If you are planning to buy or sell a Commercial Industrial property in Singapore, it is crucial to understand the process involved to ensure a smooth transaction. we have put together this guide to help you navigate through the process and provide you with all the necessary information you need to make informed decisions. From the option to purchase to the completion of the sale, we will walk you through each step in detail. So, let’s dive in and get started!
I) Option to Purchase (OTP)
Once both the seller and buyer have agreed on the sale/purchase price for the Commercial Industrial property, the following steps must be taken:
- The realtor will prepare/draft an OTP form, specifying the agreed-upon price, option fee, option period, and completion date.
- The buyer will issue a cheque for the option fee, typically 1% of the purchase price, in favour of the legal owner.
- Upon receipt of the option fee, the seller will sign the Option To Purchase form.
- The buyer will keep the original signed OTP, while the seller will keep a copy.
II) Exercise Option to Purchase
The buyer of the Commercial Industrial property will have to exercise the received option within 14 days from the date of issuance. The option period can be adjusted, subject to the agreement between the seller and buyer in the OTP. The buyer will need to take the following steps:
- The buyer must engage a lawyer to act as their solicitor and represent their interests.
- The buyer’s lawyer will present another cheque for 5% of the purchase price, less the previously paid option fee, to the seller’s solicitor.
- If the buyer is applying for a mortgage loan for the property purchase, they must obtain a Letter of Offer from a financial institution.
It is crucial to ensure that both the original signed OTP and the balance cheque (4%) are delivered to the seller’s solicitor before the OTP’s expiry. If the buyer fails to exercise the option before the expiry date, the seller will have the legal right to retain the entire amount of the option fee (1%). The seller will engage their own solicitor to act in their best interests.
III) Buyer Stamp Duty
The buyer of the Commercial Industrial property will have to pay Stamp Duty to the Inland Revenue Authority of Singapore (IRAS) within 14 days of exercising the option. The payable amount will be based on the Purchase Price or Market Valuation, whichever is higher, and calculated as follows:
| Property Value* | Rates on or before 14 Feb 2023 | Rates on or before 15 Feb 2023 |
| First $180,000 | 1% | 1% |
| Next $180,000 | 2% | 2% |
| Next $640,000 | 3% | 3% |
| Next $500,000 | 3% | 4% |
| Next $1,500,000 | 3% | 5% |
| Amt exceeding $3mil | 3% | 5% |
* Higher of Purchase Price or Market Value of the Property
Please also read: Understanding Singapore’s New Buyer Stamp Duty: What You Need to Know
IV) Sales Completion
After exercising the option, the responsibility for the legal procedure for the sale completion lies with the solicitors of both parties.
Typically, the sale transaction will be completed within 8 to 12 weeks, depending on what was agreed and stated in the OTP.
If you have any further questions or would like guidance on the sale/purchase procedure for Commercial Industrial property, please feel free to reach out to me.
