What Does a Conveyancing Lawyer Actually Do When You Buy or Sell a Property?
When buying or selling a property in Singapore, most people know that they will eventually need to engage a conveyancing lawyer.
But what does the lawyer actually do?
It can sometimes appear that the property agent negotiates the transaction, the bank provides the financing and the buyer and seller simply sign the necessary documents. In reality, there is a substantial amount of legal work taking place between the signing of the Option to Purchase (“OTP”) and completion.
A conveyancing lawyer's role is to ensure that the legal ownership of the property is properly transferred, the purchase monies are correctly accounted for, existing mortgages and CPF charges are dealt with, the necessary searches are conducted and the relevant documents are lodged with the appropriate authorities.
For buyers using CPF savings to purchase private property for the first time, CPF Board expressly requires a conveyancing lawyer. CPF Board explains that the lawyer manages the legal aspects of the transaction, including documents required by the Singapore Land Authority and the creation and lodgment of the CPF charge.
This article explains what a conveyancing lawyer typically does when you buy or sell a property in Singapore.
What Is Conveyancing?
Conveyancing is the legal process of transferring ownership of a property from one person to another.
For a typical property transaction, the process begins before the buyer becomes legally committed and continues until the property has been transferred and the necessary post-completion matters have been dealt with.
Your conveyancing lawyer may need to liaise with:
the other party's lawyers;
your bank;
CPF Board;
the Singapore Land Authority (“SLA”);
IRAS;
the managing agent or Management Corporation Strata Title (“MCST”); and
other relevant authorities.
The exact work depends on whether you are buying, selling, refinancing or transferring the property.
What Does the Buyer's Conveyancing Lawyer Do?
If you are purchasing a property, your lawyer's principal responsibility is to protect your legal interests and ensure that you receive the ownership of the property that you have agreed to purchase.
Here are some of the key steps.
1. Review the Option to Purchase
For a typical resale private property transaction, the seller will grant the buyer an OTP.
Before the buyer exercises the OTP, the lawyer can review its terms, including:
purchase price;
exercise deadline;
deposit;
completion date;
vacant possession;
existing tenancy;
fixtures and fittings;
special conditions; and
any amendments to the standard terms.
CEA provides standard contract templates for private residential resale transactions, including an OTP and Sale and Purchase Agreement, but the actual terms agreed between the parties remain important.
This is why it is preferable to appoint your lawyer before exercising the OTP, rather than only after you have become contractually committed.
2. Check the Property's Title
Your lawyer will conduct the appropriate title searches to establish matters such as:
who the registered owner is;
whether the property description corresponds with the transaction;
whether there is an existing mortgage;
whether CPF charges are registered against the property; and
whether there are other registered interests or encumbrances affecting the title.
A buyer does not want to pay the purchase price only to discover that there is an unresolved legal interest affecting the property.
CPF Board similarly advises private-property buyers to check with their lawyers to ensure that the property is free of charges such as CPF and mortgage charges upon completion.
3. Conduct Legal Requisitions and Property Searches
Your lawyer will conduct the necessary searches and requisitions relating to the property.
For example, IRAS specifically identifies legal requisitions as part of the conveyancing work ordinarily carried out by a purchaser's lawyer.
One important purpose is to check whether there is outstanding property tax attached to the property. Once ownership is transferred, a purchaser may become liable for outstanding property tax, including arrears that should have been paid by the previous owner.
IRAS' Integrated Legal Requisition System also allows legal professionals to search information including the property owner recorded in the Valuation List, Annual Value and outstanding property tax.
Depending on the property and transaction, other searches or investigations may also be required.
4. Advise on How the Property Will Be Owned
If there is more than one buyer, your lawyer will need to know how the purchasers intend to hold the property.
Two common forms of ownership are:
Joint Tenancy
The owners hold the property jointly and the right of survivorship generally applies.
If one joint tenant dies, his or her interest generally passes to the surviving joint tenant or tenants.
Tenancy-in-Common
Each owner holds a specified share, for example:
50:50
or
70:30
There is generally no right of survivorship over a tenant-in-common's share. The deceased owner's share forms part of his or her estate.
This is therefore not merely an administrative question on a conveyancing form. The manner of holding can have significant estate-planning and succession consequences.
5. Deal With Buyer's Stamp Duty and ABSD
Your lawyer will also deal with the applicable stamp duty documentation.
A purchaser may have to pay:
Buyer's Stamp Duty (“BSD”); and
Additional Buyer's Stamp Duty (“ABSD”), where applicable.
ABSD can be particularly substantial and depends on factors including the buyer's profile and existing residential property ownership.
Stamp duty should therefore be calculated before the buyer becomes committed to the transaction.
6. Deal With Your CPF Usage
If you intend to use CPF Ordinary Account savings towards the property, your lawyer may need to deal with CPF Board on your behalf.
CPF Board explains that a conveyancing lawyer is required when CPF savings are being used for a first private-property purchase. Among other things, the lawyer prepares and submits the required legal documents and creates and lodges the CPF charge over the property.
CPF OA savings may also be used for qualifying property-related costs, including legal fees, BSD and ABSD, transaction fees and SLA lodgment fees, subject to CPF's requirements.
There are therefore legal steps involved in using CPF. The money is not simply transferred from your CPF account to the seller when you ask for it.
7. Liaise With Your Bank
If you are taking a housing loan, the financing and conveyancing processes need to work together.
Your lawyer may need to:
receive instructions from the bank;
prepare or review the mortgage documentation;
arrange for you to sign the relevant documents;
satisfy the bank's legal requirements;
register the mortgage; and
arrange for the loan monies to be available for completion.
If the bank's money is not available when completion falls due, this can create serious difficulties for the buyer.
This is one reason buyers should arrange financing early.
8. Protect the Buyer's Interest in the Property
As part of the conveyancing process, appropriate instruments may be lodged or registered to protect and ultimately record the purchaser's legal interest.
The lawyer also ensures that existing interests which are supposed to be removed — such as the seller's mortgage or CPF charge — are appropriately dealt with as part of completion.
The objective is that the buyer receives the property with the title contracted for.
9. Calculate the Money Required for Completion
Before completion, your lawyer will prepare the financial completion calculations.
For a buyer, the purchase may be funded through a combination of:
Cash + CPF + Housing Loan
The lawyer needs to coordinate the different sources of funds so that the required purchase monies are available at the appropriate time.
There may also be adjustments between the buyer and seller.
For example, IRAS states that property tax is payable yearly in advance and that the lawyers generally apportion the current year's property tax between the buyer and seller as part of conveyancing. IRAS itself does not carry out this apportionment between the parties.
10. Complete the Purchase
On completion day, your lawyer coordinates with the seller's lawyers to complete the legal transaction.
Broadly, this involves ensuring that:
the balance purchase monies are provided;
the required documents are exchanged or dealt with;
the seller's existing mortgage and other relevant charges can be discharged;
the transfer is completed; and
possession or keys are dealt with in accordance with the contract.
The buyer then becomes the owner of the property.
What Does the Seller's Conveyancing Lawyer Do?
The seller's lawyer has a different role.
The objective is to transfer the seller's property to the buyer while ensuring that the seller's existing obligations — particularly the housing loan and CPF refund — are properly dealt with and the seller ultimately receives the net sale proceeds.
1. Review or Prepare the OTP
The seller's lawyer may review or prepare the OTP and advise on any unusual terms.
This is particularly important where there are special arrangements concerning:
completion dates;
tenancies;
vacant possession;
furniture;
early possession;
extensions; or
other negotiated conditions.
Once the buyer validly exercises the OTP, the seller will generally be contractually obliged to complete the sale.
2. Check the Seller's Title
The lawyer will review the title and establish what interests need to be dealt with before the property can be transferred.
For example, the property may be subject to:
a bank mortgage; and
a CPF charge.
These cannot simply be ignored when the property is sold.
3. Redeem the Existing Housing Loan
If the seller has an outstanding housing loan, the mortgage will ordinarily have to be redeemed as part of the sale.
The seller's lawyer will typically liaise with the bank to obtain the relevant redemption information and arrange for the appropriate portion of the sale proceeds to be paid towards the outstanding loan.
The mortgage can then be discharged as part of the conveyancing process.
4. Arrange the CPF Refund
If the seller used CPF savings towards the property, the required CPF refund must also be dealt with.
For most private properties bought or refinanced on or after 1 September 2002, CPF Board states that sale proceeds are generally applied in this order:
1. Outstanding housing loan
2. Required CPF refund
3. Other sale expenses, such as legal fees.
The seller's lawyer therefore needs to establish the applicable CPF refund and ensure that the necessary arrangements are made on completion.
5. Calculate the Seller's Net Sale Proceeds
The selling price is not necessarily the amount the seller receives in cash.
A simplified calculation might be:
Sale Price
less
Outstanding Housing Loan
less
Required CPF Refund
less
Applicable Sale Expenses
equals
Net Cash Sale Proceeds
The seller's lawyer will prepare the relevant completion account based on the actual transaction.
6. Deal With the Buyer's Lawyers
Throughout the conveyancing transaction, the seller's lawyer communicates with the buyer's lawyers regarding the legal completion of the sale.
This may involve:
responding to conveyancing enquiries;
providing necessary documentation;
dealing with title matters;
arranging discharge of existing encumbrances;
calculating adjustments;
coordinating completion; and
resolving legal issues which arise before completion.
7. Deal With Property Tax Adjustments
The seller remains responsible for property tax while he or she owns the property.
Because property tax is payable in advance, an adjustment may need to be made between buyer and seller on completion.
The lawyers deal with this adjustment as part of the completion account.
8. Complete the Sale
On completion, the seller's lawyer receives or accounts for the completion monies and deals with the legal transfer.
The lawyer will arrange for relevant amounts to be applied towards matters such as:
mortgage redemption;
CPF refund;
agreed adjustments; and
other applicable completion expenses.
The balance is then accounted for as the seller's net proceeds.
9. File the Notice of Transfer
There are also post-completion obligations.
When property is sold or transferred, the seller or transferor must notify IRAS within one month.
IRAS states that the Notice of Transfer is generally filed by the seller's conveyancing lawyer on the seller's behalf.
This updates the ownership information for property-tax purposes.
What Does a Conveyancing Lawyer NOT Do?
It is equally important to understand the distinction between a conveyancing lawyer and a property agent.
A property agent may assist with matters such as:
marketing the property;
arranging viewings;
identifying potential properties;
negotiating commercial terms; and
facilitating negotiations between buyer and seller.
The conveyancing lawyer deals with the legal transaction.
The roles complement each other, but they are not interchangeable.
Similarly, the lawyer is not your banker or financial adviser. While the lawyer coordinates the legal aspects of your housing loan, the bank determines whether it is prepared to lend and on what terms.
Why Does the Lawyer Ask for So Many Documents?
Clients are sometimes surprised by the amount of information required for what appears to be a straightforward property transaction.
Depending on the transaction, your lawyer may ask for:
NRIC or identification documents;
OTP;
title or property information;
bank loan documents;
CPF information;
marriage or ownership information;
tenancy documents;
property tax information;
source-of-funds information; and
other supporting documents.
Some information is required to complete the conveyancing work. Other information may be necessary for regulatory, anti-money-laundering and client due-diligence requirements.
Providing the requested documents promptly helps prevent unnecessary delays.
When Should You Appoint a Conveyancing Lawyer?
For a buyer, the ideal time is generally before exercising the OTP.
This allows the lawyer to review the transaction before you become contractually committed.
For a seller, it is sensible to appoint a lawyer before or when the OTP is being prepared, particularly where the transaction contains unusual terms.
CEA itself provides checklists for buyers and sellers and standard contract templates for private residential resale transactions, underscoring the importance of considering the relevant issues before entering into the contract.
Waiting until the last minute can make it more difficult to address problems with financing, CPF, ownership structure, completion dates or contractual terms.
Do You Need a Lawyer If You Already Have a Property Agent?
Yes, where legal conveyancing work is required.
A property agent does not replace the conveyancing lawyer.
The agent facilitates the property transaction commercially. The lawyer handles the legal transfer of ownership and the related conveyancing requirements.
For private-property purchases involving CPF, CPF Board specifically requires a conveyancing lawyer for the legal work involved in the CPF application and charge.
What About Refinancing?
Conveyancing lawyers are also involved when you refinance a property.
Even though the property is not being sold, refinancing generally involves legal work because the existing mortgage must be redeemed and the new lender's mortgage registered.
The lawyer may need to:
obtain redemption information from the existing bank;
prepare the new lender's mortgage documentation;
discharge the existing mortgage;
register the new mortgage;
deal with CPF requirements where applicable; and
coordinate the release of the new loan.
What About Decoupling or Gifting a Property?
A conveyancing lawyer is also required where one co-owner transfers his or her property share to another.
These transactions can be more complicated than an ordinary sale because they may involve:
a partial transfer of ownership;
CPF refunds;
BSD and ABSD;
valuation;
existing mortgages;
refinancing; and
release of the outgoing owner from existing financing obligations.
A gift also remains a legal transfer of property even though the outgoing owner receives no purchase price.
The structure should therefore be considered before the transfer documents are executed.
What Happens If Something Goes Wrong?
Conveyancing is often straightforward when all parties, banks and authorities are ready and the property's title is in order.
Problems can nevertheless arise.
For example:
the buyer's financing may be delayed;
there may be insufficient funds for completion;
an unexpected title issue may emerge;
the seller may have difficulty discharging an existing mortgage;
there may be an existing tenancy;
the parties may disagree over vacant possession;
completion may be delayed;
one party may seek to withdraw after becoming contractually bound; or
the parties may disagree over what was included in the sale.
Your conveyancing lawyer can identify the legal issue, advise on the contractual position and determine what steps should be taken.
This is also why involving your lawyer early is preferable to seeking advice only after a problem has arisen.
So, What Is Your Conveyancing Lawyer Actually Doing?
Although clients may only see a handful of documents requiring their signatures, behind the scenes a typical conveyancing transaction can involve:
Contract → Title → Searches → Stamp Duty → CPF → Bank → Mortgage → Completion Monies → Transfer → Registration
The lawyer's role is to coordinate these different legal and financial components so that ownership can be transferred properly and the transaction can complete.
For a buyer, that means ensuring that you obtain the property and the title you contracted to purchase.
For a seller, it means ensuring that the property can be transferred, the existing mortgage and CPF obligations are dealt with and the remaining sale proceeds are properly accounted for.
Buying or Selling a Property in Singapore?
A conveyancing lawyer is not simply there to witness signatures at the end of the transaction.
The legal work begins much earlier and can involve reviewing the contract, investigating title, conducting property searches, handling CPF and mortgage documentation, calculating completion monies, coordinating with the other party's lawyers and completing the legal transfer of ownership.
At YY Lee & Associates LLC, our conveyancing team assists clients with the purchase, sale, refinancing and transfer of residential properties in Singapore.
If you are buying or selling a property, contact YY Lee & Associates LLC early in the transaction so that the legal, CPF and financing requirements can be dealt with before completion.
Frequently Asked Questions
When should I engage a conveyancing lawyer?
A buyer should ideally engage a lawyer before exercising the OTP. A seller should consider engaging a lawyer before granting the OTP, particularly if there are special conditions or unusual arrangements.
Do I still need a lawyer if I have a property agent?
Yes, where conveyancing legal work is required. Your property agent and conveyancing lawyer perform different roles. The agent generally facilitates the commercial transaction, while the lawyer handles the legal transfer of ownership.
Does my conveyancing lawyer deal with CPF?
Where CPF is involved, the lawyer may deal with the required CPF documentation and legal processes. For a first use of CPF savings to purchase private property, CPF Board expressly requires a conveyancing lawyer.
Does my lawyer deal with my housing loan?
Your lawyer deals with the legal aspects of the mortgage and coordinates with the financing bank. The bank itself decides whether to grant the loan and the amount it is prepared to lend.
What does the seller's lawyer do with the housing loan?
Where the property is mortgaged, the seller's lawyer generally obtains the redemption information and arranges for the existing housing loan and mortgage to be dealt with as part of completion.
Who refunds the seller's CPF?
The required CPF refund is dealt with as part of the conveyancing transaction. CPF Board sets out the priority for applying sale proceeds towards the outstanding housing loan, required CPF refund and other sale expenses.
Does the lawyer deal with property tax?
Yes, there are conveyancing aspects relating to property tax. IRAS states that the purchaser's lawyer ordinarily checks for outstanding property tax and assists with apportioning the current year's property tax between buyer and seller. The seller's lawyer generally files the Notice of Transfer after the sale.
If you are buying, selling or transferring a property in Singapore, having an experienced conveyancing lawyer can help ensure that the transaction is properly documented and completed smoothly. YY Lee & Associates LLC advises and represents clients in a wide range of residential property transactions, including HDB flats and private properties. Contact us today to speak with our conveyancing team about your property transaction and the legal steps involved.