The third step, meeting the lawyers to exercute the documents.
Today we discuss on the Processes and documentation needed to prepare when you meet your lawyer for your exercising of the Option to Purchase (OTP) procedures.
In summary, the items we require are as follows:
- NRIC (Front and Back) /Passport (For foreigners)
- Marriage certificate (For Married Couples purchasing together) / Birth certificate (For family members purchasing together)
- Option to Purchase
- CPF Statement (Showcasing the overview of your OA, SA, and Medisave figures)
- Bank’s Letter of offer
So what’s the reason, you ask?
- NRICs/Passport – To ascertain purchasers’ citizenship status. (The lawyers are also obligated to check if you own any other properties locally to ensure an accurate calculation of your Buyer’s Stamp Duty)
- Marriage Certificate / Birth Certificate – It is a requirement by CPF for those who intend to use their CPF figures for your property purchase. There will be a form that will need to declare the relationship of the purchasers (i.e. married couples, fiancée and fiancé, or unrelated)
- OTP – For your lawyers to determine the exact purchase price, size of the unit and address of the unit. It will also contain the 15% payment details and account details to be payable to the developers, which will be pretty crucial for your note as well.
- CPF Statement(s) – Your lawyer will be taking your instructions as to note on how much exactly the amount of funds from your CPF that you wish to use for your property. (1st property owners can utilise the entire Ordinary Account (OA) figure in it, while 2nd property homeowners onwards will need to have a minimum sum within your Special Account (SA) + OA.
- i.e. In 2019, the minimum sum required is $88,000. (Note: This changes every year)
- So if your SA has S$40,000 and OA has S$100,000, you can only use S$52,000 [($100K – ($88K-$40K)] of your OA for your 2nd Property Purchase.
Bank Mortgage Loan Offer – For in-depth details on mortgage matters, please click here.
- PropertyWiki Tip 1: *Special note that only for OCBC bank, there’s an admin fee aka valuation fee, it ranges from $200 to $1000 (depending on your unit land size). This fee must be made payable to the law firm as OCBC does not accept private cheque but only cheques from the law firm*
- PropertyWiki Tip 2: You might have probably heard this before; “Make sure the law firm you have chosen is in in the panel of your chosen bank.” So, what does it mean?
- This meant that your bank must approve of allowing the law firm you chose to be able to act for them. If they are not in the bank’s panel, it means that the bank does not allow this law firm to act for them to draw down money for disbursement etc.
- Hence, your bank will have to engage another friendly law firm to act on the bank’s behalf, and its bills will be billed to you, the customers.
Now you might be wondering – Darn it, I’m doing all the hard work while I must pay my lawyers to tell me what I could’ve learnt easily from PropertyWiki. So myth–busting alert: – We shall share with you precisely what needs to be prepared by the law firm in the background.
The Key items that law firms need to prepare for you in summary:
- Mortgage Document
- Deed of Assignment
- Spousal Consent form
- ABSD form
- CPF LAD Form
- Warrant to Act
- Manner of Holding form
In summary, the mortgage document acts as a security (or rather, legal collateral document) for the bank to use in exchange for the loans that they provide to you for your home purchase. The mortgage document should contain the duties of a borrower that they are obligated to make monthly instalment payments, and not to use the loan for any other purpose aside from financing the property.
At the end of its loan tenure (Or if you fully pay it back), you technically take full ownership from the bank via loan redemption procedure.
Deed of Assignment (DOA)
This is another security documentation that bears some similarity to the mortgage document. The only unique thing in this document is only applicable for new launch property (aka Building under Construction or BUC). Since there can be no physical building available, banks are unable to lodge a caveat against a non-existent title deed (It means you need something to hold as collateral, but it’s a challenge for a non-existing unit).
In this situation, this process of wanting to attain a mortgage for BUC unit is called mortgage in escrow. (It means your mortgage cannot be registered until the separate title deed for the unit is issued)
Additional Note: The title deed will also not be issued until 1-2 years after possessing the vacant unit.
So to get your loans approved, the bank would need you to sign this deed of assignment and assigning all your rights of the property to them.
To also mention, some banks would require DOA for rental proceeds as well. (For those homeowners who buy for investment purposes). This is to ensure that if the homeowner can’t pay, tenant pays! Someone must pay their debts after all.
PropertyWiki tip: Your bank letter offer would indicate clearly if a DOA is necessary for their bank.
This is basically a consent form by the bank for your spouse. On a legal perspective, the lenders (the bank) are not allowed to provide a mortgage loan without your spouse consent, and it is to protect their own interest as well.
Something bizarre, you might say? There’s reasoning to it [Symbol] Imagine a scenario whereby, because your spouse can’t pay and decided to run away and leave you with this burden, you may end up broke and homeless, since the bank will want back their money from someone, somehow.
Another primary reason would be if a divorce matter were to happen, these are the possible scenarios:
- Defendant – usually the one who committed an unreasonable behaviour or adultery,
- Plaintiff – The wronged party in the marriage
Imagine a scenario whereby the wife is the plaintiff and the husband, the defendant. Wife didn’t know that the husband owns another property in private (Probably buying with their mistress??) So, the angry wife finds out about this and decides to sue the bank for not informing them, claiming damages in the process because she wants a pie of that property for the wrongdoings caused by the husband for ruining the marriage. <– Interestingly, this is perfect ammunition AND will hurt the bank.
Banks are well aware of these consequences, making it very difficult to obtain a mortgage without spousal consent.
Therefore, being well-aware of these issues, and to protect themselves from the reasons above, they have made this mandatory and strict to ensure every mortgage is provided with spousal consent.
PropertyWiki Tip: Note that some banks require spousal consent based on their nationality, please refer to this table
So this form basically is meant for the purchaser(s) to declare if they own any shares of any properties, whether 1%, 50% or 100% share of a residential (Or even in a situation whereby you own a commercial property, but with a residential element in it – Think about the older shophouses as an example). Your lawyer’s duty is to check with you, the client(s) and to be the witness for the execution of this form.
PropertyWiki Tip 101: Sometimes, you may not know if your commercial property has got any residential element in it, as it will not be reflected within the title search, so it is most ideal if you write to IRAS to have a 100% assurance on it.
CPF Letter of Authorisation and Declaration (LAD) form
The law firm has an internal checklist that they will use to take the instructions from you, the client, on the exact amount that you wish to transact via your CPF account, as well as who’s account to use (For more than 1 party involved). All clients would then be required to sign the LAD (letter of Authorisation and Declaration), to authorise their respective law firms to conduct the application to CPF board on their behalf.
Warrant to Act
The Warrant to Act is in summary, the legal binding document between the client purchasing the unit, and the official engagement of the law firm to act on the clients’ behalf, from exercising till the completion process, when the key and title deed are handed over to the relevant parties. Do note that this Warrant to Act might also include a clause stipulating the figures on legal expenditures that you agree to, in situations whereby matters in your property goes south. This is in case you require your law firm to act for you for; i.e. counter-sue the developer of your property in situations whereby the unit was not rectified after the end of the one-year defects liability period.
Manner of Holding Form
The Manner of Holding Form is a form that is a requirement for all owners of the property (more than 1 owner), to indicate clearly the ownership rights. They are:
- Joint Tenancy (JT) – survivorship, whereby should one party pass on, the share of that testator (person who passed on) will automatically be transferred to the other owner of the property.
- Tenants-In-Common (TIC) – Possible to have unequal shares, or even at 50/50% share as well, but for TIC please note that the shares are not automated and it is highly recommended you do up a will. Reason being, if that owner passes on, there’s instructions on the share of that property, which will be processed through a grant of probate). Those without a will, there will be Letters of administration involved, that will require court session to determine and rule base on intestate law
So the burning question of the day after reading this article, do you think that your lawyers have a lot of work to do for your property purchase transaction? Share with us your views below!