Option to Purchase – Singapore Property
An Option to Purchase is a right or option given by the vendor of a property to an intending purchaser to buy the property at a specified price within a specified period of time (the validity period of the option). The intending purchaser must pay a booking fee for this right or option. The intending purchaser has to exercise the Option to Purchase within its validity period if he decides to buy the property.
Booking Fee
Under the Housing Developers Rules, the booking fee payable to the licensed housing developer for an Option to Purchase is between 5% to 10% of the purchase price of the residential property.
Important Points to Note
1) Booking fee payable is between 5%-10% of purchase price.
2) Licensed developers are required to use the Standard Option to Purchase.
3) All intending purchasers must be named in the Option.
4) Option is valid for 3 weeks from delivery of Sales and Purchase Agreement (S&P) to purchaser.
5) 25% of booking fee is forfeited if Option is not exercised.
Standard Option to Purchase
A licensed housing developer is required to use the standard form of Option to Purchase prescribed under the Housing Developers Rules in the sale of the units in a licensed housing project. The developer is required to seek approval from the Controller of Housing for any change to be made to the standard Option to Purchase. The standard Option to Purchase cannot be amended even by mutual agreement between the buyer and developer unless approval is given by the Controller of Housing.
Non-assignability of Option
The purchaser is not allowed to assign or transfer the Option to Purchase that has been granted to him by the developer to any other persons. Hence, he needs to ensure that all persons who are intending to purchase the property are correctly identified and named as the ‘intending purchasers’ in the Option to Purchase. Only the intending purchasers named in the Option to Purchase may exercise the option and sign the Sale & Purchase Agreement for the property as purchasers.
Validity Period of Option
If a purchaser is granted an Option to Purchase, the developer is required within 14 days from the date of the Option, to deliver the Sale & Purchase Agreement in duplicate and the original or copies of the title deeds to the purchaser or his lawyer for review. The option is valid for 3 weeks from the date of delivery to the purchaser or his lawyer of these documents. The intending purchaser has to exercise the Option to Purchase within its validity period if he decides to buy the property.
Process to Exercise Option
Within the 3 weeks validity period, the intending purchaser may exercise the Option to Purchase by doing all of the following:
1) Sign all the copies of the Sale and Purchase Agreement.
2) Return all copies of the signed agreements to the developer
3) Pay the developer the balance of the downpayment.
The developer may, instead of the 3 weeks mentioned above, allow purchasers to pay the balance downpayment* within 8 weeks from the Option date. This is an amendment to the standard Option to Purchase approved by the Controller of Housing which all developers are free to adopt.
Non-Exercise of Option
If the Option to Purchase is not exercised before it expires, the developer will be entitled to forfeit 25% of the booking fee. The other 75% of the booking fee will be refunded to the purchaser. Thereafter, the developer can sell the property to any other interested party.