Going through all the black and white can be tedious when purchasing a property. However, these are important factors that you should be taking notes of especially if you aren’t familiar with all the legal jargon.
In this article, we are exploring some basic knowledge about the Sales and Purchase Agreement (S&P) when buying a property. Purchasing a property comes with a whole lot of documents to sign with. Yet, the Sales and Purchase Agreement is one that requires extra attention to detail. So, why is SPA so crucial in the buying process?
What is a SPA and why is it important to me?
SPA is a legally binding written contract representing the seller and the buyer in a real estate transaction. It lays out all the details as well as the role of both parties with all the terms and conditions. The SPA also protects the buyer by ensuring the seller do not change the T&C to their benefits. In the event that a party breaches the contract, the termination and indemnity clause will provide protection.
The seller here can refer to the developer is it is a primary market or the previous owner in the case of a sub-sale property. If the property is received by means of inheritance or an auction, the SPA usually isn’t involved.
Take note that once the SPA is signed, you are closing the deal. No further negotiations or amendment will take place and both parties need to respect the terms in the SPA.
Do note that upon signing your SPA, you’re basically closing the deal. No further negotiations can take place and both parties need to respect the terms stated in the SPA.
What are the Terms and Conditions (T&Cs) in a SPA?
The terms and conditions in a SPA include the completion date of the purchasing procedure, purchasing price, deposit, balance deposit, delivery date, deed of assignment, and vacant possession. Should there be any demands, it has to be inserted as special clauses in the SPA.
What Does the Sales and Purchase Agreement include?
As we mentioned earlier that the SPA consists of all relevant transaction details. What exactly are the details? We include a few important details below:
A. Manner of Payment
Manner of payment is important to manage both buyer and seller’s finances as well as to prevent any penalties incurred in case the terms are accidentally breached.
B. Defect Liability Period
You’ll only see this in your SPA if you’re buying brand new property directly from the developer (primary market). It consists of a warrant period to ensure that the developers are responsible for any defects in the property.
For more details, read up: 5 Things You Should Understand About Defect Liability Period (DLP)
C. House Plan
Wait until you receive your key just to realize that you get the wrong unit. How would you react? So make sure to specify materials and measurements to avoid developers from taking advantages of altering them.
D. Vacant Possession
Vacant possession simply means when you actually get the keys to your property. The SPA should state when and how you will receive it. Don’t forget to set the terms and conditions should the seller fail to deliver vacant possession.
Remember to also spell out the names of all parties involved correctly.
Vacant Possession? What’s That?
“Vacant possession of the said Building shall be delivered to the Purchaser in the manner stipulated in clause 24 herein within twenty-four (24) calendar months from the date of this Agreement.”
So what if the developer does not hand over the keys within the stipulated time? They would be required to pay the seller liquidated damages (LAD) at 10% per annum of the property’s purchase price.
Are There Different Types Of SPA?
Yes, there is different types of SPA for different types of property. Individual and Strata titled properties both require their own separate SPA.
1. Schedule G – Landed Individual Title
Schedule G is for landed individual properties such as semi-D houses and terrace houses.
2. Schedule H – Strata Title
Schedule H is for Strata properties such as condominiums and flats.
Strata titles are a little longer as they require more detailed SPA because they involve common properties like swimming pools, gym, parking spaces, and other facilities.
Can I cancel the agreement if I change my mind?
Yes, you can. However, you will be charged a penalty of 10% of the purchase price. Worst case, a breach of the agreement could result in a legal case.
In a nutshell, your SPA is the contract that protects you in the case your agreement turns sour. So, spend some extra time to read through all the clauses.