What Does It Mean For Property Buyers?
|As of 28th September 2020, the URA has put a stop to the re-issuing of an Option To Purchase (OTP) to prospective home buyers. URA was already stepping up the tracking of this practice and discouraging it.|
Now that it’s officially the law however, new conditions in the sale licenses will:
1. Restrict developers from providing upfront agreement to buyers to re-issue the OTP, and
2. Restrict developers from re-issuing the OTP for the same property, to the same buyer, within 12 months after the expiry of the earlier OTP.
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.
Restrict developers from providing upfront agreement to buyers to re-issue the OTP, 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.
In the past, 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 a 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.