Purchasing a Property “As Is, Where Is” – How To Avoid Paying for Property Defects

Purchasing a Property “As Is, Where Is” – How To Avoid Paying for Property Defects

It’s only natural that when you are in the process of buying a home, all that you want to do is simply sign the agreement, pay the money, and move into your new home.

Unfortunately, it is usually only after the furniture is moved in that defects emerge. Whether it is a cracked tile, a leaking pipe, or hidden mould, such defects often go unnoticed before the purchase, and a canny seller is unlikely to mention them when he or she is all too eager to sell.

Depending on how severe the defect is, the cost of repairing it can often be overwhelming for the purchaser, especially if repair costs were not budgeted for from the outset.

For many, purchasing a home is the most significant financial commitment that it is possible to make. However, if you are then unfortunate enough to discover a defect that turns your dream home into a nightmare, it could be too late to back out from the deal once you have signed the papers.

Even though you’re excited about moving into your new home, it is always important to check the fine print before you sign a contract – whether it is an option-to-purchase or a sale agreement – and insist on inspecting the property first. Failing to do so could leave you with a costly repair bill or a home that is worth less than you paid for it.

What to look for in a contract for a sale of property

When studying an option-to-purchase agreement or a contract for the sale of property, look out for clauses like:

“the property is sold on an ‘as is where is’ basis and the Purchaser shall be deemed to have inspected the Property on or before signing this Agreement and to be satisfied as to the state and condition thereof or otherwise.” These are known as known as “as is, where is” clauses.

What are “as is, where is” clauses?

These clauses are commonly included by the seller in sale-of-property contracts. Their purpose is to shift responsibility for conducting proper checks and inspections of the property away from the seller and onto the buyer.

Specifically, “as is, where is” clauses indicate that the seller has not made any promises that the property is fit for the buyer’s purposes. They also indicate that the buyer is considered to have inspected the property and accepted it in its present condition.

What is the effect of an “as is, where is” clause in a contract?

On a general level, it is always important to remember that under Singapore law, you are bound by all terms contained within a contract once you sign the contract.

This means that if you have signed a contract containing an “as is, where is” clause, the Court will consider that you have agreed to purchase the property in its present condition, regardless of whether you have inspected the property or not.

Because contract states that you have accepted the condition of the property, it will then be much harder for you to claim against the seller if you subsequently discover any faults or defects with the property.

This is based on a principle of contract law known as “caveat emptor” or “buyer beware.” The Court would not help you to rescue you from a bad deal if you were responsible for inspecting the property for defects before buying it.

Does the seller have a duty to tell me about any defects in the property?

In the majority of cases, the seller of a property is not under a legal duty to disclose to the buyer any defects in the quality of the property which affect its value. This rule applies equally to patent defects and latent defects.

What are Patent Defects?

Patent defects are those which are obvious to the buyer and could be discovered through a reasonable inspection of the property. An example of such a defect is a large hole in the wall that is plainly visible. The law assumes that the buyer can identify such an apparent defect and raise concerns with the buyer.

What are Latent Defects?

Latent defects are those which the buyer could not be expected to identify based on reasonable inspection of the property. Based on the principle of “caveat emptor” (buyer beware), a seller is not under a duty to disclose latent defects of quality, even if the seller is aware of such defects.

It is important to remember that this rule only means that a seller is not required to reveal this information automatically, without being prompted. If the seller fails to inform you of existing defects when asked, he or she may be liable for misrepresentation, which would entitle you to rescind the contract and claim damages for your loss.

Is an “as is, where is” clause enforceable in law?

Whether an “as is, where is” clause is enforceable depends on circumstances of the case. However, the Courts have consistently enforced such clauses in past cases.

The Singapore High Court clarified its interpretation of the phrase “as is, where is” in the case of Norwest Holdings Ltd (in liquidation) v Newport Mining Ltd SGHC 144, where the Court held that a buyer could not ask for the subject matter of the contract to be better than it was at the time of offer, but at the same time, the buyer had not agreed to accept anything less either.

This means that unless the contract provides differently, the buyer would not be taken to have accepted the condition of the property if the property was damaged after the contract was formed.

What are my responsibilities if I am purchasing a property?

As a buyer, you are responsible for undertaking all proper due diligence checks, especially if the agreement contains an “as is, where is” clause.

This means that you must be vigilant when inspecting the property for defects as you will have little recourse against the seller for any defects which could have been discovered through proper inspection of the property.

When negotiating to purchase a property, make sure that you get the opportunity to inspect the property before purchase. You may find it useful to engage professional surveyors for this purpose.

Additionally, it’s important to remember that an option-to-purchase agreement is a contract, meaning that once you have signed it, you will be bound by its terms. For this reason, it is highly recommended that you seek legal advice before you put any money down. This will ensure that your interests are protected in the contract, and you have not agreed to accept a property that is not in a condition which does not match your needs and budget.

What options are available to me if I have already purchased a property and have since discovered a defect?

If you signed a sale-of-property agreement containing an “as is, where is” clause, you might not be able to sue the seller of the property for breach of contract based on a later discover that the property contains defects.

However, depending on the circumstances, you may still be able to claim against the seller based on another cause of action. For example, the seller may be liable for misrepresentation if he or she failed to provide information about known defects in the property when asked.

How we can help you

Purchasing property in Singapore is not a matter that should be taken lightly. At I.R.B. Law LLP we have experienced lawyers who can advise while drafting or negotiating an option to purchase agreement or sale of property contract.

So don’t hesitate to contact us, our first consultation is typically free as we want to find out more about your problem and how we can be a part of the solution. Contact us at hello@irblaw.com.sg or call us at 6298 2537 to book a meeting with us.

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