As relevant then as it is now.
A Case Study
Straits Times, 23 Oct 2010
A man wrote a cheque for option fee to seller’s law firm, instead of to seller as earlier agreed.
AN INVESTMENT banker lost his chance to buy an $18.5 million bungalow in Ewart Park when his cheque for the option fee was made out to the seller’s law firm instead of to the seller.
He then sought High Court action to enforce the sale and stop the owner from reselling to anyone else, but his claim was dismissed by Justice Belinda Ang on Tuesday. Her judgment grounds were released yesterday.
The judge said that the seller, Ms Soon Chia Chuen, 38, was entitled to the $184,000 option fee the buyer, Mr Zain Asif Fancy, 36, had paid. This was 1% of the selling price.
He had, through his lawyers, made out a cheque for the remaining 4 per cent, or $738,400, to the law firm representing Ms Soon.
Mr Zain had believed it was sufficient to comply with the clause specified in the sale contract.
His lawyers from Tan Peng Chin LLC, who handled the deal, hand-delivered the cheque and the accompanying sales acceptance documents to Ms Soon’s lawyers from Derrick Wong & Lim on the day of the deadline in August.
But when she found out the cheque had been made out to her lawyers, she refused to continue with the sale.
She pointed out the deal was clinched after several rounds of talks, on the understanding that the cheque was to be made payable to her.
She had argued in court documents that she wanted the cheque to be in her name as she needed the money quickly to book a house in Trevose Crescent that she wanted to buy as a replacement.
The longer the delay on that deal, the higher the prices went as the seller was getting better offers from others, she said.
The property market was booming then, and Ms Soon had, among other things, ‘reluctantly’ agreed to a five-week period for Mr Zain to exercise the option instead of the usual two weeks.
She was concerned that prices would rise further and she would lose out if he opted not to buy after a five-week wait.
He had already paid the 1% option fee in June and the remaining 4% that he paid to exercise the option to buy became the subject of the court dispute.
Lawyers say that in a property deal, the money is normally paid to the law firm acting for the seller, which will keep it as a stakeholder in the sale.
This is to safeguard the money in case the deal derails for various reasons – such as if the seller subsequently dies, or is a bankrupt or cannot go through with the sale for some reason.
Mr Zain said in court documents that the property was ‘of particular significance’ to him as it ‘sits on a large and uniquely sited plot of land in one of Singapore’s most exclusive and prestigious ‘Good Class Bungalows’ enclaves and is a rare find in land-scarce Singapore’.
His lawyer, Senior Counsel Alvin Yeo from Wong Partnership, whom he hired separately to fight the High Court case, argued that the $738,400 cheque to be issued in Ms Soon’s name was not something that had to be strictly complied with.
But lawyer Prabhakaran Nair for Ms Soon countered that acceptance must match the offer in the way it was agreed upon.
Justice Ang said that sending the cheque to Ms Soon’s lawyers ‘was contrary to what was already agreed…which was for the cheque in (Ms Soon’s) favour to be forthwith released to her’.
Points to note from the legal perspective
Expiry Date and Time of Option To Purchase (OTP).
Usually 14 days from date of OTP but this period may vary.
Mode of exercise and acceptance of OTP.
Buyer is to deliver a signed copy of the acceptance as specificied by OTP.
Mode of Payment.
Payee - To Seller or the Law Firm acting for the seller.
Cashier's order or cheque.
Amount of Payment.
Exact amount as stipulated in Option.