Avoiding property tussles

Source : Today - 19 Feb 2009

Reduce risk of bargains turning into legal liabilities

IN THE current recession, people with ready cash are looking to pick up good bargains. However, tread with care.

Reported cases that I took on over the years showed that property investors unwittingly fell into costly legal tussles because they failed to take the necessary safeguards before putting down their money.

What seem like simple and standard procedures in a property transaction can lead to expensive, drawn out legal battles. Here are four tips for minimising your risks.

Tip 1: Do on-site approval checks
The year was 1991, just after the Gulf War. Property values had dived sharply here.
My client, who owned a Lornie Road home, was faced with a lawsuit from a buyer wanting to back out of the deal.

The buyer claimed that the seller had not disclosed substantial unauthorised additions and alterations to the property, which affected its title.

At stake was the recovery of a $250,000 deposit from the buyer.

Fortunately for my client, the Appellate Court was persuaded that a seller’s obligation to disclose in a conveyance did not extend to unauthorised structures where no order or notice had been issued by the Building Control Division, as that relate only to an issue of quality and not title.

In a sale and purchase of property containing unauthorised alterations and additions, caveat emptor ­applies.

This means it is for the buyer to protect himself by checking that the property is free of illegal additions and alterations before buying the option, or to include in the option to purchase, a clause enabling the buyer to exit the purchase before completion if there are illegal or unauthorised alterations and additions.

Tip 2: As a buyer, ensure you have exit or compensation clause

Last year, I represented a couple that had contracted to sell their Changi terrace house, which had an unauthorised second storey.

The buyers wanted the couple to restore the unauthorised structure, claiming they would suffer huge financial damages if they were to buy a property which required regularisation of unauthorised works.

They further argued that if the works could not be regularised, and had to be removed, this would reduce the built-in area.

It seemed like a case that was plainly in favour of the buyers.
As it turned out, the couple won the case on the argument that the contract was inadequate and did not provide for an exit or compensation clause for the buyers, where there were unauthorised works on the property.

Tip 3: Think carefully before signing on the dotted line

Beware of buying on a whim and then changing your mind.

A caveat cannot be filed willy-nilly and unless a party has an interest in the property, he can be liable for damages and costs for wrongful filing.

Tip 4: If you have to sue, do it before the time warranty lapses

In a case where a developer was suing an architectural firm for professional negligence, the claim failed because it was not filed within six years from the act of negligence.
An injured party must pursue a claim with diligence. Otherwise, it may fail because of the time bar.

The writer is director of Bernard & Rada Law Corporation. She has 22 years‚ experience in property and commercial litigation.