A landed property differs from a condominium unit in many aspects. Firstly, when one buys a landed property, he gets the land that the property sits on, on top of the property that comes with it.
Secondly, a landed property may have gone through a major ‘makeover’ with substantial addition and alteration (A&A) works done. As such, it is only logical that there are different issues that one has to address when an agent attempts to market a landed property.
Basic Due Diligence
Needless to say, one should always do a title search to determine:
a. Legal ownership of the property
b. Size of the unit
c. Tenure of the property
before one starts marketing the property.
Depending on the situation, in certain cases, the agent may even want to conduct a bankruptcy / litigation search on the Vendor if he has reasons to believe that the Vendor may be facing impending bankruptcy / litigation suits.
An experienced agent should be able to pick up tell tale signs in the course of his interaction with the Vendor. Most agents, given a choice, will not want to take on such a listing given the potential complications arising from a case of such nature.
For the rest of this article, I will focus on 3 major legal pitfalls that agents need to be mindful of:
a. Size of the land
b. Built in / built up area of the property
c. Illegal alterations / additions
A simple title search will reveal the stated land size. The question is this— can you confirm that the property you are selling indeed is as big as the land area indicated in the Certificate of Title.
For example, a semi-detached property is supposed to have 4000 sqft of land, but short of you measuring it, can you confirm that it’s 4000sqft?
I want to share a case study that we have encountered some years ago. We represented a buyer for a semi-detached property purchase. Our buyer wanted to tear down the old house on the property to re-build. Now, typically most layman will take things at face value and take the land size for what it is. However, our client happens to be in the property development business.
Shortly after the option was exercised, he sought permission to bring in a surveyor to carry out a survey because he wanted to submit plans earlier for reconstruction.
Guess what? The survey revealed a shortfall of about 100 sqft of land. How did this happen?
It turned out that the neighbor, in the course of rebuilding the perimeter fence years ago, had inadvertently move the boundary line into the Vendor’s land, thus resulting in the shortfall.
We immediately notified the Vendor’s lawyers and demanded rectification of the problem. As our client still wanted to proceed with the purchase, there were only 2 options we were looking at.
It was either that the Vendor had to get the neighbor to surrender back the strip of land or to seek compensation in the form of a reduction in the purchase price.
Eventually, after much protracted negotiations, including the threats of legal action with all parties concerned (including the errant neighbor), the case was resolved on the basis of the neighbor giving back the strip of land.
So what is the lesson drawn from here? It is not practical to have a land survey carried out in every case before the sale or during the sale. Perhaps the practical approach is to draw a distinction between new and old properties.
If the property is relatively new, the risks of such issues arising will be correspondingly lower as the land survey would have been done not too long ago.
On the other hand, if it’s an older property, then the risks would logically be higher. This is of course by no means foolproof. As such, if an agent is dealing with a potential buyer who is very particular about the accuracy of the land size, you may want to be mindful of this issue.
Built in / Built up Area
A lot of buyers do not realize this, but the fact is the built in / built up area of a landed property is nowhere to be found in the Certificate of Title or any Developer’s Sale & Purchase Agreement.
As such, how then can the agent confirm an essential piece of information like the built in / built up area of a landed property?
More often than not, the agent tends to rely on the information provided by the owner. But the question is, can this be reliable? And what is the legal basis for the owner to say so?
The simple answer is that it is risky to rely on the seller’s unsubstantiated information.
Typically, the seller may rely on the Developer’s brochure / price list at the time of original purchase. Or worse still, based on his recollection of what he believed he has been told from years ago. The problem with the information given in the brochure / price list is the fact that the built in / built up area is not subjected to a survey being carried out eventually, unlike the land size.
In other words, while a survey will be carried out to confirm the size of the land, there are no legal requirements for the built in / built up area to be verified. In fact, the Certificate of Title only shows land size, without any indication of the built in / built up area.
Thus, the only way for the agent to confirm conclusively is to engage a surveyor to confirm this important piece of information. This is of course not a practical solution as the survey cost is not cheap, not to mention that it’s time consuming. On top of that, who is going to pay for the costs?
As such, the agent should learn to qualify the built in / built up area each time he has to put this information into an advertisement or answer a potential buyer’s query. For example, he should always state that it is approximately or ‘about’ xxx sqft and educate the buyer that the built in / built up area is not reflected in the Certificate of Title. Otherwise, an unqualified statement as to the built in / built up area could potentially be a misrepresentation if it turns out to be wrong.
Illegal Alterations / Additions
One common question that a lot of clients ask is, “how do I know if there are illegal alterations / additions carried out to the unit concerned?”
Frankly, the solution does not lie in relying on the searches (legal requisition replies from URA / BCA) alone. The reply may indicate that the TOP / CSC has been issued, but the fact remains that a lot of the unauthorized works are carried out only after CSC has been issued.
If so, the legal requisition replies will not capture this. My best practical advice is to use a two-pronged approach towards solving this problem:
a. Do a visual comparison with the neighbouring unit. While this may not be applicable for a bungalow, it is a very practical thing to do if you are selling terraces / semi detached houses. If both units under comparison are identical (front, back and height) with the rest of the units in the estate, then the risks are somewhat lowered that there might be unauthorized A&A works done on the external structure. However, if for example, your unit has a longer car porch, bigger extended kitchen in the back that pushes out the structural wall, or even a taller height structure, then we would need to consider whether all these A&A works are done with the necessary approvals.
b. If there are indeed dissimilarities with the neighbouring units, or if there is a mezzanine floor, then we need to ask for the written approvals to be produced. If in doubt, then the only solution would be to call in a building surveyor / qualified architect to lend their professional opinion.
I hope this article has been useful for you. Please feel free to write in if you have any queries for us.