What is the Option to Purchase (OTP) in HDB?
An Option to Purchase (OTP) is a contractual arrangement whereby an HDB property seller grants the buyer the choice, without any compulsion, to obtain the property at a predetermined price. The OTP serves as a legal agreement between the parties involved.
Related article: Offer to Purchase vs Option to Purchase: What’s the difference?
How does the Option to Purchase (OTP) in HDB work?
To provide a potential buyer with an OTP, it is required to have a valid registration of Intent to Sell on the HDB Flat Portal and adhere to a mandatory 7-day cooling-off period following the registration.
Once the Intent to Sell has been registered, you will be directed to download an official HDB-prescribed OTP. It is important for both parties involved, you as the seller and the buyers, to utilise this prescribed OTP for the resale transaction. Any other agreements or supplementary contracts related to the sale or purchase of the flat are not considered valid according to the Housing and Development Act.
Printing only one copy of the OTP is important, as each form is assigned a unique serial number. When submitting a resale application to HDB, you must provide the serial number of the OTP.
Recommended article: Option To Purchase: 5 things you might not know about (but really should)
Does granting an Option to Purchase (OTP) in HDB require a deposit?
To proceed with the OTP process, the buyers are required to make two separate cash payments: the Option Fee and the Option Exercise Fee. The timing and amounts of these payments have been outlined as follows:
- Option Fee: This fee is payable when the OTP is granted. It acts as a preliminary deposit to secure the property’s purchase option. The buyers can negotiate the specific amount within a range of S$1 to S$1,000. The Option Fee aims to demonstrate the buyers’ seriousness and commitment to the transaction.
- Option Exercise Fee: When the buyers decide to exercise the OTP and purchase the property, they must pay the Option Exercise Fee. This payment is due at the time of exercising the OTP. The specific amount for the Option Exercise Fee is not explicitly mentioned, but it must be within a limit that, when combined with the Option Fee, does not exceed S$5,000. This fee is typically higher than the Option Fee and reflects the buyers’ intent to proceed with the transaction.
Both the Option Fee and the Option Exercise Fee contribute to the overall deposit made by the buyers, which will ultimately be considered part of the sale proceeds. The specific amounts for these fees can be negotiated between the buyers and the sellers, allowing flexibility based on the unique conditions of the transaction.
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Inland Revenue Authority of Singapore (IRAS)
