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Option to Purchase
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| 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.
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Facts: |
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| 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.
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| 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.
Some of the key things to note in the standard Option to Purchase are:
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Name of developer
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The Housing Developer's Licence Number
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Name of project account bank
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Name of buyer
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The expiry date of the option
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Description of the property (address, tenure)
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Purchase price
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Payments required and the amount to be refunded if the intending purchaser
decides not to exercise the option to purchase
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Special Conditions
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Signed by an authorized person from the developer |
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| 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.
After an Option has been granted, the Controller's approval has to be obtained for any change of name in the Option.
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| 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.
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| 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:
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Sign all the copies of the Sale and Purchase Agreement;
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Return all copies of the signed agreement to the developer; and
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Pay to the developer the balance downpayment* (which could be between 5% to 15% of the purchase
price).
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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.
* The standard downpayment is 20% of the purchase price. However, if the developer has obtained
the Controller's approval to offer to purchasers the deferred payment scheme, the downpayment required could be between 10% to 20% of the purchase
price.
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| 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.
Rate the Home Buyers' Guide |
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