Law Firm Pays $750,000 Difference for Not Exercising Option on Time
This will serve as a wake up call on the duties as a conveyancing law firm to or even to remind the client to exercise his/ her option to purchase on time.
June 20, 2009
A day late and $750,000 short for law firm
Clients win suit against firm for being late in filing purchase option for condo unit
By Desmond Ng
WHAT a difference a day makes.
For one couple, the mere delay of a day in buying their dream home cost them more than $700,000.
And the law firm, Toh, Tan & Partners, which had acted for them in the purchase, was made to pay them $750,000 in compensation.
The couple, Mr Chee Peng Kwan and Ms Jackelyn Sim, had instructed the firm to exercise their option to buy a property.
But the firm was one day late in doing so, resulting in the couple losing out on the chance to buy a unit at The Seafront on Meyer, a freehold condominium development along Meyer Road, in April 2007 at an offer price of $2.9 million.
The couple successfully sued the firm for breach of contract and negligence, and was awarded about $750,000 in compensation by the High Court on Tuesday.
The option to purchase is the right to buy a property at a certain price within a specified period, usually two weeks. To secure this, the buyer must pay an option fee to the property’s developer.
Court papers obtained by The New Paper stated that the couple wanted to live in the same block as Ms Sim’s father and sister because they wanted to stay close as a family.
The location is also attractive – it is on the site of Meyer Tower, an old development which was sold en bloc to make way for this new project.
Ms Sim’s family used to live in Meyer Tower.
The couple wanted the property so badly that they registered their interest with the developer even before the launch. They were third in the queue at the launch, behind Ms Sim’s father and sister, who were second.
The developer is CRL Realty, a subsidiary of CapitaLand. The project is expected to receive its temporary occupation permit (TOP) in 2011.
Booked units together
The couple booked their unit on the 23rd floor for about $2.9 million, while other family members booked another unit a floor below.
It is not known how much the other unit cost.
All of them engaged the same lawyers to act for them in the buying of the two units.
Their lawyers exercised the option for Ms Sim’s father and sister on the due date – 7May 2007 – but delivered the option for the couple’s unit only one day later, on 8May.
The couple discovered that their signed option had not been received by the developer on time only after the developer’s lawyers informed them. It is not known when they were told before that.
But it was too late. So the developer forfeited 25 per cent of the booking fee – about $36,500 – which had been paid by the couple.
Frantic, the couple pleaded with the developer to release their dream unit and even offered to pay a higher price.
But the developer refused to release the unit and told the couple that it ‘had no intention to resell the unit at the moment’.
In May last year, the developer suddenly released the unit for sale at $3.6 million – about $700,000 more than the initial offer.
Afraid to lose their dream home again, the couple quickly bought the unit and were given a discount of about $36,000 by the developer.
The couple then sued the law firm to claim the difference of about $750,000 – which includes the 25 per cent forfeiture fee, the difference between the new and old purchase price, additional stamp duty on the new purchase price and partial cancellation fees.
Lawyers Lee & Lee acted for the couple.
Drew & Napier, which acted for Toh, Tan & Partners, argued that its client should be responsible only for the difference between the original purchase price and the value of the property three months later.
They said that three months was a reasonable period of time to either negotiate the purchase of the preferred unit or alternative units.
They also argued that the couple cannot recover the full difference because the true market value of the unit was much lower than $3.6 million.
The couple should have looked for alternative units in the same development or other developments at a reasonable price, they said.
The court disagreed.
Assistant registrar Teo Guan Siew said the lawyers knew that the unit was special to the couple.
He said that Ms Sim’s father had called the law firm specifically to remind them to exercise the option on his daughter’s unit.
Said Mr Teo: ‘In the circumstances, the defendants (Toh, Tan & Partners) obviously had actual knowledge that the family wanted to stay close to each other, and specifically that they wanted to live together in two units with one directly above the other.’
Mr Teo noted that the price increase of slightly more than 20 per cent from the original purchase price after a year in a rising market was not unexpected or unreasonable.
Also, the lawyers had encouraged the couple to try and buy the unit from the developer up to as late as December 2007, more than seven months after the date of the original purchase.
The court felt that the couple’s argument – that the price of the new unit reflected the market price – was credible. The developer had not offered the unit to the couple at a price higher than those offered to other potential buyers.
Said assistant registrar: ‘The defendants who failed to exercise the original option on behalf of the plaintiffs (the couple) should be made to compensate the plaintiffs for the loss they suffered in having to pay the increased purchase price to get back the unit from the developer.’ Source: The New Paper
Getting a qualified conveyance law firm to deal with your property conveyancing would be the best way to prevent such mishaps from happening.
Also as a buyer, you will have to be concerned on the timeline and clear any possible air on the dates of the option, the exercising of the option and the completion dates. Your banker must work hand in hand with your law firm to ensure a smooth transition.