable inquiry; other than those disclosed in the agreement, or which the purchaser is aware of or could have ascertained on reasonable inspection of the property;
  • Tenancies;
  • That the property is not subject to any litigation;
  • Corporate matters;
  • Vendor's capacity to transfer the title to the purchaser on completion; and
  • Other matters arising out of the due diligence enquiries.

Whether or not the vendor gives the warranties will depend on the bargaining power of the parties and the commercial imperatives behind the deal. Warranties can be limited by disclosure of specific matters and imposing time limits.

Remedies against misrepresentations

The vendor is liable to the purchaser when he makes an untrue statement of fact which is relied on by the purchaser, and as a result of which loss is suffered.

If you have any questions or comments about this report, please get in touch.

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LEGAL AND REGULATORY