The Option to Purchase is the first document in almost every residential property transaction in Singapore, and it is the one that matters most. By the time it is signed, the price is fixed, the deadlines are running, and the consequences of changing your mind are already decided.

It is also the document people are most often asked to sign quickly, at a viewing, with an agent waiting.

What an OTP actually is

It is a contract. The seller grants the buyer an exclusive right to buy at an agreed price within an agreed period, and the buyer pays an option fee for that right.

During the option period the seller cannot sell to anyone else. At the end of it the buyer either exercises the option, which turns it into a binding agreement to buy, or does not, in which case the option lapses and the option fee is generally forfeited.

That structure is the same for HDB flats and private property. Almost everything else differs.

HDB resale: a prescribed form

For an HDB resale flat you must use HDB’s prescribed OTP. Other agreements or supplementary agreements relating to the sale are not valid under the Housing and Development Act, so a side arrangement with the seller is not merely unwise, it is ineffective.

The terms are set rather than negotiated:

  • Option Fee: between $1 and $1,000, agreed between the parties
  • Option Exercise Fee: an amount which, together with the Option Fee, does not exceed $5,000
  • Both amounts form part of the resale price rather than sitting on top of it
  • Option Period: 21 calendar days from the date the OTP is granted, including Saturdays, Sundays and public holidays

The expiry is precise. If the sellers grant the option on 1 April, it expires at 4pm on 22 April. Miss that and the option is gone.

Two practical points. Only one copy of the OTP should be printed, because each carries a unique serial number that you quote when submitting the resale application. And you will need your HFE letter in place before an OTP is granted, so the financing groundwork comes first.

Private property: a negotiated document

For private residential property there is no prescribed form. The OTP is drafted for the transaction, usually on a standard set of conditions of sale, and its terms are genuinely negotiable.

Market convention, rather than law, is an option fee of 1% of the price, a further 4% on exercise, and an option period of around 14 days. None of those is fixed. The option period, the deposit, the completion date and the conditions attached are all things that can be asked for before signature and almost never after.

This is where advice pays for itself. A clause that quietly shifts risk onto the buyer, an unusually short option period, or a completion date that does not fit your financing or your sale at the other end, all cost far less to change now than to live with later.

What happens if you do not exercise

Before exercise: the option lapses and the option fee is generally forfeited. That is the price of the right you bought, and it is usually the cheapest way out of a purchase you have decided against.

After exercise: you are in a binding contract. Walking away then is a breach, and the consequences are considerably more serious than losing the option fee: the deposit is generally at risk and the seller may have further claims.

The gap between those two positions is the single most important thing to understand before exercising. If you are not certain, the time to say so is during the option period.

What to do during the option period

The option period is not waiting time. It is when the work happens:

  • Have the OTP reviewed before you sign it, or at the very least before you exercise
  • Confirm your financing is actually in place, not merely indicated
  • Check your CPF position, since it affects how much cash you need at each stage
  • Establish the stamp duty payable, which falls due within 14 days of exercise. See our note on stamp duty when buying property
  • Raise anything unusual about the property, the title, or the seller’s circumstances

After exercise

Once the option is exercised, the transaction moves to completion: searches and requisitions, the stamp duty payment, the bank’s requirements, and the moving of money between the solicitors on completion day.

For an HDB resale, both parties submit their halves of the resale application through the HDB Resale Portal, and completion normally follows around eight weeks after the application is accepted. For a private resale, completion is commonly eight to twelve weeks from exercise.

Our residential conveyancing page sets out that process in full, with our fixed fees published.

If you take one thing from this

Send the OTP to a lawyer before you sign it. It is a short piece of work at the point where everything is still changeable, and it is the cheapest moment in the entire transaction to fix a problem.