Disclaimer (Block 1): This article is for educational purposes only and is intended to assist CEA-registered property agents in understanding regulatory frameworks. It does not constitute financial, tax, or legal advice. LEVR's calculations are indicative only. Always verify rates and eligibility with your bank, HDB, CPF Board, or a licensed financial advisor before advising clients.
Why Due Diligence Matters Before the OTP
The Option to Purchase (OTP) is a binding commitment. Once a buyer exercises the OTP, they are legally obligated to complete the purchase or forfeit their option exercise fee (typically 4% for private property). By the time the OTP is exercised, the buyer should have already completed the critical due diligence — not started it.
Agents who help buyers conduct thorough pre-OTP due diligence protect their clients from costly discoveries after commitment. Agents who skip this step expose their clients to title defects, planning use violations, undisclosed encumbrances, and structural problems that are expensive or impossible to remedy after purchase.
1. Title and Legal Checks
Title checks are conducted by the buyer's solicitor but agents should understand what is being checked and flag obvious red flags early:
| Check | What to Look For | Who Checks |
|---|---|---|
| Title search (SLA) | Registered owner matches seller, tenure (freehold/leasehold and remaining years), any existing mortgages or charges, caveats lodged by third parties | Buyer's solicitor |
| Outstanding mortgages | Existing mortgage must be discharged at completion; confirm seller's redemption amount and that sale proceeds cover it | Buyer's solicitor |
| Third-party caveats | Caveats by ex-spouses, co-owners, or creditors can block transfer; must be discharged before completion | Buyer's solicitor |
| Land boundary | For landed property: confirm that the physical boundary matches the survey plan filed with SLA; encroachments are a title defect | Licensed surveyor (if in doubt) |
| Road line and reserve | For landed: check whether any portion of the land is within a road reserve or drainage reserve, which restricts building | Buyer's solicitor / LTA |
2. Planning and Land Use Checks
The URA Master Plan governs the permissible use and intensity of every land parcel in Singapore. Buyers should verify:
- Zoning: Confirm the property is in a residential zone (residential, residential with commercial at 1st storey). Properties in commercial, hotel, or mixed-use zones may have different stamp duty rates and are not eligible for the residential ABSD remission
- Plot ratio and development baseline: For landed property buyers intending to rebuild, check the gross plot ratio allowable under the Master Plan and whether the existing structure has used its development baseline. Structures built before 1958 may have retained development rights that are not obvious from current planning parameters
- Conservation status: Properties within conservation areas (Emerald Hill, Blair Plain, Tiong Bahru, etc.) are subject to URA conservation guidelines that restrict external alterations, internal structural changes, and materials. Buyers who intend to renovate must check whether the property is a conserved building and understand the constraints
- Gross Floor Area and approved use: For shophouses and mixed-use strata properties, confirm the approved use for each storey. Operating a residential use in an approved commercial space (or vice versa) constitutes a planning breach
3. Outstanding Charges and Financial Obligations
Financial obligations that attach to the property or the seller:
- Property tax arrears: Any outstanding property tax owed by the seller must be cleared at or before completion. The buyer's solicitor will apportion property tax at completion; arrears must be discharged separately
- MCST maintenance fee arrears (strata property): Outstanding maintenance fees, special levies, and sinking fund contributions owed by the seller are a charge on the property and must be cleared before transfer. The buyer's solicitor obtains a management corporation statement of account at completion
- Seller's Stamp Duty (SSD): SSD applies if the property was purchased by the seller within the SSD holding period. For properties purchased before 4 July 2025, the holding period is 3 years (Regime A). For properties purchased from 4 July 2025, the holding period is 4 years (Regime B — rates: 16%/12%/8%/4%/0%) — verify based on the seller's purchase date. SSD is the seller's liability, not the buyer's — but buyers should be aware that a seller facing large SSD obligations may be more motivated to negotiate or may have less flexibility to move on price
- HDB resale levy: For HDB resale sellers who are concurrently buying a new BTO flat, the resale levy reduces the net proceeds available. Buyers of HDB resale flats should be aware if the seller is buying a BTO, as completion timing may be constrained
4. Renovation and Structural Compliance Checks
Renovation works carried out without proper approvals constitute an ongoing liability for the buyer:
- HDB flats: Request a statutory declaration from the seller confirming all renovation works were carried out with HDB permits and by registered contractors (RCRS). Inspect for signs of structural wall removal, non-standard window enlargements, or wet area works without proper waterproofing
- Private strata property: Check with the MCST whether any unauthorised works have been identified in the unit. Request the MCST's records of complaints or enforcement notices relating to the unit
- Landed property: Confirm that any addition and alteration works or rebuilding was done with URA planning permission and BCA building plan approval. Works done without approval must be regularised (if possible) or demolished — both at the owner's cost
- Encroachment onto common areas: For strata properties, check whether any fixtures or planters encroach onto common areas — the MCST can require removal at the owner's cost
5. Physical Condition Checks
The physical inspection should go beyond what is visible on a casual viewing:
- Roof and ceiling: Water staining on ceilings (especially at higher-floor units in older developments) indicates roof or RC slab leaks. Check the roof terrace or common roof area if accessible
- Plumbing and drainage: Run all taps and flush all toilets. Check for slow drainage, gurgling, or backflow. Smell for sewage odours which may indicate trap failures
- External facade: For private developments, check whether the MCST has identified facade defects or spalling concrete on the building exterior — major repairs may require special levies
- Pest evidence: Check for termite mud tubes (especially at wall junctions and timber elements), cockroach evidence in kitchen and bathroom cavities, and rodent signs in landed property gardens
- Electrical panel: Check whether the distribution board is appropriately rated for the unit and whether any circuits are tripped or showing signs of overloading
6. HDB-Specific Checks
For HDB resale purchases, additional checks apply:
- Ethnic Integration Policy (EIP) quota: Confirm with HDB that the buyer's ethnic group is within the block and neighbourhood quota before making an offer. If the quota for the buyer's ethnicity is at the limit, the buyer is ineligible to purchase that specific unit
- SPR quota: If the buyer is a Singapore Permanent Resident, confirm SPR quota availability for the block
- Minimum Occupation Period (MOP): Confirm the seller has fulfilled MOP (5 years for standard HDB flats, 10 years for DBSS and PLH flats) before the flat is eligible for resale
- Eligibility to purchase: Confirm the buyer meets HDB eligibility criteria — citizenship/PR status, family nucleus requirement, income ceiling (for grants), and any property ownership restrictions
- Outstanding HDB loan: If the seller financed with an HDB loan, confirm the outstanding amount will be fully discharged from the sale proceeds
Frequently Asked Questions
Q: When should the due diligence checks happen relative to the OTP?
A: Physical, planning, and EIP checks should happen before the option fee is paid. Legal title checks (caveat search, encumbrance search) are conducted by the solicitor after OTP exercise but before completion. Agents should help buyers complete the practical checks before committing to the OTP, so that the solicitor's legal checks confirm what has already been verified at a practical level.
Q: Who pays for professional inspections — buyer or seller?
A: The buyer pays for any professional inspections they commission — structural engineers, pest inspectors, licensed valuers. These are the buyer's due diligence costs and are not reclaimable from the seller unless a defect is found that the seller misrepresented. Legal due diligence costs (solicitor's fees for title searches and conveyancing) are also the buyer's cost.
Q: Can I back out of an OTP if due diligence reveals a problem?
A: Once an OTP has been granted and the option fee paid, the seller is obligated to sell but the buyer has a choice — exercise the OTP and complete, or forfeit the option fee and walk away. If material defects or misrepresentations are discovered after OTP exercise, the buyer may have legal remedies, but these are fact-specific and the buyer should consult their solicitor immediately. Prevention — completing due diligence before the OTP — is far preferable to remediation.
Q: What is the difference between an option fee and an exercise fee?
A: For private property, the OTP process typically involves two payments: an option fee (1% of purchase price) paid when the seller grants the OTP, and an exercise fee (4% of purchase price, making a total of 5%) paid when the buyer exercises the OTP within the 14-day window. If the buyer does not exercise, the 1% option fee is forfeited. Once the buyer exercises (pays the 4%), they are committed to complete or face further legal and financial consequences.
Q: Is a pre-purchase building inspection worth engaging for a condominium?
A: A licensed building inspector can identify defects not visible to the untrained eye — hollow tiles, hairline cracks indicative of structural movement, waterproofing failures, and electrical panel issues. For a secondary market condominium where the buyer is relying on condition, a professional inspection is a reasonable cost relative to the transaction size. For new launch condominiums, the DLP provides a post-handover remedy period, though a pre-handover snagging inspection is still advisable.
Disclaimer (Block 3): LEVR's calculator outputs are estimates based on inputs provided and current regulatory parameters as known at time of publication. They are not a guarantee of borrowing capacity, stamp duty liability, or CPF eligibility. Regulatory thresholds and rates may change. Always verify with IRAS, your bank, or a licensed financial advisor before making financial decisions.