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Lessons on leases
29/10/2002 The Star Articles of Law with Bhag Singh

BUYING a house involves large sums of money and the buyer spends a good part of his/her life repaying the bank loan taken to purchase the property.

This obligation turns out to be more onerous when it transpires that the information received is either incomplete or misleading. To this I would add information received which is not fully appreciated.

In this context a reader who is about to purchase an apartment in the present atmosphere where many properties are being sold at bargain prices asks whether this is the time to pick up a unit and what he should look out for when purchasing such a property.

Whilst the aspect of timing involves various factors, it is also not easy to state what you should actually look out for from the legal point of view. Another aspect is that buying an apartment, condominium or flat falls into the broad category of purchasing compartmentalised units.

Of course apartments, condominiums and flats denote different levels of comfort, facilities and luxury. However there appears to be no fixed legal meaning for any one type. This is because one property may be an ordinary condominium and another a luxury apartment. Only the actual facilities and levels of maintenance will distinguish between the two.

It is helpful to consider a number of aspects when purchasing such a property, especially in view of the intensity of advertising and the manner in which information is disclosed.

One important point to consider is whether the land is freehold or leasehold. If it is leasehold, then it would be useful to know whether it is for 99 years or a shorter period. This is vital because some advertisements merely describe the land as leasehold without mentioning the number of years. It would be unwise to presume that all leases are for 99 years

Even if it is known that the lease is for 99 years because it is so advertised, it would be prudent to check what the remainder of the lease is. This need arises because there may be land which was alienated as a lease, say, 27 years ago and the housing developer may take another three years to complete the construction. In this case, only 69 years of the lease may be left even though it is a 99 year lease. As far as the buyer is concerned, he is only getting a 69-year lease.

The thing about leasehold land is that, once the lease expires, the land reverts to the state. The owner will then have to either apply for a renewal of the lease before its expiry or apply for a fresh alienation if the lease has expired. These will involve the payment of a hefty premium which would be close to buying the land all over again with perhaps some discount.

Therefore when buying such a property it would be advisable for the house buyer to enquire about the nature of the land and the unexpired term of the lease. Advertisements which are silent or incomplete in this regards should be viewed with caution.

Another important aspect to look out for is the availability of a covered car park and whether the sale includes it. The cost of a covered parking lot can be substantial and can amount to almost 15% of the cost of the property.

Unlike a landed property such as a terrace house, a car park may not automatically come with the purchase of a compartmentalised unit.

In a society where a car is a necessity, the absence of a car park would be a serious disadvantage. Therefore there is a need to pay attention to this aspect when purchasing a property.

Most compartmentalised properties include a covered car park as part of the purchase. This, however, is no reason to assume that this is always so. After all the right of parties will be enshrined in the Sale and Purchase Agreement.

If a car park is not included in this contractual document, the property buyer cannot assume that this is normally the case.

One other aspect that must be mentioned is the facilities offered. It would be useful to know whether the facilities are for the full term of the lease period.

The writer is reminded of a case where the advertisement announced the development of land that had a 99-year lease. However, the land on which the swimming pool was constructed had only a 30-year lease.

When the 30-year lease expires and is not renewed, the condominium owners could end up without a swimming pool. On the other hand, if the lease is renewed, it could mean the payment of a premium which would then have to be paid by the condominium owners.

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