Q WE ENTERED into a sale and purchase agreement for a property some time in July this year with the transaction scheduled to take place on Nov 7.
We paid 1 per cent option money to Bank Y, the seller's mortgagees.
However, the seller could not complete the sale to us on the due date.
Meanwhile, a bankruptcy petition was filed against the seller, rendering it legally impossible for him to complete the sale.
Can the seller fulfil his contractual obligation under the sale and purchase agreement he signed with us by completing the sale, despite the bankruptcy petition against him?
Should the seller's mortgagees, Bank Y, be compelled to complete the sale and purchase agreement?
The bank had earlier given the seller the green light to sell the property and we had paid the 1 per cent option money to the bank.
Is Bank Y's refusal to sell the property to us fair?
A Under the law of bankruptcy, your seller would become incapable of transferring the title of the property to you once he was made a bankrupt by the court.
From the facts supplied, your seller has had a bankruptcy petition filed against him but he has not yet been made a bankrupt by the court.
This means he can still fulfil his contractual obligation under the agreement - subject to the mortgagee's consent - if no bankruptcy order is made against him ultimately.
The question is whether Bank Y is obliged to take over the sale of the property to you from your seller.
That is, is it bound by the sale and purchase agreement signed between you and your seller?
The mortgagees' power of sale over the mortgaged property arises when the mortgagor - the home owner - defaults in paying the mortgage or commits a breach of any of the terms of the mortgage.
There is nothing in law to compel the mortgagees to sell the property to a buyer chosen by the home owner.
If the mortgagees believe the contractual sale price is not right, they can sell the property to anyone, either by public auction or private treaty.
The mortgagees are not obliged to consider whether the refusal to sell to you is fair.
You mentioned that Bank Y had given the green light to your seller to sell the property but you did not say what price Bank Y had agreed on or whether it had indicated a price at all.
It is also interesting to note that you had paid 1 per cent of the purchase price to Bank Y instead of your seller.
On this issue, you might want to consult your solicitors about whether Bank Y's acts constituted a legal estoppel.
This means that having said yes to the property sale to you and you having paid your 1 per cent down payment to them, Bank Y cannot now say no.
In my opinion, it might pay to negotiate further with Bank Y to find a satisfactory settlement, or you may buy the property from Bank Y at the public auction.
Lie Chin Chin
Lawyer
Lie Kee Pong Partnership
