Buying A Property
What To Look Out For
You’re interested to buy a particular property. After viewing the property and negotiating its price, you’ve put down the option money for the seller to issue you with the Option to Purchase (OTP). Score!
Feeling pleased with yourself, you take the OTP home and read it. As you do so, you come across a clause similar to this:
“The Purchaser is treated as having notice of the actual state and condition of the Property as regards access, repair, light, air, drainage and all other respects and is deemed to have inspected the Property and no warranty or representation on the part of the Vendor or the Vendor’s agent or representative is given or to be implied as to the state, quality, fitness or anything whatsoever and accordingly the Purchaser shall not be entitled to make or raise any objection or requisition whatsoever in respect thereof.“
You’re puzzled. What does this clause mean?
The “As Is Where Is” Clause: Background and Legal Effect
This clause is known as an “as is where is” clause. It stems from an English legal doctrine known as the “caveat emptor” rule which is now part of Singapore law.
In Latin, “caveat emptor” means “let the buyer beware”. This principle puts the risks and burdens of a transaction on the buyer, and it is the buyer’s duty to do his due diligence and checks when deciding whether to go ahead with the transaction.
When applied to a property transaction, the “caveat emptor” rule will mean that when you buy a property “as is where is”, you are deemed to have checked the property for defects of quality (even if you haven’t actually done so), and have found the property acceptable.
Defects of quality are defects relating to the property’s physical condition. These defects can be patent or latent in nature:
- Patent defects are defects that
- be discovered if a buyer were to exercise ordinary vigilance when inspecting the property. Examples of patent defects of quality include easily noticeable defects such as chips on the wall and water leakage.
- Latent defects are defects which are
unlikely to be discovered during inspection, even if the buyer had exercised ordinary vigilance. Examples of latent defects of quality could consist of unnoticeable structural defects, such as internal cracks in the pillars.
You bear the risk for all defects of quality, whether they are patent or latent in nature. If you discover any defect of quality in the property only after the purchase has been completed, you may need to seek legal advice to see if you have any recourse against the seller.
If you do not have such recourse, it is likely that you will have no choice but to accept the property’s physical condition as it is.
What if the Property’s Condition on Completion is Different from How it was on the Date of the Option to Purchase?
The one time you inspected the property was the day the seller issued you the OTP. You worry that by the time you take possession of the property a few months later, the condition of the property could have deteriorated. Will you have any recourse against the seller before taking possession of the property?
The answer to this question depends on the terms in the OTP.
For example, if there is a term imposing a continuing obligation on the seller to maintain the property’s condition as at the date of the OTP up to the date of completion of the purchase, it is likely that you will have recourse against the seller if the property’s condition at the date of completion of the purchase is materially different from how it was like at the date of the OTP.
If however your OTP does not contain any such clauses, the “as is where is” clause will oblige you to accept the property as it is at the date of completion of the purchase, even if the property’s condition had deteriorated significantly since the date of the OTP.
The good news is that many standard form OTPs used today incorporate the Law Society’s Conditions of Sale 2012, a set of standard terms and conditions relating to the sale and purchase of property. Condition 5.1 of the Conditions of Sale states:
“On Completion, the Vendor must deliver the Property in the same state and condition as it was at the date of the option or the date of the contract, whichever is earlier, (save for fair wear and tear) unless otherwise agreed to by the parties.“
Condition 5.1 imposes on sellers a contractual obligation to maintain the property in the same condition as at the date of the OTP, save for fair wear and tear. If, after taking possession of the property, you find that its condition has materially changed, you may demand that the seller make the relevant repairs.
If you are dissatisfied with the seller’s repairs or the seller refuses to make the repairs, you may also commence legal proceedings to claim compensation from the seller. Before doing so however, you will need to consider whether you have the evidence to prove that the property’s condition has changed between the dates of the OTP and completion of the purchase, and whether the costs of commencing legal proceedings are worth pursuing.
Tips to Protect Your Rights as a Buyer
Here are 2 tips on further protecting your interests when buying a property “as is where is”:
1. Negotiate for a second inspection of the property before completion of the purchase
Negotiate with the seller to include a clause in the OTP making completion of the purchase subject to a second inspection of the property. Assuming the seller agrees to grant you one, the second inspection will give you the opportunity to bring in your own contractors/experts to do a more thorough inspection of the property.
At the very least, having a second inspection will make it less likely that the seller will allow the condition of the property to deteriorate too much from the first time you viewed it. This is especially if you are able to negotiate for the second inspection to occur closer to the completion date.
Depending on the wording of the clause, the clause may also give you the right to delay completion of the purchase until the seller can deliver the property to you in a condition acceptable to you.
2. Obtain photo and video evidence of the property’s state and condition during inspection
Take copious amounts of photos and videos when you view and inspect the property! That way, in the event that you need to resort to legal proceedings to enforce your rights, you will be in a better position to prove your case.
Of course, this approach also has its limitations. For example, videos and photos will not be able to document defects which are not discoverable through visual inspection.
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