1. Parties to the Agreement
This is a good starting point. If the particulars of the parties are incorrect, the validity of the agreement may be affected.
Ensure that the names and identification details of all parties (individuals or companies) involved are accurate and consistent. This helps establish the legitimacy of the agreement and avoids future disputes about ownership or obligations.
Buyers should pay particular attention to the capacity of the seller i.e. whether the seller is the legal and beneficial owner of the property in question.
In some cases, the seller may be acting in his capacity as the Executor / Administrator / Trustee / Attorney etc. In such cases, it must be ascertained whether the seller has the power to deal with the property.
2. Particulars of the property
Ensure that the particulars correspond with that stated in the document of title. Pay attention to any restriction of interest, encumbrances or any endorsements on the title that may affect the transfer of title later on.
If you are a purchaser who is applying for a housing loan, ensure that the property details in the agreement corresponds with that in the bank’s loan offer letter.
3. Condition precedent
Some agreements may include a condition precedent which stipulates that the agreement will only be effective upon the fulfilment of a particular condition (e.g. upon obtaining the state authority’s consent to transfer).
4. Purchase price and payment terms
Naturally, this is the part people often focus on the most. Make sure the purchase price corresponds to the exact price agreed upon by parties.
If any deposit sum had previously been paid to the seller or his agent, ensure that this is clearly stated in the agreement.
If the purchase price (or part of it) is to be financed by a housing loan, ensure that the terms reflect payment by loan.
The usual payment period is 3 months plus 1 month (with interest). However, parties are free to negotiate the payment terms.
5. Custody of documents
Identify which party is to retain custody of important documents (e.g. the original issue document of title, signed MOT etc.) and when they are to be released.
6. Condition of the property.
It is common for property to be sold on an “as is where is” basis, meaning that it is to be sold in the same condition as when it was inspected by the buyer, without any repairs or renovation etc.
In cases where the property is to be sold with furniture or fixtures, it would be good to include an inventory list.
Where extensive renovation has been done to the property, it is best to request for a copy of the letter of approval from the local council as well as the certificate of completion and compliance / certificate of fitness for occupation.
7. Real property gains tax
The agreement should outline the parties responsibilities relating to the filing of the real property gains tax (RPGT) returns forms. Parties have to comply with the timeframe stipulated in the Real Property Gains Tax Act.
Identify whether the seller is subject to RPGT. Where the seller is subject to RPGT, ensure that there are provisions relating to the retention of the relevant percentage of the purchase price by the buyer to be forwarded to IRB/LHDN pursuant to the RPGT Act.
8. Delivery of vacant possession
The agreement should stipulate when the seller must deliver vacant possession to the buyer, failing which the seller will usually be required to pay a percentage of interest to the buyer.
Vacant possession is usually delivered to the buyer after the seller has received the full purchase price.
The agreeement should also stipulate when the apportionment of outgoings shall be paid after vacant possession is delivered.
8. Termination
What if the deal falls through or parties no long wish to continue with the transaction? This is where the termination clause comes into play.
The termination clause should clearly identify when either party can decide to terminate and whether there is any penalty involved.
Provisions for the refund of monies paid and the return of documents should also be included here.
9. Representations and warranties
These include the statements made by one party to the other to induce the other party to enter into the agreement.
Some examples include:
- Legal ownership and the right to sell.
- Absence of encumbrances (e.g., liens, caveats, or outstanding loans).
- Compliance with local laws and regulations.
Parties should ensure these representations are accurate and backed by remedies if breached.
10. Force majeure
Force majeure, which is French for “superior force”, refers to a contractual provision that releases parties from their obligations when unexpected and uncontrollable events occur. These events—whether natural disasters or man-made crises—render performance of the contract impossible or unfeasible.
The agreement should identify what will happen should a force majeure event occur.
Conclusion
Sale and purchase agreements are rife with legal jargon and confusing terms which may at times be frustratingly puzzling to even seasoned investors. It is always prudent to consult a conveyancing lawyer to draft or review the terms before signing, especially for high-value transactions. Doing so will give you peace of mind and can save you from costly disputes later.