Q: Recently I was in talks with a potential buyer for my condo and things were progressing well. Last week, after a third viewing, the buyer had confirmed that he wanted to purchase the unit and will present me the cheque as soon as possible. It was at that time I took my home off the market and even rejected going into negotiations with other potential buyers. However, I have not heard back from the buyer and repeated calls to his mobile have gone unanswered. I feel like he had cheated me of my time and opportunities to sell my unit to another willing buyer. Is there any legal recourse I can take?
A: Hi there Andrea, I am sorry to hear about your experience. I can only imagine how frustrating it must have been to waste time and effort on dealing with an insincere buyer.
Your rights, going forward, depend very much on whether or not any paperwork was concluded with the buyer. As you may appreciate, transacting in property is a big step to take for both sellers and buyers alike. Therefore, accepted real-estate practice calls for major milestones in the sale/purchase of property to be documented in writing.
Two types of written agreements are critical in the sale/purchase of residential property. I will explain them below. If you did not sign any of these written agreements with the buyer, I am afraid you may no right of recourse against him or her. However, if you did, you can consider taking the actions described below.
The first agreement is what we call an option to purchase (OTP).
The OTP is signed by both buyer and seller. It signifies a genuine intention of the buyer to see through the purchase of the property, and almost always involves the buyer paying the seller an option fee. Industry practice pegs this option fee as usually being one per cent of the sale price. Once the OTC is signed and the option fee paid, the seller has an obligation to reserve the property for the buyer for a short period of time, usually two weeks. Within this two weeks, the buyer must take further steps to conclude the purchase. If the buyer does not see through the purchase eventually, the seller is entitled to retain the option fee, and to then offer the property for sale to other interested parties. Because the OTP commits both seller and buyer to certain obligations, parties are advised to give the sale/purchase careful considerations before exercising the OTP.
If the buyer decides to proceed with the purchase, he or she will enter into the second key agreement with the seller – the sale and purchase agreement (SPA).
The SPA formally “concludes” the transaction of the property. Once signed, the buyer has to make payment and finish all legal documentation associated with the transaction by a stipulated date known as the completion date. If the buyer fails to do this, the seller can choose to extend the completion out of goodwill (if the buyer is genuine about the purchase but needs more time to complete it). Alternatively, the seller can take the buyer to court and ask for a court order compelling the buyer to complete the sale. The seller also has the option of revoking the SPA, which then allows the seller to sell the property to other interested parties.
As a seller, it is important to “lock in” a prospective buyer’s commitment with an OTP once parties ascertain each others’ sincerity and agree on a sale price. This way, you need not risk dealing with irresponsible buyers who may drop you at their whim and fancy.
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Wei Li practises litigation and arbitration at KEL LLC – a boutique Singapore law firm specialising in civil and commercial law. He acts for corporate and individual clients in managing and resolving disputes across a wide range of issues and industries. Wei Li has a particular interest and expertise in Internet and social-media law. He provides strategic counsel and representation to businesses and high-profile individuals in a spectrum of media-related issues such as reputation management, appropriate-use policies, privacy and digital marketing. In addition to his practice as a lawyer, Wei Li teaches as an adjunct faculty at the Singapore Management University’s School of Law.
For more information, visit http://kel.asia/
Disclaimer: This article provides a general guide to the subject matter and should not be treated as professional legal advice. If you require specific legal advice, you are encouraged to consult a qualified legal professional to obtain the same.