Buying real estate in Singapore involves serious investment, often exceeding a million dollars for condominium properties, so it’s important to have all the checks in place before taking any action. The conveyancing process for transferring the title to a property is intended exactly for this purpose and provides a clear roadmap for safe real estate transactions.
Conveyancing in Singapore includes several stages, such as sourcing the property and assessment of related costs, due diligence on chosen real estate, and getting an option to purchase. The second phase starts after the buyers have paid the conveyance fee and instruct their lawyers to exercise the option to purchase, place a caveat on the property, and obtain the certificate of ownership from the authorities.
The conveyancing for non-residents’ buying properties in Singapore includes additional steps as foreigners are generally forbidden from buying landed property, HDB flats, or anything below 6 stories and not classified as a condo. In such a case, the preliminary due-diligence shall include determining eligibility for buying a specific piece of real estate.
While buyers can do some of the above steps such as sourcing or title search on their own, the involvement of lawyers is not only advisable but is required by law for the registration of title transfer with the authorities. The experienced conveyancing lawyers would not only help with having a thorough examination of property, title, ownership structure, and documents but also will provide for safe depositing of downpayment and ensure smooth title transfer.
Sourcing and Due Diligence on Properties in Singapore
Eligibility
Sourcing and due diligence on real estate in Singapore should be preceded by determining a buyer’s eligibility to own the property. As the Residential Property Act sets restrictions on foreigners’ purchasing landed property, which includes not only the building but also the ownership to land, the most available option for foreigners in Singapore is condos. At the same time, the law includes certain exceptions for non-residents such as the right to buy residential units in buildings above six floors or landed property in Sentosa Island. Finally, certain categories of foreigners may have the right to purchase restricted properties, such as land, after obtaining prior approval from the authorities so the individual situation must be taken into account before going any further.
Assessing Associated Costs
The purchase of real estate is accompanied by taxes and fees, and buying Singaporean properties is no exception. In addition to the price of the real estate, the buyer is paying the property taxes, conveyance fees, stamp duties between 1-4%, and additional buyers’ stamp duty (ABSD) affecting Singaporean buying more than one real estate as well as foreigners and amounting to 15% and even 25%, for example in case of entities buying a 3rd property.
While the tax calculations can be made on the website of the Inland Revenue Authority of Singapore (IRAS), the buyers should additionally check the maintenance fees, the cost of various insurances as well as so-called sinking fund fees collected by condominiums for future needs. On top of that, there are costs of researching the title, preparing the documents and lawyers’ commission but compared to the abovementioned expenses, they are only a fraction of percent from the total cost of real estate transactions.
Title and Structure of Ownership
The seller’s ownership of the property should be confirmed by the title search, which can be done through the Integrated Land Information Service (ILIS). The title search should identify all the owners of the property and their corresponding shares. The structure of ownership should also be clarified as in case of a joint tenancy, the tenants have equal rights to the property irrespective of their contribution to the purchasing price while tenants-in-common have rights proportionate to their shares.
Form of Ownership (Tenure)
In Singapore, the properties may belong to the sellers on the basis of freehold, when sellers own the property, or leaseholds when sellers have the right to lease it from the government for various periods from 1 up to 99 years. There are cases when such leases last up to 999 years but they are so rare that they can be disregarded. It goes without saying that the buyers will have the same tenure on the property as the sellers so that when buying leasehold real estate in Singapore, the remaining period of the lease before expiry shall be calculated.
Encumbrances
The conveyance process can be continued only in the absence of encumbrances on the property, such as mortgages or caveats placed by third persons. The buyers can check if the properties have any caveats on the website of the Urban Development Authority, which includes information about transactions with caveats or issued options to purchase. However, if the buyers are still interested in the property with a caveat, they can ask the sellers seller to remove such a caveat in court. In any case, the property shall be caveats free before buyers should go any further.
Availability of financing options
In case the buyers need a loan to purchase property in Singapore, they should ensure that the financing would be available before asking the Option to Purchase. This would prevent buyers from being sued if, for some reason, the bank declines the loan and would further exclude situations when buyers lose their option fee. Still, in current practice, buyers pay 1% option fee to sellers to get an option to purchase even before starting their research.
Option to Purchase, Payment and Title Transfer
Executing the Option to Purchase
After the buyer and buyer’s lawyer have done all the checks as described above and made sure the property has “good root” of title which means that it is available for sale and there are no problems with ownership, the buyer’s lawyer shall exercise the option to purchase and make the arrangements for paying the deposit. At this stage, the buyer also pays the rest of the option fee, which can amount to 9% of the purchase price.
Lodging a Caveat on Property
After the buyers’ lawyer has exercised the option to purchase and buyers have made prepayment, they have all reasons to make sure that the property would be no longer available for any other potential buyers. In order to do so, the buyer’s attorney should lodge a caveat on the property with the Land Titles Registry of the Singapore Land Authority (SLA).
Downpayment
The buyers make a downpayment for property to a conveyancing account opened with their lawyer. There are other options as well, including conveyancing account of Singapore Academy of Law or escrow accounts, jointly owned by buyer’s and seller’s lawyers.
Example of calculating the option fees and downpayment: Let’s assume the buyer is purchasing the private condo apartment with the listed price of $1,000,000, option fee of 10%, and maximum allowed financing of 80%. The option fee, paid when initiating the option to purchase, makes 1% or $10,000. After the buyer’s lawyer has exercised the option to purchase, the buyer pays the option exercise fee, making 9% or $90,000. The remaining downpayment equals $200,000 minus paid option fees, totaling $100,000.
Transferring the Property and the Title
After the buyer has made the downpayment, the seller should deliver the property into the possession of the buyer and hand over the keys. At this stage, the buyer gives the property a final inspection and either accept it from the seller or comment on defects to be eliminated. The buyers proceed with the registration of change in ownership with their lawyer and SLA, receiving a transfer form and a certificate of title which ends the conveyancing process.
Summary
Although conveyancing in Singapore, as described above, may look quite straightforward, it’s not devoid of its pitfalls. One of them is losing the option fee if the deal falls through in case the buyers do not receive financing or change their mind at the last stage. In this light, the importance of preliminary due diligence on the property, including assessment of value, common charges, etc. before paying the option fee becomes a priority.
While buyers can do some of the research on their own, it’s advisable to delegate searching for caveats on the property as well as running a professional due diligence review to qualified attorneys. Taking into account the prices for real estate and the amount of option fee even when calculated at 1%, entrusting the conveyancing process to experienced lawyers is the best guarantee of successful completion of purchasing properties in Singapore.
