Jit Tan shares the lowdown on sales and purchase agreements (SPAs) and what homebuyers should look out for before signing the dotted line.
READ THE 2019 VERSION INSTEAD: A Conveyancer reveals: 7 things home buyers should check before signing the SPA
1. What is a SPA and why do I need one?
SPA is actually a written contract representing the seller and buyer in a real estate transaction. It lists down all the terms and conditions of the purchase as well as the role of both parties. In the event there is a default from any one party, the termination and indemnity clause in the agreement will provide protection.
2. What are the terms and conditions (T&Cs) that should be in a SPA?
The completion date of the purchasing procedure must be stated clearly in the SPA. Other standard T&Cs include the purchase price deposit, the balance deposit, deed of assignment, the delivery date, and vacant possession. Should there be any demands from either seller or buyer, these are to be agreed on beforehand and inserted as special clauses in the SPA.
3. Are there different types of SPAs for primary properties and sub-sale properties?
Deals involving residential primary properties will include templates provided by the government such as schedule H and G. For commercial primary properties, developers will have their own schedule but it is usually somewhat similar to their residential counterpart. However, these will be a little bit more in favour of the developer. The main difference between a primary and secondary property’s SPA is that the former usually does not allow for any form of negotiation between the developer and the buyer while it is the opposite for the latter.
4. What are some of the important things to take note of before I sign a SPA?
A buyer must ensure that that both he/she and the seller are able to comply to the SPA’s T&Cs. It goes without saying that both parties want a hassle-free transaction. Buyers must be aware of and understand fully the schedule of payments and what are the documents needed in order to proceed. Sellers, on the other hand, must make sure they can comply with the timeline stated in the SPA. Both parties have to guarantee that they will not breach any of the T&Cs listed in the SPA.
5. Can I cancel the agreement if I change my mind?
Yes, you can. However, as there is a default clause, the party who defaults will normally be charged a penalty of 10% of the purchase price. It should be noted that if the SPA contains a specific performance clause, it would be difficult for a seller to wrangle himself/ herself out of a deal as a breach of the agreement could result in a legal case.