Singapore: Sale and purchase


Real estate ownership

Forms of real estate ownership

Land in Singapore generally comprises Government-owned land and privately-owned freehold land. For the former, leasehold interests in the land may be granted to individuals, corporations or other entities. Leases can also be issued by freehold private land owners.

There are generally no legal restrictions on the ownership of commercial properties in Singapore. Industrial properties are more regulated, particularly Government-leased properties (e.g. JTC or URA properties, where the relevant Government agency will need to approve any lease or transfer of a lease in accordance with policy-driven regulations). Foreign ownership of residential property is regulated to a large extent, including the express restrictions set out in the Residential Property Act (Cap. 274). Broadly, foreign persons or entities require Government approval to acquire landed residential property, although they may purchase a flat or unit within a residential development without similar restrictions.

Major property legislation

The Conveyancing and Law of Property Act (Cap. 61) is the main property legislation which regulates the ownership, transfer, leasing and mortgaging of properties in Singapore. In addition, other property-related legislation includes:

  • The Land Titles Act (Cap. 157) which regulates the registration of titles to land;
  • The Land Titles (Strata) Act (Cap. 158) which regulates the strata subdivision of land and the collective sale of property;
  • The Building Maintenance and Strata Management Act (Cap. 30C) which regulates the proper maintenance and management of strata-subdivided buildings in Singapore;
  • The Housing Developers (Control and Licensing) Act (Cap. 130) and its Rules which regulate developers of a residential project with more than 4 units; and
  • The Sale of Commercial Properties Act (Cap. 281) and its Rules which regulate the developers of a non-residential project with more than four units.

Title registration

The system of land registration in Singapore is by title registration, adopted from the Torrens system of land registration. This means that entry into the land-register confers an indefeasible title to the registered proprietor, subject to any subsisting registered encumbrances or interests. Conveyance instruments such as Transfer and Mortgage are stamped (where applicable) and registered electronically before the certificates of title are updated and re-issued by the Singapore Land Authority (SLA).

The land-register is the public register of title. Public searches may be conducted (subject to payment of fees) on the title to find out the ownership particulars of each property and any encumbrances registered against the property such as mortgages, legal charges and restrictions.

The land-register is maintained by the Registrar of Titles. The register can be accessed online here.

The following documents are registrable in the land-register:

  • Transfers;
  • Legal charges;
  • Discharges;
  • Court orders affecting land interests;
  • Registrable leases; and
  • Any other instruments affecting land interests.

Transfer of real estate ownership

A combination of contract and land law legislation and legal principles govern property transactions in Singapore
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After preliminary negotiations occur and both contracting parties settle on a price, a purchase option agreement is commonly drafted and issued by the vendor to the purchaser in exchange for an option fee (typically 1% of the purchase price). If the purchaser wishes to proceed with the transaction, he must exercise the option within the option period (typically two weeks) and in accordance with the terms of the purchase option agreement, failing which, the option will lapse and the option fee may be forfeited to the vendor.

Once the option has been duly exercised by the purchaser, the purchase option agreement becomes a binding sale contract, and its terms will govern the transaction, including the remedies available to each party for breach or rescission.

Alternatively, contracting parties can negotiate and enter into a Sale and Purchase Agreement (SPA).

In both scenarios, an initial deposit is usually paid by the purchaser upon exercise of the option or the signing of the SPA, and such deposit is commonly held by the vendor’s solicitors pending completion of the sale, for the purchaser’s protection.

On the date of completion, the purchaser will pay the balance of the purchase price to the vendor in exchange for all existing title deeds and access items (e.g. keys) to the property. If the property is subject to any existing encumbrances, the vendor must also hand over the necessary discharges to the purchaser.

Following completion, the relevant instruments including discharges, transfer, mortgages and/or charges will be lodged. Upon final registration, updated title deeds will be issued by the land registry.

Direct (i.e. asset transfer) vs indirect (i.e. share transfer) transfer of real estate

Asset transfers can take the form of a direct transfer of ownership of the property itself or indirectly through the transfer of shares of the property holding company.

Property holding company share transfers may be the preferred means of acquiring non-residential assets as the stamp duty payable on the transfer of shares (currently 0.2% of the company’s net asset value or the transfer price) is significantly lower than that payable on an asset transfer (currently around 3%). Furthermore, a share transfer means that there is no need to assign or novate underlying leases or asset management contracts, although care should be taken over any change of control restrictions.

However, where residential properties or shares in companies holding residential properties are transferred, the transaction may be subject to additional stamp duties.


Considerations for foreign ownership of non-residential real estate

Apart from any head lease covenants or specifically regulated industries, there are generally no restrictions imposed on entities and individuals seeking to own or lease non-residential real estate (including shares in companies holding non-residential properties) in Singapore, and foreigners are allowed to directly purchase non-residential real estate assets.

Sale and purchase process

Typical process

The following is a summary of the legal due diligence process that is undertaken when acquiring commercial real estate in Singapore:

  • The purchaser’s solicitors will carry out a title search at the land-register. Search fees at the land-register are nominal and results can be obtained almost instantly;
  • The purchaser’s solicitors will also usually send legal requisitions to the following Government agencies as follows:
  • National Environment Agency – Environmental Health Department;
  • National Environment Agency – Central Building Plan Department;
  • Public Utilities Board – Water Reclamation (Network);
  • Inland Revenue Authority of Singapore;
  • Land Transport Authority (S&L Department) – Rapid Transit System;
  • Land Transport Authority (S&L Department) – Street Works;
  • Building and Construction Authority; and
  • Urban Redevelopment Authority.

If any of the replies from the relevant Government agencies to the legal requisitions on the property is unsatisfactory, and the vendor is unable to regularise the unsatisfactory matters disclosed in the replies, the purchaser will usually have the right to annul the transaction under the sale contract terms;

  • (The purchaser’s solicitors may conduct further due diligence by requesting additional information from the vendor’s solicitors (e.g. whether there are any unregistered documents affecting the property such as tenancy agreements or trust arrangements);
  • If there are defects in title, such as missing documents or suspected unauthorised building works or other encumbrances, the vendor will need to respond to, or rectify those deficiencies in order to prove good title;
  • As part of technical due diligence, the purchaser may also engage a surveyor to inspect the physical condition of the property, identify whether there is any encroachments affecting the property and ascertain if the fixtures and equipment expressed to be sold are in fact existing and functional as these matters may also affect the valuation of the property;
  • In respect of strata sub-divided properties, the purchaser’s solicitors will also seek confirmation from the relevant management corporation that there are no outstanding management fees or breach of the existing by-laws by the vendor;
  • Completed properties are typically sold on an “as-is where-is” basis with very limited warranties given on the property; and
  • If the property transaction is to be effected via a share sale, then corporate due diligence may be necessary as the company may have other existing liabilities not contemplated by the purchaser.

Other notes

  • Legal due diligence may not reveal any unauthorised building works, which may expose the purchaser to further liability.
  • It is also important to pay attention to unregistered interests such as tenancies, uncrystallised floating charges and other interests arising from resulting or constructive trusts that may not be found from the land search records obtained from the land-register and which might not have been disclosed by the vendor.
  • The Master Plan sets out the designated uses of land. Some uses need permission of the Urban Redevelopment Authority and/or the Building and Construction Authority before building works can commence. Certain approvals are given on a temporary basis and may not be renewed.
  • Development works must not commence without first submitting the outline applications and obtaining the planning approval from the Urban Redevelopment Authority.
  • A new building cannot be occupied unless a temporary occupation permit has been issued by the Building and Construction Authority.

Sale and purchase contract

General components of a sale contract

Property contracts can be made voidable for lack of certainty if parties’ intentions are not set out in clear and express terms.
The sale contract must contain the following:

  • Details of the parties;
  • Property address;
  • Price of the property; and
  • Date of completion.

It is also common to include the following terms:

  • Deposit. Timing for payment of the initial deposit (e.g. 1%) and the balance deposit (e.g. 4%);
  • Balance purchase price. Timing for payment of the balance purchase price;
  • Other payments. Payment of the vendor’s agent’s commission;
  • The Law Society of Singapore’s Conditions of Sale. Unless the property transaction is complex, the form of the sale contract is fairly simple and brief, and it is common to supplement the same through the import of standard terms and conditions set out by the Law Society of Singapore by reference in the contract;
  • Condition of property. Whether the property is sold “as-is, where-is” or otherwise;
  • Possession. Whether the property is sold with vacant possession or subject to any existing tenancies;
  • Apportionment of rents and outgoings. Rents and other outgoings are apportioned between the purchaser and vendor up to and including the date of completion;
  • Escape clauses. Clauses which entitle either party to withdraw from the transaction under certain circumstances;
  • Good title. The title deeds must be delivered to the purchaser on completion free of any encumbrance;
  • Default. If the purchaser defaults, the deposit will be forfeited, and the vendor can rescind the agreement and resell the property. Any shortfall arising from such resale and expenses relating to it will be paid by the purchaser. If the vendor defaults, the purchaser can enforce specific performance of the agreement or claim for damages. The purchaser may be able to recover any loss suffered from buying another property and expenses relating to it from the vendor* .
  • Proper assurance. On completion, the vendor must execute a Transfer to the purchaser to be registered with the land-register.

As for a typical share sale agreement, many of the above provisions (such as terms (g), (j) and (k)) do not apply as the transaction relates to a transfer of title in the shares and there is no separate transfer of title in the property (which the company already owns). Instead, additional clauses dealing with the corporate aspects of the transaction are required.

Transfer of occupational leases and income

If the property transaction is effected by a share transfer, there is no change in the registered proprietor and the benefit of any occupational leases and income remains the same.

If the property is sold as an asset transfer subject to a lease, a novation agreement should (where possible) also be entered into to replace the vendor with the purchaser as the new landlord, and to assume all the rights, obligations and liabilities under the subsisting lease.

Common rights, interests and encumbrances

Property interests include:

  • Legal interest in the form of either an estate in fee simple (i.e. freehold) or a leasehold estate;
  • Legal charge over land (e.g. mortgages or statutory charges);
  • Equitable interest derived from being the beneficiary of a trust, whether such a trust is intentionally created by a settlor, or arises by operation of the law in the form of a resulting or constructive trust;
  • Restrictions; and
  • Easements.

These rights are created by registering the relevant instruments at the land registry. Such registration operates as deemed notice to any third party. Unregistrable interests, such as trusts arising by operation of the law or leases for a term of less than seven years, are protected by common law rules.

Typical representations and warranties

There are no legal requirements for a vendor to give a purchaser any warranties. However, a purchaser will often require a vendor to provide warranties on the following matters:

  • That the vendor has not received any notices adverse to the vendor’s interest in the property;
  • No third party has any right or interest whatsoever, whether legal or equitable, in the property;
  • The property is not adversely affected by any encumbrances of which the vendor is aware or could have ascertained on reasonable inquiry; other than those disclosed in the agreement, or which the purchaser is aware of or could have ascertained on reasonable inspection of the property;
  • Tenancies;
  • That the property is not subject to any litigation;
  • Corporate matters;
  • Vendor’s capacity; and
  • Other matters arising out of the due diligence enquiries.

Whether or not the vendor gives the warranties will depend on the bargaining power of the parties and the commercial imperatives behind the deal. Warranties can be limited by disclosure of specific matters and imposing time limits.

Remedies against misrepresentations

The vendor is liable to the purchaser when he makes an untrue statement of fact which is relied on by the purchaser, and as a result of which loss is suffered.

Costs relating to sale and purchase of real estate

Tax

Under the Stamp Duties Act (Cap. 312), the purchaser may be liable for the payment of ABSD in addition to the buyer’s stamp duty (BSD) for the acquisition of property, while the vendor may be liable for seller’s stamp duty (SSD) for disposition of property. However, commercial properties are currently exempted from the ABSD and SSD regime.

If a purchaser acquires a commercial property via a share transfer of a company, the current stamp duty payable will be 0.2% of the higher of the purchase price or the net asset value of the shares. However, if the company’s tangible assets are primarily residential properties, additional conveyance duty (ACD) may be payable on such transfers, in addition to the existing stamp duty of 0.2%. Exemptions may apply to transfers between associated companies.

Estate agent’s fees

The estate agent arranges for listing and viewing of property. He/she may assist the vendor and purchaser to negotiate key commercial terms of the sale and purchase. The estate agent may also at times provide a standard form sale contract (which may be reviewed and commented by lawyers). He/she also assists parties in matters like preparing an inventory list and arranging for inspection of the property if so agreed between the contracting parties. Estate agents’ fees are charged at a usual rate of 1% of the purchase price but this is open to negotiation. Typically, the fees are payable by the vendor from the sale proceeds.

Legal fees

Lawyers are appointed to, amongst others, negotiate, prepare, execute and register (where applicable) the necessary documents (e.g. the sale contract, instrument of transfer, and directors’ and shareholders’ resolutions).

The purchaser’s lawyer will conduct title review and investigation of the property, and the vendor’s lawyer will answer title requisitions (if any) raised by purchaser’s lawyer and arrange to remedy any title defect(s).

For share transfer, the legal due diligence will be carried out by the lawyers.

Vendor’s lawyers are also typically involved in discharging the existing mortgage (if any), while the purchaser’s lawyers would help in the legal documentation for financing of the purchase if the bank does not appoint a separate set of lawyers.

The purchaser’s lawyers will typically arrange for stamping and registration of the relevant instruments.

There is no fixed scale of legal fees, and the parties will negotiate the applicable fees with their respective lawyers. However, the Law Society of Singapore has set out the following recommended guidelines to assist solicitors and clients in reaching a fee arrangement which is fair and reasonable, having regard to the circumstances of the individual case.

Other fees

Stamp duty is applicable.

Updated on 1 February 2019.

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