Let’s have a brief look at the key components of the Option To Purchase.
In a typical resale transaction, the OTP is offered From the Seller To the Buyer in exchange for Option Money.
This OTP template from CEA is divided into 2 main sections (this manner of layout for the OTP is slightly different from the OTP used by Law Firms and Property Agents).
Section 1 of OTP
The main clauses, including blanks for all parties to fill in, such as name, identification, property, price, dates, etc
Section 2 of OTP – consisting Annex A to D
Annex A to C allow for the parties to “vary the scope of specific clauses in the OTP.
Annex D enables the parties to add or vary terms in the OTP.
The OTP template is using Law Society of Singapore’s Conditions of Sale (COS) 2020. The previous version of COS was done in 2012.
What are some of the key updates in “Conditions of Sale 2020”?
- Condition 9.5 of COS 2020 – Amended to provide for situations involving the loss of mental capacity of the (or one of the) vendor(s) or buyer(s). Previously in the COS 2012, this Condition only provided for situations of death of the (or one of the) vendor(s) or buyer(s).
- Condition 9.6 of COS 2020 – This Condition was amended to increase the minimum number of business days prior to the scheduled completion date for which the vendor is to furnish the mode of payment of the purchase price to the purchaser, from 5 to 7 business days.
- Condition 10.2 of COS 2020 – To bring the COS in line with the amendments made in the Insolvency, Restructuring and Dissolution Act 2018, this Condition was amended to indicate that the seller warrants that if the property was the subject matter of a transaction at an undervalue, the transaction was made at least 3 years ago, instead of 5 years as it previously was in COS 2012.
- Condition 16 of COS 2020 – This is a new addition to the COS 2020 which provides for parties to consider mediation to resolve dispute arising out of the conveyance before commencing legal action.
A recent case study on use of OTP is Ong Keh Choo v Paul Huntington Bernardo and another  SGCA 69 where the OTP was rescinded, and the buyers were allowed to retain their Option Money, even though they were the ones who originally did not proceed with the purchase.