Beware of Indemnity Clause

Case 1:
Some developers are getting the original buyers to sign a Letter of Authority with an indemnity clause that the original buyers will be liable for breaches by their sub-purchasers, including payments for pty tax and maintenance fees.

However, the Housing Controller said tt this was against rule 16 of the Housing Developers Rules, which requires a developer to enter into fresh S&P with the sub-purchasers on the same terms and obligations as the original buyers. Thus the sub-purchasers will be in a direct contractual relationship with the developer and releases the original buyers from their obligations.

Case 2:
Some developers are offering Interest Absorption Scheme (IAS) to attract buyers. Such scheme is similar to the Deferred Payment Scheme tt was scrapped by Govt last yr, except tt buyers need to secure home loans and developers will pay the interest until TOP.

But the scheme comes with an indemnity clause tt shd the developer fail to pay interest to the bank, buyers will have to make the payment and their credit standing will also be affected. Experts think tt such risks are low bcos the developer's reputation is at stake, and the amt of interest is negligible to the overall project cost.

* CNA-S&P , CNA-IAS *