http://www.straitstimes.com/PrimeNew...ry_573280.html

Sep 1, 2010

Buyers advised not to backdate options

By Esther Teo


SOME home buyers who signed their option to purchase on Aug 30 or after this year may try to escape the brunt of tighter financing rules by bending the rules.

Experts, however, have warned against this as they may fall foul of the law.

Unlike those who signed their options before Monday, buyers with one outstanding home loan on Aug 30 or after will have to make a down payment of 30 per cent of the property's price, in contrast to the 20 per cent that previously applied.

And at least 10 per cent of their down payment must be in cash - up from 5 per cent before - but the remainder can come from their Central Provident Fund (CPF) accounts.

Property agents contacted by The Straits Times yesterday report that some buyers are delaying the exercise of their option in the light of the new rules.

Some are considering backdating their option to purchase so that they are covered by the old rules.

Unlike exercising an option, there is no need for a lawyer to be present when an option to purchase is signed, making collusion between buyer and seller possible, said PropNex chief executive Mohamed Ismail.

But the window to do so is small, since a buyer is usually given 14 days from signing the option to decide whether he wants to proceed with the purchase by exercising the option.

Mr Ismail said that PropNex had a clear stance of not backdating options to purchase.

Mr Steven Tan, executive director of residential at

OrangeTee agency, also said that he discouraged any form of backdating as it could lead to legal complications.

The changes to tighten home financing were announced by the Ministry of National Development (MND) on Monday. Also announced was an extension of the period in which sellers' stamp duty applies, to within three years of a home purchase, up from one year previously.

The amount of duty will be staggered, with those selling their property sooner having to pay more.

The full duty imposed for a sale within one year is 1 per cent for the first $180,000, 2 per cent for the second $180,000 and 3 per cent for the balance.

A sale in the third year would incur one-third of these charges.

The seller's holding period will be based on the time that elapses between the seller first buying the property and a buyer exercising an option to purchase or signing a sale and purchase agreement, whichever is earlier.