The Option to Purchase is frequently used to initiate the sale of a property. Less frequently and therefore less understood is the Offer to Purchase and the lack of familiarity with it led to a sale breaking down and to the court case which this article discusses and extracts lessons from.

A Tale of Two Real Estate Agents
(Lessons in Structuring an Offer to Purchase)

In the High Court case of Chew Ai Hua, Sandra v Woo Kah Wai and another (Chesney Real Estate Pte Ltd, third party) [2013] SGHC 12, (on appeal sub nom Woo Kah Wai and another v Chew Ai Hua Sandra and another, [2014] SGCA 41), (“Chew v Woo”), the defendants/appellants (“the Woos”) received from the plaintiff/respondent (“Sandra”) a written offer to take an option to purchase from them to buy their apartment. They were pleased with the price and other terms Sandra offered and issued to her an option to purchase. But when Sandra sought to exercise the option, they rejected her on the ground that she had exceeded the deadline for exercising the option and forfeited to themselves the option fee she had paid. 

Sandra’s real estate agent had prepared for her the offer (or the Offer to Purchase) and the Woos’ real estate agent had prepared for them the option (or the Option to Purchase). In the ensuing litigation, both the agents testified before the High Court. After hearing them, the learned Judicial Commissioner, Lionel Yee JC,  observed that there might be some real estate agents who do not fully appreciate how option periods should be calculated and said,  “It may well be that the proper interpretation needs to be given proper dissemination in the industry.” 

The comment of the learned Judicial Commissioner – whose judgment in all aspects was upheld by the Court of Appeal – was well made but as the case shows what needs to be given dissemination in the real estate agent industry is rather more  than just the method of calculating option periods. There are other principles of contract law, besides, which the real estate industry, or for that matter anyone who has to craft an Offer to Purchase or  Option to Purchase, may usefully note so as not to fall into the errors that occurred in Chew v Woo.

The first and foremost of these principles is that an agreement, contractually binding on the seller, to grant an Option to Purchase to the buyer arises  if the following conditions are met: (i) the offeror (buyer) makes the offer to pay for and take an option to purchase; (ii) the offeree (seller) accepts the offer; (iii) consideration is furnished in the form of the Option Fee proffered to and accepted by the offeree (seller); (iv) there is sufficient certainty with regard to  the terms of the proposed sale; and (v) the evidentiary requirements of s 6 (d) of the Civil Law Act (Cap 43) are satisfied. This principle was set by the Court of Appeal in Joseph Mathew and another v Singh Chiranjeev and another [2010] 1 SLR 338 (“Joseph Mathew v Singh Chiranjeev”). 

A seller who accepts an Offer to Purchase may, therefore, be ensnared in a legal bind even before the seller gets round to issuing the Option to Purchase – a case of being bound by a contract before a contract. This is contrary to the mistaken notion, all too common, that despite accepting the Offer to Purchase, the seller has no contractual obligation of any sort to the buyer who made the offer until the seller has actually issued the Option to Purchase.

In Joseph Mathew v Singh Chiranjeev, the appellants, a husband and wife (the sellers) put their property on the market. While they were in India, the husband exchanged e-mails with their real estate agent in Singapore who informed him that the respondents (the buyers) had made an offer to purchase their property at a certain price and on certain other terms. She also told him that the buyers were requesting for an Option to Purchase to be issued on the terms offered and they had placed with her a cheque for the Option Fee in exchange for the Option to Purchase. He confirmed to her by e-mail his and his wife’s agreement to sell at the price offered and instructed the agent to bank in the buyers’ cheque. These e-mails were copied to the buyers. The agent then prepared the Option to Purchase and couriered it to him and his wife for them to sign. But they changed their mind about selling and declined to sign the Option to Purchase. They offered to return the Option Fee to the buyers, who rejected the offer and sued.  

The sellers argued that until they signed the Option to Purchase there was no binding contract of any kind between them and the buyers. The Court of Appeal dismissed the sellers’ argument and decided in favour of the buyers, laying down the rule which has been mentioned above. The Court held that all the ingredients from (i) to (v) were met and this gave rise to an agreement to grant the Option to Purchase which was a fully formed contract enforceable on its own terms, independently of the Option to Purchase which might or might not, as a matter of fact, follow. Delivering the judgment of the Court, Andrew Phang Boon Leong JA said at para 19, “The need to courier the Option to Purchase to the appellants for their signature was merely a necessary part of the process of giving effect to a binding agreement (to grant an option) that had already been entered into between the appellants and the respondents” (emphasis added).

Joseph Mathew v Singh Chiranjeev was followed in Chew v Woo. 

The Woos engaged the real estate agent named Chesney Real Estate Pte Ltd (“Chesney”) to market the sale of their apartment. Chesney was run by a director named Ms Cindy Lim (“Cindy”). Sandra was prepared to buy the apartment at the price of $920,000 and her real estate agent Mr Adrian Thoo (“Adrian”) held preliminary discussions with Cindy who confirmed to him that the Woos were agreeable to the price and asked him to get his client to make an offer to purchase. 

What then followed was a frenzied burst of activity, astonishingly all in the space of a week, during which a sale was done and undone and the seeds of litigation were sown:

1. 10 February 2010. Adrian prepared the Offer to Purchase which Sandra signed with instructions to give it, together with her cheque for the Option Fee, to the Woos. 

2. 11 February. At Chesney’s office Adrian delivered the Offer to Purchase and Sandra’s cheque to one Ms Masila binte Kamis (“Masila”) who was assisting Cindy in the matter. The Offer to Purchase stipulated that the owner of the property was to issue an Option to Purchase and deliver it to the offeror “within three days (ie 4pm 13 February 2010)” failing which the Offer would lapse and the option money tendered was to be refunded immediately. This tight deadline set Masila scrambling to prepare the Option to Purchase on 11 February itself. She planned for her clients to sign the Option later that day and told Adrian to return to Chesney’s office the next day (12 February) to collect the signed Option to Purchase from her. In the evening of 11 February at Chesney’s office, Mr. Woo signed the Option to Purchase, which was dated 11 February, and took delivery of Sandra’s cheque which he promptly banked in.

3. 12 February. Adrian was at Chesney’s office to take delivery of the Option to Purchase. The Offer to Purchase had a condition which said that the “Option Period” was “3 days”, which led Masila (wrongly and fatally as will be seen) to set the Option Period in the Option to Purchase to expire on 13 February, 4pm. When Adrian saw the date he asked Masila to have the Option Period extended. Cindy was not present then, but on being informed by Masila, Cindy spoke to the Woos. 

4. 13 February (Saturday). This was the eve of Chinese New Year’s Day. 

5. Around noon. The Woos told Cindy they were not agreeable to any change. According to Cindy, she then immediately telephoned Adrian and told him accordingly. But Adrian said she had told him, in that telephone conversation, that despite the Woos’ decision that the Option Period was not to be expressly amended, he could take it that the Woos had agreed to extend the deadline to three working days, which would expire on 19 February.

6. Late afternoon. By prior arrangement with Masila, Adrian met up with her at a bus stop in Toa Payoh and took the signed Option to Purchase from her. 

7. 6 pm.  Adrian handed the Option to Purchase to Sandra. 

8. 14 February (Sunday). This was Chinese New Year’s Day.

9. 15 February (Monday). This was a Chinese New Year public holiday.

10. 16 February (Tuesday). This was also a Chinese New Year public holiday.

11. 17 February (Wednesday). To exercise the Option to Purchase, Sandra was to sign and return it with a deposit to the Woos’ solicitors before the Option Period expired. Having been advised by Adrian that the Option Period was three working days, Sandra’s solicitors were at the Woos’ solicitors’ office to deliver the signed Option to Purchase and the deposit but the office was still closed to business. 

12. 18 February (Thursday). Sandra’s solicitors were at the Woos’ solicitors’ office again to exercise the Option. The office was open but the Woos’ solicitors refused to accept delivery on the ground that the Option Period had already lapsed.

13. Both parties fought much of the case over the factual issue whether the Woos had at all times insisted that the expiry date of the Option was to be as stated on the face of the Option which was 4pm 13 February or whether they had relented and authorised Cindy to tell Adrian that he could take it that the expiry date was changed to three working days thereby effectively extending it to 19 February. But the Court led them back to the earlier stage when the Offer to Purchase was made and accepted. 

The operative part of the Offer to Purchase read as follows:

“We the undersigned hereby offer to purchase [the Property] … at the purchase price of S$920,000/- … subject to the following terms and conditions:

1. Option Period: 3 days

2. Completion Period: 12 weeks

3. The sale of [the Property] is subject to signing the Option to Purchase.

4. Within three (3) Days (i.e. by 4p.m. 13th February 2010), the Owner of [the Property] must either accept or reject this offer failing which this offer shall lapse. If rejected, the option money tendered herewith will be refunded to us within the time stipulated above without any interest thereon and thereafter neither party shall have any claim against each other. If accepted, the Owner shall deliver to the undersigned the Option duly signed by the Owner within the stipulated time above.
…

Enclosed herewith [cheque] for the amount of S$9,200/- … made payable to Woo Kah Wai … being Option Money for the purchase of [the Property].”

Following Joseph Mathew v Singh Chiranjeev, the Court ruled that when the Woos accepted this Offer to Purchase, they bound themselves to an agreement with Sandra to grant her an Option to Purchase in conformity with the terms set out in her Offer to Purchase and that the remaining issue was whether the setting of the Option Period to end at 4pm on 13 February breached the agreement. 

The Woos argued against this, submitting that the Offer to Purchase was in effect an offer to purchase the property subject to contract and they had accepted it on that basis. Therefore, there was no contract until they had actually signed and released the Option to Purchase and the only issue was whether Sandra had breached it in failing to exercise it within the Option Period. 

To argue as the Woos did is to fail to understand that the “Offer to Purchase” which Adrian and other real estate agents regularly use is not an offer to buy the property but an offer to buy an option for the offeror to buy the property. (See the Court of Appeal, per Chao Hick Tin JA at Para 47). The true nature of the beast tends to be masked by the label “Offer to Purchase”.

The learned Judicial Commissioner therefore rejected the Woos’ submission, and went on to find that the Woos had breached the agreement. The Option to Purchase did not conform in one material aspect – Masila informed Adrian to collect the signed Option from her on 12 February. The Offer to Purchase stipulated that the Option Period was to be “3 days”. Yet the Option required Sandra to exercise the Option to Purchase by 4pm on 13 February. Since the Option was to be in Sandra’s hands on 12 February at the earliest, she would have only a day or so and not three days, if she had to exercise the Option by 4pm of the next day. This clearly did not conform to the stipulation in the Offer for three days. The learned Judicial Commissioner applied what he described as the general rule that in the absence of clear evidence that the parties have intended otherwise, the Option Period does not start on the date the Option to Purchase is signed but when it is delivered or at the very earliest when the prospective buyer or the agent for the prospective buyer is notified that it is available for collection. The Woos did not comply with this rule and were, therefore, in breach of the agreement to grant the Option to Purchase.

From the foregoing, we can see that what ought to have been an occasion for mutual celebration by the Woos and Sandra – they because they had managed to dispose of their apartment at the price they wanted and she because she had managed to acquire an apartment she liked at a price she was satisfied was a reasonable price to pay – descended swiftly into a distressing and destructive game of forfeit for the lack of draftsmanship. What then, are the lessons we can learn from Chew v Woo to apply when drafting an Offer to Purchase? Some of them are as follows.

1. Get the names of the owners right 
The Offer to Purchase in Chew v Woo was addressed to only Mr Woo when Mrs Woo was a joint owner. This mistake was perpetuated by Masila when she drafted the Option to Purchase. Since only Mr Woo was named as the issuer of the Option to Purchase, the learned Judicial Commissioner noted that in theory (at least) Sandra could have failed to enforce the Option against Mrs Woo in view of s 6 (d) of the Civil Law Act (Cap 43). Section 6(d) effectively provides that no action can be brought against a person on a promise or agreement under a contract for the sale or other disposition of immovable property (or any interest in such property) unless the promise or agreement or a note or memorandum of such promise or agreement is in writing and signed by the person or the person’s authorised representative. Citing Joseph Mathew v Singh Chiranjeev, his Honour observed that an Option to Purchase creates in favour of the option holder an equitable interest in the land – the contract before him was of such a nature and, therefore, needed to comply with s 6 (d). 

As it turned out, Adrian was saved an embarrassment because the fact that Mrs Woo was not named in the Option and did not sign it was not an issue in the case – Mrs Woo had chosen not to plead it and as his honour pointed out, citing the authority of Midlink  Development Pte Ltd v The Stansfield Group Pte Ltd [2004] 4 SLR (R) 258, s 6(d) must be expressly pleaded to be deployed in legal proceedings.

It has to be said, though, that the circumstances disclosed at the hearing show that Sandra might not necessarily have failed in her claim, or been without other remedies against Mrs Woo had the latter pleaded a defence based on s 6 (d). But certainly, if Mrs Woo had pleaded the defence, Sandra would have had an unnecessary additional hurdle to surmount as illustrated by Tay Joo Sing v Ku Yu Sang [1994] 3 SLR 719 and Mookka Pillai Rajagopal v Khusvinder Singh Chopra [1996] 3 SLR (R) 210, two of the several cases where the issue of missing signatories was vigorously litigated.

To avoid this potentially sticky problem of the missing co-owner’s signature, the drafter of the Offer to Purchase could, and should unfailingly, carry out an online title search, a facility provided by Singapore Land Authority for as little as $18 (at the time of writing), and obtain instantaneously, among other things, the owner or owners’ names.

2. Set reasonable and practical deadlines
The Offer to Purchase required the Woos to issue the Option to Purchase by 4pm 13 February 2010, which gave Chesney just a day or so to get out the Option to Purchase, have it signed by the Woos and delivered to Adrian. This difficult and stressful deadline apparently caused Chesney to be so confused as to wrongly set Sandra the same ridiculously short time span to exercise the Option to Purchase. To anyone who gave it half a thought, 13 February was a bad day to choose to do business on because it was a Saturday when most offices, including Government departments and law firms, would have closed their doors for the weekend and even more so because this particular Saturday was the eve of Chinese New Year’s Day, a day when those who would not customarily close for business on a Saturday would probably have done so to begin the festivities for the Chinese New Year. 

3. Be precise about dates
The Offer to Purchase stated that the Option Period was “three days”. The statement “three days” set the Court the task of having to decide from which date the countdown of the three days ought to start, and if the last day fell on a public holiday, what then?

The learned Judicial Commissioner rejected Sandra’s submission to read it as three “working days”. His honour construed it to read three “calendar days” which, in the circumstances of the case, meant that the last day fell on 15 February (which as we have seen was a public holiday) and asked – would it be an implied term that the expiry date was extended to the first working day?  He did not feel compelled to decide the issue because he was deciding the case on another ground. However, the Court of Appeal (per Chao Hick Tin JA at para 86) observed that in such a case, the Woos would have been bound to ensure that their solicitors’ office was open on 15 February for Sandra to exercise the Option to Purchase, notwithstanding that it was a public holiday. 

This would have imposed on not only the Woos’ solicitors but also Sandra’s solicitors the inconvenience of having to open their offices when the rest of the community had taken the day off to enjoy the Chinese New Year public holidays. It seemed futile to set 4pm, Saturday as Sandra’s deadline to exercise the Option because if she really was minded to exercise the Option on or just before 4pm that day, the Woos would not have been able to cash in her cheque until the next working day. No reason was given and there seemed none for the parties to chase this quick fire schedule without any regard for the interests of the solicitors and their staff. Probably insufficient or no thought was given to this matter by the agents involved.

The problem would have been avoided if Adrian had checked his calendar and stated a specific date which was a working day rather than state generally “3 days”. If not a specific date, he could alternatively have written “3 working days” and defined the term “working day” as a day that is not a public holiday or a Saturday. Expressly excluding Saturday is necessary to prevent unnecessary dispute since Saturday is not universally adopted as a public holiday. Careful drafters do this.

4. State the deposit payable on the exercising of the Option to Purchase 
An essential feature that makes an Option to Purchase what it is, is that to exercise the Option to bring into existence a sale and purchase agreement, the Option holder has to pay a deposit to the seller. Joseph Mathew v Singh Chiranjeev is an illustration of this. The sellers’ agent told the sellers that the buyers had asked for an Option to Purchase to be issued in the first instance and that they had offered to buy the property at the price of $506,000 and on the following other terms:

1. Option Fee: One per cent.

2. Three weeks to exercise the Option to Purchase ie from [stated date] to [stated date].

3. Next 9% will be paid to your Lawyer by [stated date].

4. Completion date: 10 weeks after [stated date].

The Offer to Purchase in Chew v Woo – whilst identifying the property and  stating the offered price, the Option Fee, the Option Period and the completion date of the sale – was silent on the payment of a deposit and its amount. This omission caused the Court of Appeal, on its own initiative, to ask whether the Offer to Purchase was sufficiently certain in all its terms to be capable of being converted, on acceptance by the Woos, into a contractual agreement to grant an Option to Purchase. 

The Court said, “For a valid contract for the grant of an OTP (ie Option to Purchase) to arise, the parties, the property, the purchase price as well as the amount payable upon the purchaser’s exercise of the OTP to be granted must be agreed on … there is genuine doubt as to whether the OTP was sufficiently complete to give rise, upon its acceptance, to a valid contract for the grant of an OTP without stipulating the sum that was payable upon the exercise of the OTP to be granted. Without such a stipulation in a contract for the grant of an OTP, there would be uncertainty as to what sum of money the vendor may require from the purchaser upon the latter’s exercise of the OTP”(emphasis added).

The Option to Purchase issued by the Woos provided that on exercising the Option, Sandra was to pay a deposit equivalent to five per cent of the sale price (inclusive of the Option Fee paid.) Although she had not said anything about the payment of a deposit in her Offer to Purchase, Sandra was completely happy to go along with that. On the Woos’ part, they, too, did not seek to make an issue of the fact that the Offer to Purchase had been silent on the amount of the deposit Sandra was willing to pay. The Court concluded from this that the parties, probably influenced by the industry norm, had at all times shared the same assumption that a five per cent deposit (inclusive of the Option Fee) was payable. Given this common understanding (albeit unspoken) between the parties, there was never any question of any uncertainty. The Court, therefore, decided to let the issue rest. 

But the Court went on to warn, “We would, however, caution that our conclusion on this issue is tied to the specific facts of this case. If contracts for the grant of an OTP become more prevalent and if a similar dispute is argued more comprehensively before this court in a future case, there may be a different answer to the question of whether the absence of a term in a contract for the grant of an OTP (or a document setting out the terms of such a contract) stipulating the amount payable on the exercise of the OTP to be granted is fatal to the completeness of that contract”.

5. Ask for longer rather than shorter Option Period
The Offer to Purchase stated that the Option Period was to be three days. In inviting the Owner to give his own client just three days to exercise the Option, Adrian was doing her a great disfavour. Adrian testified that he meant three “working” days (which the Court did not accept.) But even then, the industry standard for an Option Period is two to three weeks and not to take advantage of this was a missed opportunity. The decision to ask for only three days or even three working days when a longer period would probably have been agreed by the Owner was seemingly due to a lack of appreciation why a buyer might prefer to secure an Option to Purchase in the first instance rather than entering straightaway into a bilateral sale and purchase agreement. The Option Period is time that can be fruitfully used by the buyer to make preliminary arrangements for financing for the purchase, including getting the cash to pay for the deposit payable on the exercising of the Option to Purchase, and by the buyer’s solicitors to make important investigations on the property. If the buyer and the solicitors are satisfied with the results well before the expiry of the Option Period, the buyer may proceed to exercise the Option – the buyer is not compelled to wait until the last day of the Option Period to exercise the Option. It therefore serves the buyer to have a longer Option Period rather than a shorter one.

6. Offeror - Prepare the Option to Purchase
In most cases, the parties proceed immediately to settle an Option to Purchase or even an outright bilateral sale agreement. In these cases, the seller drafts the Option to Purchase or the bilateral sale agreement for the buyer’s consideration. This is a convention, a sensible one based on practical reasons and convenience but nevertheless a convention at best,  not an iron-clad rule, and  there are occasionally instances where  the buyer prepares the Option or the agreement for the seller’s consideration.

In an Offer to Purchase situation, there is no such convention. On the contrary, in a situation similar to Chew v Woo, the buyer would be well advised to seize the initiative to prepare the Option to Purchase to accompany the Offer to Purchase. This is because in as much as the seller becomes contractually bound to issue an Option to Purchase to the buyer once the seller accepts the buyer’s Offer to Purchase without qualification, equally the buyer is contractually bound to accept the Option as issued by the seller (so long as the Option conforms to the terms stated in the Offer) on pain of having the Option Fee forfeited otherwise.

Therefore, the buyer who leaves things half unsaid, impliedly yielding the right to the seller to decide on the rest of the terms of the sale, puts himself or herself at peril. To illustrate the potential problems this could cause, we return to Chew v Woo. 

a. In her Offer to Purchase, Sandra did not state the sum of the deposit she had in mind to pay on the exercise of the Option and left it to the Woos to decide. As it turned out, the Woos were restrained and required a deposit of only five per cent of the sale price (including the Option Fee) and this suited Sandra. As the Court of Appeal observed, this concurrence might have had something to do with the industry norm. 

But what if the Woos had required a 10 per cent deposit?

In Joseph Mathew v Singh Chiranjeev, where the negotiations took place in mid- 2007, the parties agreed to a 10 per cent deposit. So five per cent for a deposit is by no means the one and only percentage that the industry sees. In fact, before 2005, 10 per cent was pretty much the norm because most buyers would have to pay at least 10 per cent of the sale price with their own cash. In July 2005, by a combination of rule-changes by the Monetary Authority of Singapore and the Central Provident Fund, a buyer of private residential property, if eligible, could take a 90 per cent loan and pay the remaining 10 per cent through a combination of at least five per cent in cash and the remainder with CPF. Since, in theory, the buyer had to pay only five per cent with the buyer’s own cash, the trend in the industry began to shift toward the taking of a five per cent deposit. Though there are suggestions that the 10 per cent deposit could face extinction, it has not quite gone the way of the dodo yet and indeed could acquire a new lease of life whenever it is a rabid sellers’ market.

b. In not addressing the issue of the deposit, Sandra also left open the question whether the balance four per cent (which together with the Option Fee made up the deposit) was to be paid to the Woos or to the Woos’ solicitors to hold as stakeholders pending completion. The Woos were, therefore, at liberty to provide that the four per cent was to be paid directly to them. In the circumstances of the case the four per cent was not paid for the reasons we have seen earlier, but if Sandra had paid the deposit to the Woos (and not to their solicitors to hold as stakeholders), it would have meant that the Woos could have used the money as they liked subject to their refunding it if the sale was aborted or to their crediting Sandra with it if the sale was completed. There was no suggestion that in this hypothetical situation, if the sale was aborted the Woos would not have been able to refund the money to Sandra. In fact, in the majority of cases the sellers would be able to discharge their liability to make the refund. 

But speaking generally, it is conceivable that a seller could become insolvent even during the relatively short time between the date of the sale agreement and the completion date; if a stubborn seller is based outside Singapore, it may take costly court proceedings before the buyer can recover the money; if the property is mortgaged to the hilt, there would be no surplus to satisfy the buyer’s lien over the property for the deposit. In each of these sets of circumstances the buyer might not be able to recover the deposit quickly without incurring costs or worse, might not be able to recover the deposit at all.

It is always a concern for the buyer’s solicitor to see, for the first time, the non-stakeholding provision when shown by the happy but unsuspecting client the signed Option to Purchase secured without the benefit of the solicitor’s input. The buyer’s solicitor can only fervently hope that all will be well up to the time that completion is scheduled and completion is effected without incident – hope because the buyer cannot change any of the terms in the Option without the consent of the seller. Any attempt to unilaterally impose an obligation on the seller’s solicitor to hold the deposit as stakeholder would result in the buyer losing the Option Fee as a forfeit to the seller and, perhaps more painfully, losing the opportunity to own the property. This was precisely what happened in Zain Asif Fancy v Soon Chia Chuen (alias Sun Jiajun) [2010] 1 SLR 1192 where the Option provided that to exercise the Option the buyer had to pay a deposit to the seller. Nothing was said about the deposit being paid to the seller’s solicitor for the latter to hold as stakeholder pending completion. But when the buyer exercised the Option, he paid the deposit through his solicitor who paid it to the seller’s solicitor with the direction to the latter to hold the deposit as stakeholder pending completion. The seller declared this a breach by the buyer causing the Option to lapse and the Option Fee forfeited to him, and he was upheld by the Court. 

7. List out all required terms of the sale
Should the buyer be unable to prepare a formal Option to Purchase to accompany the Offer, and has to leave it to the seller to prepare the Option, the buyer  should at least list out briefly in the Offer the conditions of sale which the buyer requires to see in the Option. These conditions do not have to be expressed in formal, legal phraseology as long as the language used is clear enough. 

In addition to the three Ps (Parties, Property and Price) which are the minimum terms that need to be captured in writing for any enforceable sale agreement of real estate to arise, there are also other important terms that need to be agreed upfront to prevent any disputes breaking out before the sale can be successfully completed.

An important term for the buyer is that which is commonly known as a satisfactory legal requisitions-clause by which the buyer may withdraw from the sale without penalty if the authorities’ replies to the legal requisitions sent to them by the buyer (or the buyer’s solicitors) are unsatisfactory. This is particularly important to have where the property is a landed property fronting a busy road or is at the corner of two busy roads. The buyer might want to discontinue with the sale if the authorities advise that there are future or possible plans to widen the road into part of the property. Or if the buyer has plans to redevelop the property involving deep piling, the buyer would want to know whether the property is within what is known as an MRT safeguarded corridor where such deep piling may be prohibited. And of course, the buyer would want to know whether the building or substantial parts of it have been erected without the approval of the authorities and are illegal structures, and so on. If the seller is given the right to draft the Option to Purchase and it is not a term of the Offer to Purchase that such a clause is to be included in the Option to Purchase, the seller will in all probability not include the clause and then, when the Option to Purchase is issued and delivered to the buyer it becomes a case of caveat emptor and the buyer takes the risks.

There are a host of other terms which are important not only to the buyer but to the seller as well. These are required to ensure that as far as possible there are no open ends in the sale agreement which might cause the parties to squabble. For example, if the property is sold subject to an existing tenancy, is the security deposit in the hands of the seller to be transferred to the buyer? What is to be done if the seller or the buyer fails to complete the sale on time or at all? Are the property tax and other outgoings (eg in the case of an apartment in a condominium, the management corporation’s levies for maintenance and sinking fund charges) covering a certain period after the completion date, which the seller has already paid, to be clawed back by the seller and if so how should the apportioning be carried out? Fortunately, most of these nitty gritty details are captured in the standard terms of sale known as The Law Society of Singapore’s Conditions of Sale 2012 and these Conditions can easily be included in the Offer to Purchase by a brief statement that these Conditions are to apply but that they are general conditions and apply to the extent that they are not inconsistent with the other terms that are expressly set out in the Offer.

A possible downside  of the approach advocated is that the parties might not be able to cut a deal extra speedily since it takes time to plan and prepare a proper Offer to Purchase and Option to Purchase and to negotiate and settle the preliminary drafts. But what is the point of adopting an approach like that in Chew v Woo where the parties, hoping to tie each other to a binding commitment immediately, act with undue haste and end up selling and buying not property but litigation?

► Gan Hiang Chye  
     Consultant
     Corporate – Real Estate
     Rajah & Tann Singapore LLP
     E-mail: [email protected]