The Ministry of Law ("MinLaw") conducted a second series of public consultations between 18 January 2010 and 12 February 2010 to obtain feedback about its revised proposed measures to safeguard conveyancing moneys.
Presently, lawyers hold stakeholding and other moneys ("Conveyancing Moneys") to facilitate the conveyancing process. Conveyancing Moneys include option deposits, stamp fees, moneys released pursuant to a housing loan, balance purchase moneys, Central Provident Fund ("CPF") moneys and sales proceeds.
Revised proposed measures
Under the revised proposed measures, Conveyancing Moneys will be deposited into:-
(1) a "conveyancing account" opened by a law firm with a bank approved by the Minister for Law to provide such service ("Approved Bank"); or
(2) an escrow account pursuant to an escrow agreement.
Option deposits may also be placed with the Singapore Academy of Law ("SAL") which presently operates a stakeholding service for part of the moneys payable to a housing developer for properties sold under the rules of the Housing Developers (Control And Licensing) Act.
For disbursements and to facilitate adjustments that may arise on legal completion in the amounts payable, a "float" amount may be deposited in the law firm's client account. This float amount is capped at:-
(1) S$5,000/- for regular conveyancing transactions; and
(2) S$2,000/- per unit for collective or en bloc sales (subject to an overall cap of S$200,000 for the entire collective sale transaction).
Features of conveyancing accounts
Moneys can be deposited in the conveyancing account by cheque, cashier's order or bank draft, drawn in the format of "- Conveyancing", or via telegraphic transfer ("TT"). The Approved Banks will maintain a website list of law firms and their conveyancing account numbers to facilitate TT remittances. The law firm needs to submit a prescribed "Pay-In" form for each deposit so that the bank can earmark the deposit for the particular property transaction and prevent co-mingling of moneys pertaining to different properties.
Save for payments to the Inland Revenue Authority of Singapore ("IRAS") and to the Commissioner of Lands, two signatories from separate parties are required for withdrawals. The law firm account holder needs to complete a prescribed "Pay-Out Form'" which must be countersigned by the other party's lawyer. The Approved Bank will release the cashier's orders in exchange for the original signed Pay-Out Form and debit the transaction fee from the law firm's current account. It will be possible to arrange for a same day alteration of a cashier's order subject to a revised Pay-Out Form being submitted before the bank's cut off time.
Consequently, separate representation for vendors and purchasers shall be mandatory to allow the effectiveness of the joint signatories. However, for refinancing cases, there can still be joint representation of all parties by the same law firm if the CPF Board officers are counter signatories or if no Conveyancing Moneys are deposited into the law firm’s conveyancing account.
With the proposed amendments, countersigning lawyers take on an additional role of verifying that payments are consistent with the known facts of the conveyancing transaction and are empowered to request for supporting documentation for such verification.
Stakeholding by the SAL
Under the revised proposals, the existing stakeholding services by SAL will be expanded to cover option deposits for private property or Housing and Development Board ("HDB") industrial/commercial property transactions.
Similar to payment into conveyancing accounts, cash deposits will not be acceptable. The SAL requires the Pay-In Form to be signed by both seller and buyer or by their lawyers with the seller's and buyer's written authorisation, and cheque payment of the stakeholding fee.
Stakeholding moneys paid to SAL must be deposited at least 14 days before withdrawal and Pay-Out Forms are to be submitted at least three working days before withdrawal of the moneys. SAL will also only issue payment to authorised payees such as sellers, their mortgagees, the CPF Board for the account of the sellers, the relevant management corporation, HDB, IRAS, Official Assignee/Receiver or liquidator, purchasers or other party authorised in writing by the seller before a commissioner of oaths or notary public. Pay-Outs will be by SAL cheques or, if required by the sellers' mortgagee and with payment of an additional fee, by cashier’s orders.
Central Signature Repository
For the verification of countersignatures, approved entities such as SAL and the Approved Banks will have access to a "Central Signature Repository" containing specimen authorised signatures of conveyancing lawyers and authorised officers of other potential countersignatories.
Where the seller of any immovable property is a nonresident property trader, the buyer continues to be liable under certain conditions to withhold 15% tax on payments to be made to the seller. But the existing obligation on the buyer's lawyer to withhold such tax will be removed by the proposed amendment to the Income Tax Act.
After completion of the second series of public consultations and review of the feedback submitted, it is anticipated that the new procedures will come into effect by 1 January 2011. In the meantime, a pilot trial involving law firms, banks and SAL will be conducted between April 2010 and August 2010. Rodyk & Davidson LLP is pleased to be part of the pilot trial to test out the new workflows for selected transactions and to provide input to MinLaw to fine-tune the workflows and legislation, if necessary.