New regulation kicks in today to limit the number of OTP re-issue cases.
Effective Date: 28 September 2020
RESTRICTION ON RE-ISSUE OF OPTION TO PURCHASE FOR THE SAME UNIT TO SAME PURCHASER(S)
1. Under the terms of the standard Option to Purchase (OTP), the OTP will expire three weeks after the Sale and Purchase Agreement (S&PA) 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 S&PA and returning it to the developer. If the purchaser fails to exercise the OTP, 25% of the booking fee may be forfeited by the developer.
2. 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% of their booking fees if they commit to new property purchases without securing the necessary finances upfront.
3. 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.
Restriction on Re-Issue of OTPs
4. 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. Therefore, the Controller of Housing will impose new conditions in the sale licences (see Annex A)
issued to housing developers with effect from 28 September 2020 to:
i. restrict developers from providing upfront agreement to purchaser(s) to reissue OTP; and
ii. restrict developers from re-issuing OTP to the same purchaser(s) for the same unit within 12 months after the expiry of the earlier OTP; and to inform purchaser(s) of this condition upfront.
Extension of OTP Validity Period
5. 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 purchasers 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.
6. 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 purchaser 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 the following information:
a. a copy of the OTP;
b. expiry date of the OTP; and
c. reasons for requiring more time to exercise the OTP.
7. Please refer to Annex B for a set of frequently asked questions relating to the restriction on re-issue of OTP to the same purchaser(s) for the same unit.
8. We would appreciate it if you could convey the contents of this circular to the relevant members of your organisation. If you or your members have any feedback or query relating to this circular, you can email to firstname.lastname@example.org.