SINGAPORE – Developers are restricted from reissuing options to purchase (OTPs) to the same buyer of the same unit within 12 months after the expiry of the earlier OTP, the Urban Redevelopment Authority (URA) said in a circular issued on Monday morning (Sept 28).
They are also restricted from providing upfront agreements to buyers to re-issue OTPs, it added. Both restrictions take effect immediately.
This latest move by the URA is aimed at curbing a property market practice believed to be inflating private home sales figures, while encouraging financial prudence in home buying amid a weak economy and uncertain employment climate.
The re-issuing of OTPs refers to an arrangement some private home buyers make with a developer, via a property agent, to continually re-issue OTPs upon expiry – without any forfeiture of the booking fee.
This can be done for up to a year – or even as long as up to 18 months – from the date of the first OTP. The idea is to give the buyer time, for instance, to sell his existing home.
“The need for greater financial discipline in making property purchase decisions is especially pertinent given the current economic situation, where workers are facing uncertainties in the labour market. Purchasers should only commit to a property purchase when they are ready to exercise the OTP within the validity period,” Ms Ling Hui Lin, controller of housing, URA, said in Monday’s circular.
“Therefore, the Controller of Housing will impose new conditions in the sale licences issued to developers with effect from today,” she said.
Under the terms of the standard OTP, the option will expire three weeks after the sale and purchase agreement and copies of the title deeds are delivered to the intending purchaser.
The intending purchaser will have to exercise the OTP before it expires by signing the sales and purchase agreement and returning it to the developer. If the purchaser fails to exercise the OTP, 25 per cent of the booking fee may be forfeited to the developer.
The three-week validity period for the OTP is put in place to encourage purchasers to exercise financial prudence and commit to purchasing a property only when they have the financial means to do so. Purchasers will be exposed to the risk of forfeiting 25 per cent of their booking fees if they commit to new property purchases without securing the necessary finances upfront.
“However, we have observed that there have been instances where the OTP is re-issued multiple times to the same purchaser(s) for the same unit, which lengthens the option period significantly,” URA’s Ms Ling noted.
While the current validity period in the standard OTP is generally sufficient for most purchasers to exercise the OTP, the Controller recognises that there may be some buyers who require more time to finalise the necessary arrangements before exercising the OTP.
For example, purchasers may require more time to complete the sale of their existing property before exercising the OTP, Ms Ling said.
Upon application by such purchasers or the developers, the Controller is prepared to extend the validity period of the OTP up to 12 weeks from the OTP date, provided that both parties (i.e. the buyer and the developer) are agreeable.
Purchasers or developers who wish to apply for an extension of the OTP validity period may submit their application to email@example.com, with a copy and expiry date of the OTP; and reasons for requiring more time to exercise the OTP.