Property Transactions Involving Deceased Owners And Owners Who Have Lost Mental Capacity

March 1, 2024

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Introduction

  1. Transactions rely on parties having sufficient capacity to deal with the asset in question. This is regardless of whether we are talking about a business, goods, or even real estate. In the case of real estate transactions, there is some guidance available on how to conduct the transaction if the owner has already passed on or lost mental capacity, or even if the unfortunate event happens after the Sale and Purchase Agreement is signed, or the Option to Purchase is exercised.

The Law Society of Singapore’s Conditions of Sale

  1. The Law Society of Singapore‚Äôs Conditions of Sale (the ‚ÄúConditions of Sale‚ÄĚ) is a standard set of conditions that, while not automatically applied, is usually incorporated into a property transaction. Parties may also agree to vary or over-ride certain conditions in the Conditions of Sale by agreement. These conditions are updated from time to time in accordance with the development of the local legal landscape. Currently, there are three versions of the Conditions of Sale, namely, the Conditions of Sale 1999, the Conditions of Sale 2012, and the Conditions of Sale 2020.
  2. In this article, we will be looking at Condition 9.5 of the Conditions of Sale 2012 and Conditions of Sale 2020, as the death and/or loss of mental capacity of a party to the transaction in provided for therein. There is no such provision in the Conditions of Sale 1999.
  3. The Law Society of Singapore‚Äôs Conditions of Sale 2012 (the ‚ÄúCOS 2012‚ÄĚ) provides at Condition 9.5:-

If either the Vendor or the Purchaser (or one of the Vendors or Purchasers) dies before the Scheduled Completion Date, the Scheduled Completion Date may be postponed for a reasonable period but in any event, not more than three (3) months from the date of death, for a Grant of Probate or Letters of Administration to be obtained in order to complete the Contract and no interest shall be payable by any party during such extension period.

(emphasis added)

  1. The Law Society Conditions of Singapore‚Äôs Conditions of Sale 2020 (the ‚ÄúCOS 2020‚ÄĚ) provides at Condition 9.5:-

If either the Vendor or the Purchaser (or one of the Vendors or Purchasers) dies or loses mental capacity before the Scheduled Completion Date, the Scheduled Completion Date may be postponed for a reasonable period but in any event, not more than three (3) months from the date of death or other loss of mental capacity based on medical evidence, for a Grant of Probate or Letters of Administration or Order of Court for Appointment of Deputies (as the case may be) to be obtained in order to complete the Contract and no interest shall be payable by any party during such extension period.

(emphasis added)

  1. As one can see, depending on the Conditions of Sale that is provided for in the Sale and Purchase Agreement or the Option to Purchase, there are contingencies built in the standard terms for the passing or loss of mental capacity of one of the parties.
  2. The COS 2012 only provides for the death of a party while the COS 2020 provides for both the death and/or the loss of mental capacity of a party. In general, it would be more advantageous to incorporate the COS 2020 in the Sale and Purchase Agreement or the Option to Purchase, as the loss of mental capacity is a real concern.
  3. Further, while the extension period of three months is provided for by the Conditions of Sale, parties are free to negotiate on a longer or shorter period as they may deem fit. For example, parties may wish to negotiate for a longer period of time should the application for the grant turn out to be more complex than envisioned, or if the application for deputyship is not as straightforward as they initially thought.

In the event of death

  1. In the event of death, it becomes pertinent for an application to be made to for a Grant of Probate (if there is a Will) or a Grant of Letters of Administration (if there is no Will, or no surviving executor) to appoint personal representative(s) to represent the estate of the deceased person, and continue with the transaction. Unless provided for in the Sale and Purchase Agreement or the Option to Purchase, the contract still binds the estate even though the contracting party is deceased.
  2. If the Sale and Purchase Agreement or the Option to Purchase is issued after the demise of the owner, then the proper party would be the personal representative(s) on behalf of the estate.
  3. If the Sale and Purchase Agreement or the Option to Purchase is issued before the demise of the owner, and the owner passes away prior to completion, then the COS 2012 and the COS 2020 both provide for an extension of time for three months for completion, provided parties did not agree to exclude or to vary the said condition.
  4. Purchasers will need to note that the property in question needs to be listed in the Schedule of Assets that form part of the Grant, before the personal representative is said to have sufficient standing to deal with the property. Payment should then be made to the estate account of the deceased person, and the personal representative shall distribute the proceeds accordingly after the completion of the transaction.

 In the event of loss of mental capacity

  1. If, however, the event at hand is the loss of mental capacity, and not the death, of a party, then the pertinent issue would be whether the said party has drawn up a Lasting Power of Attorney (‚ÄúLPA‚ÄĚ).
  2. In the event that an LPA has been drawn up and registered the same with the Office of Public Guardian, then the Donee(s) appointed through the LPA will step into the shoes of the incapacitated party to continue with the transaction, if they are empowered to do so.
  3. If he/she/they are not empowered to do so, or if the incapacitated party has not drawn up an LPA, then a deputyship application needs to be made.
  4. The Purchasers’ solicitors will then seek a copy of the LPA together with the medical report to satisfy themselves and their clients that the person(s) claiming to be the representative(s) of the incapacitated party are rightly appointed and have sufficient powers to see the transaction to completion.
  5. Without the LPA, the Purchasers’ solicitors will instead seek a copy of the deputyship order granted by the local Courts to see if the representative(s) are granted the powers to complete the transaction.
  6. Under Condition 9.5 of the COS 2020, there is a default extension of time of three months to complete the matter, provided that parties did not agree otherwise. The extension of time in the event of the loss of mental capacity of one party is not provided for in the COS 2012. However, this does not prevent parties from agreeing to provide for the same in the course of negotiations, and including the provision in their Sale and Purchase Agreement or the Option to Purchase.

Conclusion

  1. In all the above cases, Purchasers will need to verify the legitimacy of the representative(s) through official documents, which are either registered with the relevant authority, or issued by the local Courts. Care also needs to be taken to ensure that payment is made to the correct recipient. While there may a delay in the completion of the transaction, the demise or loss of mental capacity of the owner(s) does not immediately void the transaction.
  2. Here at Sim Mong Teck & Partners, our experienced conveyancing team have a wealth of experience and knowledge on property related matters. This allows us to provide you with sound and practical advice on your queries.
  3. Should you have any questions pertaining to your property or other conveyancing matters, please reach out to our lawyers or Business Development team.