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Navigating the maze of a collective sale
HOMEOWNERS who are in the final stages of selling their property in the current collective sale frenzy, especially the first-timers, are often excited about the prospect of a windfall, yet anxious as they do not know what to expect. To help ease some of this anxiety, we have compiled a non-exhaustive selection of issues that may arise closer to the completion of a collective sale exercise which homeowners should be aware of.
Tenants – Source of income and a potential source of unexpected liability
For homeowners whose properties are tenanted, the tenancy agreements are usually for a term of one or two years. These agreements do not automatically terminate once the sale order for the collective sale to proceed is issued by Strata Titles Board or the courts (in the event of an appeal). Therefore, under the tenancy agreement, tenants have the right to enforce their rights to remain in the property until the expiry of the term of the tenancy.
Hence, such homeowner landlords should ensure that they have the right to terminate their tenancy agreement upon serving notice to the tenant without being liable to pay any damages to the tenant for early termination. They should review their tenancy agreements to ensure that there are provisions which permit them to do so, or to insert an appropriate clause to such effect when the tenancy is due for renewal or when they enter into a fresh tenancy agreement with a prospective tenant.
Mortgages – Reading the fine print in your redemption statement
Homeowners who have just purchased their property with a mortgage loan, or who have just refinanced their mortgage (for better interest rates) with another bank or financial institution, may be tied down by a lock-in period (typically for loan packages with a fixed interest rate). If they redeem the mortgage within the said lock-in period, they will have to pay a penalty of usually around 1.5 per cent of the loan amount.
Unfortunately, we understand that a collective sale is not a reason for which banks or financial institutions (“mortgagees”) would consider in waiving the early redemption penalty. Any lock-in period penalty would be reflected in the mortgagee’s preliminary redemption statement.
In addition, most mortgagees require homeowners’ solicitors to serve the notice of redemption of the mortgage by giving at least three months’ prior written notice to the mortgagee. If the written notice falls short of the requisite three months, most mortgagees will likely charge a daily interest in lieu of notice.
It has become increasingly challenging for the solicitors acting for homeowners to avoid the homeowner incurring any interest in lieu of notice when the developer has negotiated for completion of the sale and purchase to take place exactly three months from the date of the sale order. Therefore, there is a possibility that the notice of redemption cannot be served on the mortgagees with the required full three months. Any interest in lieu of notice would be reflected in the mortgagee’s preliminary redemption statement.
Homeowners whose interest rates are pegged to pre-fixed interest periods would be liable for break-funding charges in the event that the completion date does not fall on the exact date of the end of the said pre-fixed interest period. Such break -funding costs would also be reflected in the mortgagee’s preliminary redemption statement.
Vacant possession – What is vacant? Do homeowners need to leave a bare shell when they hand over the keys?
It is not necessarily the case.
Some of the homeowners may have installed brand new air-conditioners or have expensive light fixtures or chandeliers which they would like to remove. Generally, developers would be happy if homeowners get help to remove these items, saving them the trouble and cost of doing so – as long as the affected part of the property is duly patched up and not left with gaping holes where the air-conditioners used to be!
However, homeowners may also choose to leave these fixtures in their property which can be arranged to be sent to the dumpster or recycled in some instances by the developers.
Completion – Title deeds
For homeowners who have an existing loan facility secured by a mortgage over their property, the title deed would be in the bank’s possession.
Homeowners who did not take up any form of financing to assist them in the purchase of their property or who only have a CPF Charge over their property, should have the title deeds to their property in their possession. It is always good to locate this important piece of document before the title deeds are to be handed over to the developer. If the title deeds cannot be located, an application must be made to the Singapore Land Authority (SLA) for a replacement title deed (which must be done through a lawyer) and would typically take at least three weeks before the replacement title deed is ready for collection from SLA.
Homeowners should note that they have the obligation to hand over the title deeds on completion of the entire collective sale exercise (ie when they receive the sale proceeds from the collective sale). If a homeowner fails to hand over the title deed to the property on completion, it would be considered a default of the homeowner’s obligation and the developer may charge late completion interest on the full sale price, which would definitely erode away the homeowner’s profit from the collective sale.
Navigating through a collective sales could give rise to a number of complex issues. Homeowners should take the initiative to clear any doubts pertaining to potential issues, thereby ensuring a smooth completion of the collective sale exercise. W