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Sub-sale and sub-purchase, sometimes known as confirmor sale, occurs when a purchaser/confirmor enters into an agreement for sale and purchase of a property with the owner/vendor but before completion sub-sells the property to a sub-purchaser.
Considerations for purchaser/confirmor
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There may be provisions in the agreement with the owner/vendor that prohibit sub-sale. A purchaser should first ascertain whether there is such prohibition before entering into any agreement with a sub-purchaser. |
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If the sub-purchaser fails to complete, the purchaser is still obliged to complete under the agreement with the owner. The purchaser may not have sufficient time to obtain a mortgage to complete and he may not have ready money to pay the balance of the price. |
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Completion of the sub-sale should take place on the same completion date as provided in the agreement with the vendor, but at an earlier time than that stated in the agreement with the owner/vendor. This will ensure that the purchaser/confirmor will have sufficient time to complete and deliver the balance of purchase price and other relevant document to the owner/vendor at or before the time for completion as stipulated in the agreement with the owner/vendor. |
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In relation to a residential property, if the purchaser/confirmor has applied for deferred payment of stamp duty, he will have to pay stamp duty on the agreement with the owner/vendor within seven days of signing the sub-sale agreement. |
Considerations for sub-purchaser
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A sub-purchaser may not have an opportunity to inspect the property before entering into a sub-sale agreement with the purchaser. A sub-purchaser should be advised of the usual provision in the sub-sale agreement that the sub-purchaser is deemed to have inspected the property and accepted its physical condition on an "as is" basis. |
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The terms of a sub-sale agreement are usually subject to those of the agreement between the purchaser/confirmor and the owner/vendor. The sub-purchaser is bound by whatever terms the purchaser/confirmor has accepted under the agreement with the owner/vendor, for example, if the purchaser/confirmor has accepted substantial alterations to the property, the sub-purchaser may have to accept the same under the sub-sale agreement. |
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It should be ensured that the balance of the purchase price payable by the sub-purchaser on completion is sufficient to cover the balance of purchase price payable by the purchaser/confirmor under the head agreement between the owner/vendor and the purchaser/confirmor before releasing any deposit to the purchaser/confirmor. |
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If the purchaser/confirmor fails to complete, the transaction may fall through and the sub-purchaser may have to institute legal proceedings against the purchaser/confirmor for recovery of the deposits paid under the sub-sale agreement and damages. |
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It may be advisable to procure the purchaser/confirmor to execute a power of attorney in favour of the sub-purchaser so that the latter can complete the purchase with the owner/vendor as the attorney of the purchaser/confirmor in the event that the purchaser/confirmor fails to complete. |
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