Embarassment:Keppel Land Imposed Erroneous & Onerous Indemnity Clause on Sellers!

Developers get ‘kiasu’ ; Some want original buyers to indemnify them from sub-sale problems; Controller of Housing says such a clause is wrong
TODAY
498 words
3 March 2009
TODAY (Singapore)
AM & PM
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English
(c) 2009. MediaCorp Press Ltd.

SOME developers are getting so “kiasu” (afraid to lose out) that they are getting the original buyers of homes to indemnify them should a sub-purchaser fail to pay. However, the Controller of Housing has told at least one developer, Keppel Land, that this is wrong.
The issue was raised when the buyer of an apartment at Park Infinia at Wee Nam Road, just off Keng Lee Road, tried to sell the unit bought from KepLand. The developer had wanted the original buyer to not only be liable for breaches by the sub-purchaser, but also to ensure that property tax and maintenance bills are paid. Asked to sign such a form, the original buyer asked lawyers to look into its enforceability. The lawyers then wrote to the Housing Controller for advice.
In response to the law firm, the Controller of Housing said in a letter seen by Today: “We are of the view that requiring your clients to sign a Letter of Authority with the indemnity clause stated above is contrary to the intention of rule 16 of the Housing Developers Rules, which requires a developer to enter into a fresh S&P Agreement (Sale and Purchase) with the sub-purchasers on the same terms and obligations as the original purchasers. This will place the sub-purchasers in a direct contractual relationship with the developer and releases the original purchasers from their obligations under the original S&P Agreement.”
The Controller added: “We have therefore written to the developer to request that the indemnity clause be deleted from the Letter of Authority which your clients have been asked to sign and complete the sub-sale expeditiously.”
A KepLand spokesman said the matter had since been resolved between the company and the purchaser, and the offending clause taken out of the S&P agreement.
A lawyer-friend of the purchaser said: “The clause should never have been included in the first place. How can any purchaser keep tabs on the financial position of a sub-purchaser down the road?”
Sources said this was not first time that KepLand had asked original purchasers to sign the indemnity form. It also appears that other developers have asked their purchasers to sign similar forms or are keen to follow KepLand’s example.
“In the current climate where scores of purchasers are said to be defaulting on their mortgage payments, it’s not hard to see why developers have to resort to such measures to protect their own interests,” said a prominent developer.
Against a backdrop of rising business failures and unemployment, property industry observers think mortgage defaults could increase this year. As a result, banks have become stricter on their mortgage financing, especially for those buying second and third properties.