Risks of a Property Transaction - Why It Matters
Property transactions can carry hidden risks that aren’t visible during inspections. In Singapore, legal requisitions act as essential “background checks” conducted by lawyers alongside title searches. These searches help uncover potential legal, planning, or financial issues—such as unpaid taxes, maintenance charges, government notices, road reserves, or acquisition plans—ensuring buyers are fully informed before completing a purchase.
1. Inland Revenue Authority of Singapore (IRAS)
Purpose: To verify whether Property Tax is owing to IRAS.
Why it matters: Once a property is transferred, the new owner is liable for any outstanding property tax, including arrears owed by the previous owner. It is critical for buyers to check with IRAS for any outstanding property tax before completing the purchase. If the tax remains unpaid, IRAS may appoint agents like the bank, tenant, lawyer or other third parties with money due to the buyer to recover the tax owing.
2. Land Transport Authority (LTA)
Purpose: LTA legal requisitions provide key information about transport infrastructure and planning, including rail systems, public roads, and nearby sewerage networks. These searches help identify whether a property may be affected by future developments, such as transit projects or compulsory land acquisition. RLP searches focus on land ownership and boundaries, ensuring legal clarity and reducing disputes. They also reveal if the property is impacted by road reserves, transit schemes, or safeguarding lines that could lead to future acquisition.
Why it matters: Imagine buying a "quiet" ground-floor unit only to find out a major highway viaduct is scheduled to be built a short distance in two years. Orbuying a landed property and finding out that there are lines of road reserves which reduce the land area.
3. National Environment Agency (NEA)
Purpose: To check for environmental health issues and drainage, for instance notices issued to abate pollution by fumes, vapours, gases, heat, radiation, or smells that are injurious or dangerous to health.
Why it matters: This covers "Pollution Control" and "Environmental Health." It identifies if there are issues with the public sewerage system or disclose if the property is subject to investigations or restrictions related to environmental health.
4. Public Utilities Board (PUB)
Purpose: To disclose information with respect to the water supply system and the public sewerage system within or in the vicinity of the property. It ensures that the building on the property doesn't interfere with Singapore’s water management infrastructure.
Why it matters: If a property has been built over a public drain or encroaches on a drainage reserve without permission, the PUB can demand the structure be torn down.
5. Urban Redevelopment Authority (URA)
Purpose: To confirm the "Master Plan" zoning and approved use. It verifies the allowable use of the land and whether there are any unauthorised structures on the site. The search will show the proposals to develop the site, the approval date/expiry date.
Why it matters: A buyer might think they are buying a residential home, but if the URA has it zoned as "Home Office" or "Commercial," the financing and tax implications change drastically.
6. Building and Construction Authority (BCA)
Purpose: To check for compliance with the Building Control Act and ensure that building works comply with standards for safety, accessibility, environmental sustainability and buildability. All building works, except those that are minor and exempted under the First Schedule of the Building Control Regulations, will require plan approval from the Commissioner of Building Control.
Why it matters: If the BCA has issued an order to repair a crumbling facade or a notice to remove unauthorised works on the property, those repair costs or rectification costs (which can be massive) fall on the new owner after completion of the purchase of the property.
7. Management Corporation Strata Title (MCST)
Purpose: The Section 47 Certificate (Building Maintenance and Strata Management Act) will disclose the management fund and sinking fund contributions payable quarterly by the owner, any special levy incurred for upgrading the common property and any notices issued to remove unauthorised renovation works at the specific unit.
Why it matters: If the seller owes thousands in unpaid management fees or sinking fund contributions, the MCST has the power to register a charge against the property, potentially preventing or delaying the completion of the sale of property. This certificate confirms whether the seller has fully settled maintenance and sinking fund fees due. If the condominium is undergoing a major project (for example, full facade repainting or lift replacement), the certificate will show what is the amount of the special levy or payments required from each subsidiary proprietor of their unit.
8. Other Issues To Take Note Of
8. 1. Who pays for these legal requisitions?
The purchaser typically bears the cost of legal requisitions. These are considered "disbursements"—out-of-pocket expenses paid to the various government departments and the MCST. The disbursements are separate charges from the professional legal fees and usually cost a few hundred dollars.
8. 2. What happens if a reply to legal requisition is “unsatisfactory”?
Normally the terms in the Option to Purchase or Sale and Purchase agreement would provide that the transaction is “subject to the purchaser receiving satisfactory replies” to the usual legal requisitions. The purchaser’s right to rescind the contract and get his deposit back depends on the provisions in the contract, the particular facts and evidence in the case, whether the issues are minor and remediable by the seller, or serious issues for example, an issue that affects the title in the property.
8. 3. When are these requisitions actually made?
In a usual private property transaction, the legal requisitions are sent out after the purchaser has exercised the Option to Purchase (OTP). Because the completion period is typically 8 to 12 weeks, this leaves enough time to resolve any "surprises" before the final handover of original title deeds, keys and documents to the property in exchange for the purchase price on completion day.
8. 4. Why Legal Requisitions Fail to Detect Physical Realities:
Legal requisitions are "paper checks" of government records, not physical inspections of the property. Government authorities only have records of “authorised works”.
Encroachments: A legal requisition on a landed property will show the registered boundary lines, but it will not show illegal encroachments, for instance, if a neighbour’s fence is 2 metres inside your boundary.
Unauthorised Structures: Requisitions to local planning authorities reveal what has been approved, but they cannot reveal what has been built without approval. If a previous owner added a loft or a shed without a permit, the legal record remains “good” because the record only tracks "notified" activity or submitted plans.
The Doctrine of Caveat Emptor
The principle of Caveat Emptor (Let the Buyer Beware) applies to the purchase of property. The seller is under no obligation to disclose physical defects or structures that are discoverable by inspection of the property. Beyond legal requisitions, purchasers are well advised to appoint the following professionals for a thorough physical inspection to ensure peace of mind and avoid inheriting financial burdens attached to the property. It is important to note that the fees for these specialist reports are borne by the purchaser.
Professional Qualified Person (QP/ Architect) - Compares the actual house to the BCA Approved Drawings. They will spot unauthorized lofts, knockeddown load-bearing walls, or illegal roof covers.
Registered Surveyor - Conducts a Boundary Survey to check for encroachments
Licensed Valuer - Provides a valuation report on market price. Flag "illegal GFA" (Gross Floor Area) if the functional living space significantly exceeds official records, which can affect loan disbursement.
Professional Engineer (PE) - Specializes in structural integrity.
WE ARE READY TO ASSIST
We would love to help you in your property journey. Contact one of our TemasekClass consultants for a non-obligatory discussion.