The Singapore Real Estate Market

The Singapore real estate market consists of residential, commercial and industrial properties. The architecture of land in Singapore starts from a high level Long-Term Plan (formerly Concept Plan) which guides development over the next 40 to 50 years, revised every 10 years, to the Master Plan which guides development over the next 10 to 15 years, revised every 5 years, by the Urban Redevelopment Authority (URA) under the Ministry of National Development (MND).

The Business Times reported that 80% of Singapore residents live in public housing while the remaining 20% live in private housing, with about 1.1 million flats in the public housing stock, about 382,000 in the private housing stock with about 309,000 non-landed properties and 73,000 landed properties.

Supply and demand are closely monitored by the Government. Newly launched properties by developers form the primary market in Singapore. The sub-sale and resale market involving individual buyers and sellers form the secondary market. There is also the auction market where properties are sold thought open bidding. Due to its illiquid and longer transaction time, the real estate market lags the stock market. Data from URA’s Property Price Index, HDB’s Resale Price Index and JTC’s Industrial Property Statistics gives us a good guide to where the market is heading in conjunction with economic indicators such as the stock market.

Despite its illiquidity, high transaction costs, and longer transaction time, socio and economic factors, government policies play a critical role in regulating the real estate market. Cooling measures such as Additional Buyer Stamp Duties (ABSD) and Seller Stamp Duties (SSD) were introduced to reduce speculation further. Total Debt Servicing Ratio (TDSR), Mortgage Servicing Ratio (MSR) and Loan-to-Value (LTV) limits are other measures that keep the real estate market robust. Just like how we use financial ratios to evaluate stocks, we want to deploy our assets to real estate in a healthy way.

The real estate submarket locations are :

• Core Central Region (CCR): Postal districts 9,10,11, some parts of 1,2,4,6,7;

• Rest of Central Region (RCR): Postal districts 3,8,12, some parts of 1,2,4,5,6,7,13,14,15,20;

• Outside Central Region (OCR): Postal districts 16,17,18,19, some parts of 5,14,15,20.

Postal districts: URA Postal Districts

The real estate categories are :

• Residential: HDB, Private landed and non-landed

• Commercial: retail and office

• Industrial: Business Park, factory, warehouse

Useful references:

URA news and media releases

https://www.ura.gov.sg/Corporate/Media-Room/Media-Releases/pr22-18

Planning and Development of Land in Singapore

The themes from the Master Plan include Livable and Inclusive Communities, Local Hubs Global Gateways, Rejuvenating Familiar Places, Convenient & Sustainable Mobility, and A Sustainable and Resilient City of the Future. Harnessing data analytics and geospatial technologies, planners and architects make informed decisions in planning for land use, amenities and infrastructure through population data, town demographic analysis, spatial coverage of amenities, public transport and mobility behaviors, economic and commercial accessibility.

Urban Transformation projects such as the Changi Region, Greater Rustic Coast, Greater Southern Waterfront, Kallang River, Paya Lebar Air Base, Punggol Digital District, Rail Corridor, and Woodlands Regional Centre are also designed to bring jobs and amenities to residents closer, spurring economic growth.

The Zoning and Plot Ratio in the Master Plan shows the permissible land use and density for developments in Singapore respectively. The Plot Ratio of a site is defined as the ratio of the gross floor area to its site area, Plot Ratio = Gross Floor Area / Site Area.

Commercial and Residential zones can be used for Mixed Commercial and Residential development. The commercial area cannot exceed 40% of the maximum allowable floor area and commercial areas cannot be located above the residential areas.

The types of developments in a commercial zone include:

• Offices

• Mixed uses (e.g. Office, shopping, cinema)

• Convention, exhibition centre

• Commercial school

• Bank

• Market, food centre, restaurant

• Cinema,

• Entertainment

• Foreign trade mission, chancery

• Hotel

• Recreation club

• Medical suite

• Clinic

White zone: a development with 2 or more uses as mixed use development.

Industrial properties include standard factories, stack-up factories, business parks, flatted factories, warehouse, and science parks. A minimum of 60% of total floor area for pure industrial activities and maximum of 40% of total floor area for ancillary uses. Commercial offices are not allowed and retail is also not allowed in warehouse use.

Development charge, differential premium and upgrading premium

To increase the value of a freehold land, planning permission is required and a charge is levied when the plot ratio is increased or land is rezoned to a higher value use. For example increasing the gross plot ration of the land from 3.5 to 2.4, or change the use from residential to commercial of a freehold land.

The Land Betterment Charge (LBC) Bill was passed in Parliament on May 2021 to consolidate the collection of charges for the enhancement of land value under a single agency which is the Singapore Land Authority (SLA). This Bill simplifies the process of collection and gives better transparency for landowners and developers in Singapore.

The LBC replaces the current Development Charge (DC) and Temporary Development Levy (TDL) system under the Urban Redevelopment Authority (URA) and the Differential Premium (DP) system under the Singapore Land Authority (SLA), under a single LBC. The method and approach of computing the DC, TDP and DP rates will remain the same but a single agency - SLA will be responsible for collecting the charges. This streamlines the application and collection of the charges instead of applying to different agencies as before.

The Development Charge (DC) system, by URA:

The development charge rates are revised half yearly, and is assessed by the Chief Valuer. It is calculated by:

Development charge = Development ceiling - Development Baseline - Development charge exemption

The Differential Premium (DP) system, by SLA:

To lift state title restrictions by increasing the intensity or use of a leasehold land. The development premium system is also calculated based on the development charge rates.

An Upgrading Premium (UP) is payable to increase the tenure of a leasehold land. This is not based on the development charge table and is assessed by the Chief Valuer.

Change of use, URA:

Permission is required from URA if you want to change the use of your property from one Use Class to another Use Class, say for example, from a shop to a restaurant. This is to ensure that the use is aligned with the planning intention of that area.

Currently the 18 Use Class are:

Class 1 - Shop

Class 2 - Office

Class 3 - Restaurant

Class 4 - Amusement Centre

Class 5 Motor Vehicle Showroom

Class 6 - Theatre

Class 7 - Light Industrial building

Class 8 - General Industrial building

Class 9 - Special Industrial building

Class 10 - Warehouse

Class 11 - Convalescent Home

Class 12 - Child Care Centre

Class 13 - Community building

Class 14 - Sports and Recreation building

Class 15 - Nightclub

Class 16 - Pet shop

Class 17 - Community Sports and Fitness building

Class 18 - Commercial School

Unclassified Use: any uses that is not covered under any of these 18 Use Class

You can also enquire the approved use of premises of a development here: https://www.ura.gov.sg/EnquiryOnApprovedUse/

Usually the change of use is granted for a temporary period as a temporary permission is issued. A new application is required if you wish to continue or renew. URA may revoke if the use causes problems to the surrounding.

For more information on the application for change of use, click here.

Types of Properties in Singapore

The Singapore Land Authority (SLA) manages and administers state land on top of issuing and managing land titles. State land in Singapore is released through public tender or auctions via the Government Land Sales (GLS) programme by SLA through its agents such as the Urban Redevelopment Authority (URA), Housing Development Board (HDB), Jurong Town Council (JTC) and Land Transport Authority (LTA). Note: the transfer of HDB's industrial properties and land to JTC took effect on 1 January 2018.

The main types of properties in Singapore are:

1. Residential Properties

• HDBs

• Private condominiums and apartments

  • Condo: 4000m2/0.4ha/44000sf, 50% coverage

  • High-rise Apt: 1000m2, >=6storeys

  • Low-rise Apt: 1000m2, <6storeys, some walk-up

• Landed properties

  • Good Class Bungalow (GCB), Bungalow, Detached house, Semi-D, Terrace, Strata Landed (wo Condo status)

2. Commercial

• Office

• Shop

• Mixed commercial

• Commercial with residential

3. Industrial:

• Factory

• Warehouse, cannot do retail

• Business Park

Note: there is a minimum of 60% of total floor area to be use for industrial activities and a maximum of 40% for ancillary uses.

Landed properties in Singapore

The 3 main types of landed housing properties in Singapore are detached houses (with about 11,000 units), semi-detached houses (22,000 units) and terrace houses (40,000 units). Residential shophouses are classified as terrace houses while Good Class Bungalows (GCBs) are a more exclusive form of detached houses. These landed properties form about 5.1% of the Singapore housing stock.

There are 58 landed housing areas in Singapore, of which are 39 Good Class Bungalow (GCB) areas. However, there are landed properties that are built on non-landed areas which can be converted to a higher density, these tend to carry a high value. These 73,000 landed properties in Singapore make up 19.3% of the private housing stock and 5.1% of the total housing stock as of September 2021.

Landed property types: Good Class Bungalow (GCB), Bungalow, Detached house, Semi-D, Terrace, Strata Landed (wo Condo status). List of Good Class Bungalow Areas

Minimum Size:

• GCB: 1400m2/15,070sqft

• Other Bungalows >400m2

• Semi-detached (including Type 1 Terrace corner unit) >200m2

• Back-to-back semi-detached >200m2

• Type 1 Terrace intermediate unit >150m2

• Type 2 Terrace corner unit >150m2

• Type 2 Terrace intermediate unit >80m2

Bungalow site-coverage guidelines:

• Within GCB Areas: 40% site coverage, 2 storeys

• Outside GCB areas: 50% site coverage, 3 storeys

The tenure for landed properties can be freehold or leasehold. Land lots can be an individual lot with a Certified of Title (CT) which is not subdivided with its own land and boundaries, or a strata lot with a Subsidiary Strata Certificate of Title (SSCT) which is subdivided into individual lots with shared land, communal spaces, facilities and are managed by a Management Corporation Strata Title (MCST). Strata landed properties are usually detached, semi-detached and terrace.

There are restrictions for foreigners to own land in Singapore under the Residential Property Act. Hence, foreigners need to seek Land Dealings Approval Unit (LDAU) under Singapore Land Authority (SLA) if they are interested to buy.

Restrictions on Real Estate ownership and restricted properties in Singapore

Restrictions apply to one's capacity to hold land and the type of property under the Residential Property Act. A foreign person cannot acquire an interest in any development for a term exceeding 7 years (including any option to renew) without the prior approval of the Controller of Residential Property who is under Land Dealings Approval Unit.

Restricted properties:

• Vacant residential land

• Terrace house

• Semi-detached house

• Bungalow / detached house

• Strata landed house which is not within an approved condo development under Planning act (e.g. townhouse or cluster housing), disallowed since 3 Apr 2012.

• Lease of restricted properties for a term exceeding 7 years, including any extension or option for renewal

• Shophouse, for non-commercial use

• Association premises

• Place of worship

• Worker’s dormitory, service apartments, boarding house (not registered under the provisions of the Hotels Act).

Properties not restricted under the Residential Property Act:

• Condominium unit, apartment or flat unit (but cannot own 100%)

• Strata landed house in a condominium development (e.g. Skies Miltonia)

• Lease of restricted properties for a term less than 7 years including any extension or option to for renewal

• Commercial shophouse

• Industrial and commercial properties

• Hotel (under Hotels Act)

• Housing Development Act applies for Executive condominium unit, HDB flat and HDB shophouse

Capacity to hold land summary:

• In order to own land, one must be 21 years old and above with mental capacity. If one is below 21 years old, it should be held under trust.

• To lease land, one must be 18 years old and above with mental capacity. For those with age between 18 to below 21 years old, they can only lease for maximum period of 3 years.

• A private limited company (Pte Ltd) registered under the Companies Act can own real property under company’s name.

• A limited liability partnership (LLP) registered under the Limited Liability Partnership Act which has a separate legal personality from that of its partners is capable of owning property in its own name.

NO capacity to own/hold land;

• A person below 21 years of age

• A person with no mental capacity

• Societies

• Partnership and Limited Partnership (must be under personal name)

• Sole Proprietorship (must be under personal name)

• Foreign persons who wish to own restricted properties

A foreign person is not:

• A citizen of Singapore

• A Singapore company, LLP or society

A foreign person includes:

• Singapore Permanent Resident (SPR)

• Company with foreign shareholders

• Foreign LLP company

• Foreign society

If a foreign person wishes to purchase a restricted property, an application for an in-principal-approval is required from Land Dealings Approval Unit (LDAU) with a validity of 6 months.

Assessment criteria:

• Individual merits

• Minimum SPR status for 5 years

• Make an adequate economic contribution to SG - academic, professional and/or tech qualifications, expertise and working experience needed by Singapore or investments in the type of industry or service sector needed in Singapore.

Sentosa Cove:

• Need LDAU approval

• No strict assessment criteria, no need to be SPR, no need to contribute to SG economy etc.

• No MOP

• Land must not exceed 18,000sf

• 99year leasehold, no freehold

• Can only own 1 restricted property

• For owner-occupation only

• Rest of rules similar to other landed on mainland

Ownership: Joint Tenancy vs Tenants in Common

TL:DL Joint Tenancy (JT) owns the interest together and right of survivorship applies. Tenancy-in-Common (TIC) has separate and distinct shares and right of survivorship does not apply - distributed according to the Will or Intestate Succession Act.

Joint Tenancy:

• No words of severance, right of survivorship. Have to act jointly.

• 4 Unities: possession, interest (equal share), title, time.

• JT has all the rights of ownership except the right to leave his interest after his death - because of the right of survivorship, JT cannot devise his interest in his will.

• Joint tenants are not allowed to transfer their shares separately, and need consent of all other joint tenants. If not, they will have to severe the JT by partitioning.

• JT ownership does not mean equal contribution.

Tenancy-in-common:

• Words of severance, no right of survivorship.

• Unity of possession only. Regardless of the % shares, have the right to enjoy and use the whole property.

• Subsidiary proprietors (SPs) share the common in the form of TIC, unity of possession.

To delete a deceased owner’s name from a deed, the surviving JT may lodge a Notice of Death. For TIC, the personal representative of the deceased owner may lodge a Transmission Application on Death of Proprietor. Original or a certified true copy of the Grant of Letters of Administration or Probate of the will of the deceased owner will have to be produced for inspection.

Termination/severance of Joint Tenancy:

• By alienation - part their shares to one owner and cease the co-ownership.

• By partitioning - parties unilaterally or jointly severed the JT and convert to TIC.

• Upon bankruptcy - the bankrupt JT will have his property automatically vested with the Official Assignee (OA), severing the JT and the OA becomes a TIC with the existing joint tenant.

• By court order - court awards a different proportion of sales proceeds to respective parties breaking the JT, especially for divorce cases.

Notes on partitioning: In 2001, amendments were made to Land Titles Act (LTA) to allow severance of joint tenancy by unilateral declaration (without other owner’s consent) by registering a declaration in the prescribed form at the Singapore Land Registry. The new provision now states very clearly that unilateral severance of a joint tenancy can only be in equal shares. The amendment also clarifies that tenants in common can convert their holdings by way of declaration to joint tenancy only if they are tenants in common in equal shares.

Basic Land Law Concepts in Singapore

Title, Right, Interest and Tenure?

You may have the Title to an Estate, but others may have Interest and, or Rights to it as well. Right, Title, and Interest - what are they and what are the differences?

Estate can mean land and buildings, or a persons possession when they pass on.

Title means ownership. Refers to all rights that can be secured and enjoyed under law and it can be encumbered. Forms of ownership can be Joint-Tenancy or Tenant In Common (link to p1l8)

An Interest, perhaps the most general term, indicates a stake in property, land or chattels. Interest can be possessory and non-possessory Interest. Non possessory Interest can include easements, encumbrances, mortgages, liens, wills, trusts etc. Can also be used in conjunction with Right, Title, Estate. (link to mortgage, liens, wills, trust). Under the common law legal system in Singapore, property ownership can be in the form of a legal interest and an equitable interest.

• A legal interest or a legal title means that the owner's name is registered on the certificate of ownership or on a property register.

• An equitable interest means that the owner is entitled to a beneficiary interest to the property on top of other rights.

Legal interest are enforceable against the whole world whereas an equitable interest is enforceable against the whole world except the bona fide purchase for value without notice.

A Right could very well be everything imaginable. A moral or legal entitlement to have or do something. Proprietary / legal rights in land vs personal rights. Enforceable against a third party and assignable vs enforceable against a person who grants it.

The type of proprietary or legal rights of the land owner:

• Right of possession/ enjoyment

• Right of exclusion

• Right of alienation, right to assign, right of disposition

• Right to rent (out)

• Right to pledge property as collateral

Note:

• • • Tenant has interest to the land during the lease term but do not have all the rights as the owner, only the first two right above, right of possession/ enjoyment and right of exclusion applies to the tenant.

    • HDB owners need approval to alienate/ assign/ dispose (gift or sale), to rent out, and cannot pledge as collateral for a mortgage even if it is fully paid.

A Covenant is an agreement between two or more parties regarding certain use of the property or conditions tied to the ownership of the property. Types of covenants include Positive Covenant and Restrictive Covenant. A Positive Covenant is a promise to do something. It does not automatically run with the land unless certain conditions are met, like to maintain drains, pipes, fence, retaining wall, party wall and boundaries. A Restrictive Covenant is a promise not to do something and it runs with the land and are enforceable on subsequent buyers.

An Encumbrance is a claim against a property. Any burden, interest, right or claim which affects the use of, or the ability to transfer the property. It does not prohibit the passing of property title but may diminish the value.

Examples of encumbrances are: lien, mortgage, easement and restrictive covenant.

• Lien: a legal claim on assets which allows the holder to obtain access to property if debts are not paid.

• Mortgage: a loan from a bank or mortgage lender to finance the purchase of the property - which acts as a collateral in exchange.

• Easement: a legal right to use another’s land for a specific limited purpose.

Interests on land are registered with the Land Titles Registry. The Land Register shows who owns the land and any encumbrances, mortgages or charges relating to the land. This to protect the rights of property owners, prevent fraudulent transactions, allow public searches to be carried out and facilitate transactions by giving proof of title.

Two land registration system co-exist to register these Interests and they are the Land Titles Register for titles under the Land Titles Act which is the current system, and the Register of Deeds for Common Law land under the Registration of Deeds Act which is the old system.

SLA's Land Titles Registry handles the registration of all property transactions in Singapore, including:

• landed properties, such as bungalows, terrace houses and semi-detached houses;

• flats, whether private or HDB; and

• commercial and industrial properties.

Documents must be lodged either electronically via STARS eLodgment or manually (only for HDB properties) using the approved form.

The land register for each parcel of land has a description of the land, the nature of the estate, i.e. freehold or leasehold and the proprietor of the estate. It also details particulars of other interests affecting the land, including mortgages, charges and restrictive covenants. Documents that can be registered include Sales & Purchase agreement, transfer documents for gift of real property, mortgage agreement for foreclosure, lease/tenancy agreement that is more than 7 years including option to renew, Court Order, Grant of Probate, and Letters of Administration. Interests like easements and short-term tenancies less than 7 years need not be registered.

Under this system, registration is mandatory to effect the transfer of an estate or interest in land. Upon lodgment, the documents are given a priority number. The date and time of lodgment are shown on the lodgment form. Instruments lodged are provisionally accepted and particulars of the lodgments are reflected on the land register.

The Registration of Deeds has been in use since colonial times and it is cumbersome as the title has to be deduced for 15 years to ‘good root of title’. It is not compulsory. To verify ownership, a 15-year search at the Land Registry must be made. It is difficult and time consuming. Legal interest in land is passed by deed.

Types of Real Estate Titles and Tenure

Singapore Land law is based on English land law with some local modifications over time. All land belongs to the state under the doctrines of tenure and estates and ownership can be in the form of an estate or some lesser interest in the land.

Hence Estate is the length of time for which land is held; leasehold estate of 99 years or 60 years, freehold estate of perpetuity.

Land tenure refers to the mode of holding the land; freehold and leasehold. Property titles are generally differentiated if they are individual or shared lots.

Land includes items that are permanent on land with corporeal hereditaments (tangible objects) and incorporeal hereditaments (intangible, easements). Land also includes the airspace limited to a height and subterranean space up 30m below the Singapore Height Datum. Restrictions on land include: height, set-backs from boundary line, burial, extracting sand, use of land, restriction on cutting down trees.

Types of Titles:

Land Title: Certificate of Title (CT)

• Have own boundary

• No sharing of common area and facilities

• No subdivision into individual lots

• Under Land Titles Act

Strata Title: Subsidiary Strata Certificate of Title (SSCT)

• Shared land, common area and facilities

• Subdivided into individual lots

• Under Land Titles Strata Act

HDB Subsidiary Certificate of Titles (SCTs) or HDB Leases

• HDB are not strata titled and are issued as Lease Titles

• No share to the land or common area

• HDB is the Lessor and owners are Lessees

Strata properties:

• SSCT are issued to owners of each lot/ unit, and owners are called subsidiary proprietors (SP).

• Building owners need to obtain strata subdivision permission from URA to subdivide into strata lots.

• Each unit has a Share Value (SV) which is issued by the Commissioner of Buildings (COB) under BCA according to strata area. The SV is recorded in the Strata Roll kept by MCST

• SP pay maintenance fee which comprises of management and sinking fund according to SV.

• The subsidiary proprietors (SP) are to follow By-Laws, rules set out by MC, passed in resolutions at AGMs by voting by the SPs. There is a set of prescribed by-laws in the Building Maintenance and Strata Management Act (BMSMA).

• The share value also determines the voting rights of owners, their share of common area and the amount of maintenance fee for each unit.

Shave Value (SV) of Residential projects built after April 2005 by Strata Area:

• 5 SV for <=50m2

• 6 SV for 51-100m2

• 7 SV for101-150m2

• 8 SV for 151-200m2

• +1 SV for every additional 50m2

Some Strata Lot have Accessory Lots attached to them, for example: parking lot/s.

Accessory Lot:

• Attached to Strata lot

• Not part of common areas

• No share value

• Under Lot Based System, described as Accessory Lot with TS2-A543X

License:

TOL (Temp Occupation Licenses) are fixed short term, renewable on a daily, monthly or yearly basis. Encroachment on state land can be regularized/ retained by applying TOL.

NTROAL = non renewable TOL, for one-off fixed duration events, not more than 90 days.

Types of Estates:

• Freehold Estates;

  • Estate in fee simple - absolute freehold estate, no need to pay land rent except for statutory charge/ property tax. No longer granted. Land title: Certificate of Title (CT). Estate in fee simple are no longer given unless the fee simple title re-grant to one or more titles for the development, subdivision, amalgamation or other purposes subject to the State.

  • Estate in perpetuity - also known as Statutory Land Grant (SLG) are subjected to implied terms under State Lands Act and owners have a duty to maintain boundaries of land, to pay land rent etc. Land title: Certificate of Title (CT).

  • Freehold interest or title itself does not have reversionary, future and remainder of fee simple. Reversionary, future and remainder of fee simple only exist where there is a leasehold interest or life estate.

• Leasehold Estates - 99 years, 60 years, fixed duration specified in lease document. Strata title for private properties as Subsidiary Strata Certificate of Title (SSCT), and Lease title for HDB flats in the form of Deed (legal contract signed between HDB and lessees) as Subsidiary Certificate of Title (SCT). Leasehold Estate have reversionary and future interest. The original owner owns future interest of the leasehold estate, or remainder of Fee Simple, or the State has reversionary interest and future interest.

• Life Estates - the duration of a person’s lifetime, life tenant. Cannot will, assign, sell or rent except for short-term periodic lease. Title: Life Estate. There is a reversionary interest to the original owner once the life tenant passes on.

Present and Future Interest: Dividing Time

• Present interest: This is the interest that one currently has; not in the future. The present interest that one has can either be legal or equitable in the form of freehold, leasehold or life estates.

• Remainder/future interest: future interest that is created in some person other than the grantor or transferor, whereas a reversion creates a future interest in the grantor or his or her heirs.

Reversionary interest: the interest that revert to the original grantor on the expiry of a leasehold estate or life estate. A reversion occurs when a property owner makes an effective transfer of property to another but retains some future right to the property.

Reversionary vs Remainder interest:

• Reversion arises through the operation of law than by the act of parties.

• Reversion, revert to the original grantor on the expiry of the LH estate, occurs when the property owner makes an effective transfer of property to another but retains some future right.

• Remainder is a future interest that is created in some person other than the grantor or transferor.

License is not an interest in land, e.g. Temporary occupation licenses. It is a right granted to the licensee by the licensor and cannot be assigned or transferred without the permission of the licensor.

What is Real Property?

In legal terms, Real property is the ownership of permanent and immovable properties which includes the land and buildings, and anything affixed to the land such as tress, and fixtures. Movable property like sofa, beds and TVs are considered chattels or personal property.

However, there are times where it is difficult to distinguish whether the item is a fixture or a chattel. This is important as fixtures are to be sold with the land/ property unless parties agree otherwise.

Two test to distinguish between fixtures and chattels:

1. Degree of annexation

2. Purpose of annexation - Fittings fixed for own/ personal enjoyment vs Fixtures fixed for better enjoyment of the land.

Fixtures are to be sold with land/property unless otherwise agreed, and listed in the inventory list. Seller can remove everything except fixtures if there is no inventory list attached with the Option-to-Purchase (OTP).

Trade fixtures aka Chattel fixtures are items attached for the purpose of trade or business. These may not be sold together with property.

Rental/ tenancies fixture and chattels: tenants are not allowed to remove fixtures that belong to the landlord. If the tenant were to install fixtures, it would become part of the property unless they are deemed as trade fixtures. Usually lease agreements provide for reinstatement, whereby the tenant must remove all fixtures or chattels unless agreed otherwise by the landlord.

Rights in a land - Encumbrances, easements, license, restrictive covenants

In Singapore, the alienation and occupation of State Land is regulated under the State Lands Act under the Singapore Land Authority (SLA). Land is granted and leased with implied covenants (section 13) and conditions (section 14) which are endorsed and included in land titles. Some examples of the implied covenants include: pay rent, maintain landmarks, not to use for burial, not to assign land for less than 7 years, right to enter land for oil and minerals, free access to make drains, pipes etc., free access for Collector of Land Revenue, and Earth, clay can be removed for public good.

The Land Acquisition Act (LTA) covers the acquisition of private land and compensation to be made on such acquisition. In short, the State can acquire any land, regardless if it is freehold or leasehold for public purpose, public benefit, interest, public utilities, public security and defense as well as for any residential, commercial or industrial purpose with planning objectives.

Compensation is based on market value as at date of notice of acquisition determined by Chief Valuer, SLA. Residents are given 1 year to deliver vacant possession. Potential value is not taken into account between the date of notice of acquisition and date of vacant possession. Appeals on the compensation amount can be made to the Appeals Board under the Ministry of Law.

Type of rights in land:

Encumbrance: a right to, interest in or legal liability on real property that does not prohibit passing title, but may diminish its value. Some examples:

• Lien: a legal claim on assets which allows the holder to obtain access to property if debts are not paid.

• Mortgage: a loan from a bank or mortgage lender to finance the purchase of the property - which acts as a collateral in exchange.

• Easement: a legal right to use another’s land for a specific limited purpose.

• Restrictive covenant: an agreement in a deed that restricts the future use of the property.

License: under common law, is not an interest in land and not a legal right but more of a personal right, like giving permission. A personal right granted to the licensee which cannot be assigned or transferred without the permission of the licensor. An example will be a trespass if there is no license. A license is also revocable, temporary and does not run with the land. The termination of a license can be done so anytime upon giving reasonable notice, or when the licensor transfers the land to another, or upon expiry of a contractual license, and it ends automatically when the licensee dies.

Easement: an incorporeal hereditament, a right to enjoy someone’s land, belongs to public, public right of way. It is an interest which does not give land owner nor the public the right to physical/ exclusive possession. Easements runs with the land without express mention, binds successive party, LTA section101. Under LTA section 102, the new owner has to maintain the easement. Easements are created implicitly by statutory law under the Land Titles Act or implicitly under common law by express or implied reservation or grant by seller, by necessity or by prescription by public. Easements are extinguished or terminated by by abandonment (LTA s106(2)), by express or implied release of dominant tenement, by unification ownership, by expiry or by court order. We can check easements with the Cadastral Map or INLIS.

Covenant: a legal agreement made between 2 parties that is contained in a deed.

Types of covenants

• Positive or affirmative covenant: promise to do something which ‘touch and concern’ the land like to maintain the drains, pipes, fence, retaining wall, party wall and boundaries. In writing with privity of estate.

• Restrictive covenant or negative covenant (burden): promise not to do something, runs with the land, enforceable on subsequent buyers if it ‘touch and concern’ the land, like block right of way, right of water etc. Restrictive covenant can be implied by law or express private agreement.

Restrictive covenants last for 20 years and is renewable 10 every years, it does not register interests, but imposes burdens. It is assignable, runs with land, cannot be removed by court order but may be removed by paying Differential Premium.

Caveats last for 5 years, it registers interests, is temporary, not assignable, shows limitations of owner’s interest and encumbrances. Caveator's permission must be sought before the completion of sale for it to be removed.

State covenants cannot be removed by Court order but may me removed by payment of Differential Premium;

HDB rules and regulations, URA guidelines, tree conservation areas, Statutory Acts that affect land, height restriction, setbacks, leasehold tenure, zoning/ and plot ratio.

Interest, caveat, mortgage, restrictive covenant can be registered with SLA’s Land Title Registry, including landed properties, flats private or HDB, commercial and industrial properties. The Land Title Registry registers the interest on land, shows who owns the land and whether there are encumbrances, mortgages, or charges affecting the land. This enables efficiency and certainty to transactions by protecting the rights of property owners, preventing fraudulent or secret transactions, facilitating transactions by proof of title, and allowing public searches to be conducted.

Currently there are two land registration systems which co-exist to register instruments. An Instrument is a formal or legal written document that serves as evidence of a person having legal or equitable interest to the property. For example: S&P agreement, TA >7 year lease including option to renew, Grant of probate, Letters of Administration, Trust Deed, Mortgage Agreement for foreclosure, Court Order.

The two systems are the:

1. Register of Deeds under common law, under Registration of Deeds Act - old system; and

2. the Land Titles Register for titles under the LTA LTR under LTA - current system.

Deed: an instrument that is signed, sealed and delivered under old common law, the Registration of Deeds Act. Registration of deeds (including Trust Deeds) is not mandatory but advisable as - to secure priority (according to the date of registration by applying the Doctrine of Notice) and to use as evidence. It is defeasible.

Land Titles Register is maintained under the Land Titles System (Torrens System), which is mandatory to effect the transfer of an estate or interest in land. Documents are lodged electronically via STARS eLodgement or manually - only for HDB using the approved form. The 3 principles of the Land Titles System are to mirror - reflects accurately and completely, curtain - no need to go behind Title to trace history, insure - guaranteed by state.

The Land Titles Registry is also responsible for issuing Land Titles, such as Certificates of Title (CT) for Land sold by the State, New Certificates of Title for new landed developments, Subsidiary Strata Certificate of Title (SSCT) for new condominiums, flats, flatted factories, office buildings, conservation of old flats built before the Land Titles (Strata) Act, and replacement of CT, SSCT and Subsidiary Certificate of Title.

Title search can be done online at INLIS or manually at the LTR.

Registrable documents under the Land Titles System:

• S&P agreement

• Gift of real property transfer document

• Mortgage agreement for foreclosure

• Lease/ TA >7yr

• Court order

• Grant of Probate and Letters of Administration.

Easements and short-term tenancies not more than 7 years need not be registered.

Mortgage, charge and caveats

A mortgage is an interest in land created when the property is pledged as security/ collateral for repayment of a loan. It is not a debt but a security for a debt, it is a transfer of an interest in land from the owner to the lender on conditions of the terms of the mortgage. Mortgagee (lender) holds the title as Lien till the mortgage is fully paid.

As Mortgagor (borrower) assigns the interest to the Mortgagee in exchange for the sum borrowed, Mortgagee will have either legal or equitable interest to the property. Mortgage is an interest and is assignable. It can be passed on to the next owner, e.g. beneficiary. Mortgagee shall exercise their right of foreclosure or right to sell if loan is defaulted.

Order and priority of claims on a Mortgage:

Legal - 1st charge, mortgage agreement.

Equitable - 2nd charge, no mortgage agreement

Legal mortgage has priority over equitable mortgage.

Mortgage, rights and interest

Legal mortgage (secured)

Mortgagor and mortgagee signs a mortgage agreement and property is pledged as a security for the loan as a collateral for the mortgage. The mortgagee has the right to exercise in case of a default. Here, the mortgagor assigns the legal interest to the mortgagee. The mortgagee has legal interest and mortgagor has equitable interest. Thus both parties have interest at the same time. The mortgage agreement is also stamped and registered with SLA.

Equitable mortgage (unsecured)

This is where no mortgage agreement signed, done verbally or by action of parties. It is not registered with SLA (equitable).

Usually mortgagor passes the certificate of title to the mortgagee for a loan. If the loan not redeemed at the stipulated time, the title belongs to the mortgagee. The mortgagee holds the title as Lien. Here the mortgagor still holds on to the legal interest, whereas mortgagee have equitable interest.

Legal Rights of Mortgagee

1. Right to sell (without court order). Mortgagee sells the property via private treaty or Auction, also now as Mortgagee sale. After sale, sales proceeds will be held on trust for the mortgagor and outstanding loan plus interest will be deducted from it with the balance returned to the mortgagor. Title is still under the Mortgagor’s name.

2. Right of foreclosure (through court order). Mortgagee repossess the property through court order, title is transferred to Mortgagee and becomes the owner of the property. Mortgagee can decide to sell the foreclosed property in future or grant occupational lease.

3. Right to grant an occupation lease (max 21 years) or building lease (max 99 years). Mortgagee can lease out the property and collect the rent.

Does Mortgagee have rights to enter into a mortgaged property that is subjected to a prior and existing lease?

• Not if the Mortgagee is aware of the existence of the tenancy agreement. Mortgagee’s interest will be subjected to the tenancy agreement, which is passed on that gives the right to collect the rent.

• Yes, if Mortgagee is unaware of the tenancy agreement. Therefore, must give tenant 1 month’s notice of the intention to take possession.

Legal Rights of Mortgagor

1. Right of Equity of redemption.

2. Reversionary interest.

3. Section 23 of the Conveyancing and Law of Property Act (CLPA) states the maximum lease to be granted by the mortgagor is 3 years. If mortgagor were to lease out the property, the term must not exceed 3 years. If lease term is more than 3 years, mortgagor needs to get mortgagee’s consent.

4. Section 22 of CLPA requires mortgagor to give 3 months’ notice or 3 months’ interest in lieu of notice to mortgagee in the event the mortgagor wishes to make an early redemption.

5. Section 20 of CLPA gives the mortgagor the right to inspect title deeds.

Priority of Mortgages

• Bank has priority over CPF

• Bank 1st charge -> CPF 2nd charge -> others 3rd charge

Legal mortgage always has priority over equitable mortgage, regardless of who registered first. Priority for legal mortgage will be based who registers first.

Charge vs Mortgage?

• A charge is a right to payment, which gives the lenders the contractual right to apply for a court order to ‘sell’ the collateral. A charge only gives the chargee certain rights over the property as security for the loan but not the ownership of the property. E.g. CPF charge. Chargees in general, e.g. CPF do not seek delivery of possession like mortgagees.

• For a mortgage, the mortgagee can claim delivery of possession, besides other reliefs, including payment of moneys secured by the mortgage, sale of the mortgaged property, foreclosure, redemption, delivery of possession to the mortgagee by the mortgagor or by any other person who is or is alleged to be in possession of the property (e.g. a tenant), and reconveyance of the property or its release from the security, etc.

Caveats is a notice of claim lodged by a person who claims an interest in the land, caveat lasts for 5 years.

• 3rd Party can register their interests by lodging a caveat on the property title. Caveats lodged are reflected under ‘encumbrance’ in the certificate of title.

• Parties, other than the owners, who have an interest in the property have the right to lodge a caveat on the title to claim an interest.

• The Land Titles Act allows any person who claims an interest in the property to lodge a caveat. Usually through conveyancing lawyers.

• The Registrar of Titles will notify all parties including owners.

• Caveat system is applying the ‘Doctrine of Notice’, i.e. those who lodge a caveat will have priority over those who didn't lodge.

• Provides protection of unregistrable interests (e.g. buyer’s interest) during transitional period. Caveat protects lien, beneficial interest and agreement of charges.

• Protects interest of the caveator by prohibiting registration of conflicting interests. E.g. prevents another buyer from lodging the same caveat.

• Caveats show other interests on the property, limitations of ownership.

• Caveats are not compulsory. If the party does not want people to know about his/ her interest on the property, not required to lodge a caveat.

Who may lodge a Caveat?

Any party who claims an interest including HDB, Buyer, Financial Institution, CPF Board, Beneficiary, Lessees, Controller of Residential Property (is empowered to lodge a caveat on restrict property to prevent foreign person from selling it during MOP. this is know as Registrar’s Caveat), a person who holds the original title as lien, MCST.

Who cannot lodge a Caveat?

• Creditors, except through court order. Creditors have no interest/ rights to the property. Licensed Money Lenders are not allowed to lodge a caveat as creditors unless owner has deposited the original title deed giving the right to lodge a caveat. Likewise for banks if the property is pledged to the bank for loan.

• BUT HDB flats owners cannot use their HDB as collateral for loan taken from Money Lenders even if the original lease agreement is deposited with Licensed Money Lenders, they are not allowed to lodge a caveat on HDB flats.

• Licensees who have only a license/permission to occupy the property is not allowed to lodge caveats too as they have no interest in the property.

SLA, Registrar has no power under the law to remove a caveat on its own motion. We need to obtain a court order or lodge an Application to cancel a vexatious caveat. Best to seek legal advice.

Removal of Caveat:

• Upon sale

• Full loan redemption

• Caveator death or bankrupt

• By court order.

Process

• Buyer pays deposit and exercise OTP

• Buyer‘s lawyer lodge a caveat (Seller has legal interes, buyer has equitable interest, title still under Seller’s name)

• Completion of S&P (8 to 12 weeks to completion of sale)

• Title is transferred to Buyer

• Buyer is now the new owner with new title

• Buyer’s Mortgagee lodge a caveat on buyer’s title

• Buyer does not have 100% interest in the property

• Buyer has 100% interest only when there is no encumbrance on the property title.

Types of Mortgages

• Fixed rate: a fixed rate which does not change when market rates move up or down. Usually the rate is fixed for the first few years and becomes variable after this fixed period.

• Floating or variable rate: moves with the reference rate which like CPF Ordinary Account, Singapore Interbank Offered Rate (SIBOR), Singapore Swap Offered Rate (SOR) or a bank's rate like fixed deposit rate.

• Combination of fixed rate and variable, SIBOR and SOR pegged.

• Interest only - not allowed in Singapore for residential properties, but available for commercial and international properties. Interest component is

• Multi-currency mortgages: only for international properties where borrowers have the option to switch between the base currency of the property and local currency.

The most common calculation method of interest is using a monthly rest (monthly reducing) method, which is based on the outstanding balance of the loan. The interest reduces over time as you pay down the outstanding loan every month.

Example:

Laon: $1,000,000

Tenure: 20 years

Interest rate: 2.8%

Number of monthly payments: 240

Total amount paid: $1,307,134

Total interest paid: $307,134

Monthly payable: $5,446.39

Payment schedule example, for first 5 years:

Year Beginning principal Monthly instalment Interest paid Principal paid Ending principal

Year 1 $1,000,000 $5,446 $27,517 $37,840 $962,160

Year 2 $962,160 $5,446 $26,444 $38,913 $923,247

Year 3 $923,247 $5,446 $25,340 $40,017 $883,230

Year 4 $883,230 $5,446 $24,205 $41,152 $842,078

Year 4 $842,078 $5,446 $23,038 $42,319 $799,759

Useful references:

https://www.moneysense.gov.sg/articles/2018/10/how-home-loans-work

https://www.moneysense.gov.sg/financial-tools/mortgage-calculator?sc_lang=en

https://www.singsaver.com.sg/blog/car-loan-interest-secretly-double-seems

https://www.singsaver.com.sg/blog/reducing-balance-method-what-is-it-and-why-it-saves-money

Estate planning: Succession, Trust, and Gift

Trust

There are several reasons to setting up a trust, from providing for a loved one who is a child or lacks mental capacity, to investing, or income tax reassessment for income generating assets.

Property Trust. A property under trust is a legal arrangement where the owner (settlor) entrusts someone (trustee) to hold and manage the property for a beneficiary (trustor).

Property trust instruments may come in the form of a contract, will or deed, usually for 20 years and is extendable.

The trustee holds the legal title of the trust property and has the legal interest to the property during the trust period. In the meantime, equitable interest is held by the beneficiary (or beneficiaries). Beneficiary has the right to lodge a caveat on the title to prevent the trustee from selling the property. The instrument registrable to lodge a caveat with the Land Registry is the trust deed and not a Will as a Will is not a registrable instrument. Trust deed may also be registered under the Registration of Deeds Act so that it is enforceable. Deeds that are not registered are not enforceable in court.

A trust can be created during a person's lifetime - inter-vivo trust (living trust) done through lawyers and it has to be registered with SLA's registry, or upon death - testamentary trust, done through a Will. A trust can be created by the Court - Public trust, whereby the Court appoints a trustee/administrator to distribute the estate of the deceased, or where an Official Assignee acts as the public trustee to handle a bankrupt's assets.

Trustee owes fiduciary duties to the beneficiary/ies of the trust. Trustees have the right to make decisions based on due diligence and in the best interest of the beneficiary, and can be held personally liable for their actions if the beneficiary deems there was a breach of trust. Trustee may not have all rights to the property even though the property title is under the Trustee’s name. The rights and authorities, power of the trustee must be clearly spelt out in the trust deed or in the testator’s Will.

Requirements for a trust to be complied with:

1 Certainty of intention

2 Certainty of subject matter

3 Certainty of object

4 Constitution

5 Formalities

6 Capacity

Trustees Act

1 Not to gain any profit for himself

2 To act with honesty

3 To render proper account of his dealings

4 to act at best interest of the beneficiaries

5 Not to misappropriation the trust funds

6 To invest only in authorized investments

7 To consider the standard investment criteria, such as suitability of investment and the need for diversification

8 To seek advice where it would be prudent to do so

9 To take proper care and skill reasonably.

Termination of Trust

1 Trustee resigns

2 By Court order

3 Upon passing the property to beneficiary

4 Upon sale

Types of Trust

1 Express Trust - Trust Deed

2 Resulting Trust, Constructive Trust, Unregistered Trust - implied under Common Law, without expressly written in a Trust Deed, the law implies that the trust exists. Valid and enforceable even if they are not evidenced in writing. Does not apply to HDB!!! Based on HDB Act (HDA), section 51(6).

Resulting Trust (no longer apply in SG):

• A paid the property but registered in B’s name. A’s intention was to have B holding the property for him. A claims the property under resulting trust by showing proof of payment although the property was under B’s name (certainty of subject matter and object).

• Under Residential Property Act, Singaporeans are not allowed to hold restricted property on trust for any foreign person. It is illegal for foreign person to have interest on restricted property without getting LDAU’s approval.

Constructive Trust:

• Use stolen money to buy goods/property under one’s name.

• Arise from fraudulent or unconscionable dealings.

• Court has the power to remove the donee under the Mental Capacity Act if donee is not acting at the best interest of the donor.

Unregistered Trust:

• Transitional period before completion of sale, buyer’s interest is not fully registered yet.

• Seller is holding the property on trust for the buyer in the meantime before the completion of sale.

Gifts

Under the law of property, a gift is a voluntary transfer of property from one person to another without valuable or monetary consideration. It is irrevocable unless it comes with a condition and the condition is not fulfilled or revoked under statutory law.

Parties who;

Give: Donor, transferor, assignor, grantor

Receive: Donee, transferee, assignee, grantee

Conditions for a gift to be legally effective, the donor must have:

• Intended to give the gift to the donee (donative intent),

• The gift must actually be delivered to and,

• Accepted by the donee.

Types of gifts:

• Lifetime gifts - a gift of a present or future interest made and delivered in the donor’s lifetime (lawyer either prepare the transfer documents or draft an inter vivos trust deed); or

• Deathbed gifts - will, a future gift made in expectation of the donor’s imminent death (Will).

  • Note for Muslim (farid): Gift is invalid if the property is transferred an hour before the death of the Muslim deceased.

Stamp duty is payable on the transfer documents based on the valuation amount although the property is a gift to another party.

Bankruptcy Act and Gifts

Bankruptcy Act - person/ company sued under bankruptcy for a debt of minimum $15,000 from 14 July 2015 (formally, $10,000). Official Assignee (OA) takes over and administer the assets of the bankrupt as public trustee and administer cases where the creditors are individuals or small businesses. Private trustees are appointed by institutional creditors (such as banks), to administer the bankruptcy. Any disposal of the bankrupt’s assets may subject to OA’s consent. Bankrupt cannot be trustee; cannot be director of company, cannot be RES (subject to CEA’s approval).

Intention to defraud creditors can be void and seized by OA; transfer/assign undervalued gift to another who is an associate of the person including ex-spouse.

Insolvency, restructuring and dissolution Act 2018 (IRDA, replaced Bankruptcy Act)

• 3 years from date of transfer of undervalued gift or property - money/ property will be recovered once the person is made a bankrupt. Unless giver was not insolvent at the time of gift.

• 2 years if it is transferred under unfair preference to a person who is an associate of the individual. Unfair preference or voidable preference: paying a debt to a creditor shortly before going into bankruptcy, that payment or transfer can be set aside on the application of the liquidator or trustee in bankruptcy as an unfair preference.

Property protected against creditors by law, cannot be sold or taken over by OA:

• HDB flats where at least one of the owners is a Singapore Citizen

• CPF contributions

• Properties held on trust by the bankrupt

• necessary personal items and household furniture

• limited tools of trade

• life insurance policies held on express trust for the benefit of the bankrupt's spouse or children

• compensation awarded for legal action in respect of personal injuries or wrongful acts against the bankrupt.

HDB Act

If HDB Buyer is bankrupt, the buyer can only buy up to 5-room and purchase price must not exceed $500,000. The buyer of 5-room or smaller need not obtain a letter of consent from the OA. Executive flats, 3-Gen or any flat type that has a net purchase price of $500,000 and above must obtain the letter of consent from OA.

If HDB Seller is bankrupt, who is a Singaporean, need not obtain letter of consent from OA before selling their HDB flats. Singapore Permanent Resident (SPR) will still need to get OA’s consent. OA will not seize HDB flats. Lessee can voluntarily sell their HDB flat and downgrade to a smaller flat. HDB lessees are not allowed to use their HDB flat or sales proceeds of HDB flat as payment for debts.

Succession

In general, any property is passed on to a successor by law when the person dies. Testate succession refers to the devaluation of property through the operation of a valid will, and intestate succession refers when a person dies without a will - the Intestate Succession Act will apply. The property or estate needs to be administered regardless whether a person dies testate or intestate. Will is a gift, just that it is in the future. We need not get lawyer to write a will, but it is best to engage one.

Process:

Will -> proved in Court through probate process -> Grant of Probate is a certificate with the seal of the Court certifying that the will has been verified and registered with the Court, and that the named executor(s) are authorised to deal with the testator’s estate as trustee(s), according to Testate succession. There is a six month period to challenge the validity of a Will after probate has been granted, Wills Act.

No Will -> administrators apply for Letters of Administration to deal with the estate -> Court appoints the Administrator who will act like a trustee, and duties include: determining the deceased’s assets and liabilities; transferring the remaining assets to the beneficiaries of the estate, according to the Intestate Succession Act.

Intestate Succession Act, allocation rate:

(does not apply to Muslims)

• Married without children & without parents: 100% to spouse

• Married without children: 50% to spouse / 50% to parent(s)

• Married with children: 50% to spouse / 50% to children

• Married without spouse but with children: 100% to children

• Not married: 100% to parent(s)

• No parent: 100% to sibling(s) or children of deceased sibling(s)

• No parent or sibling: 100% to Grandparent(s)

• No Grandparent: 100% to Uncle(s) & Aunt(s)

• No relative: 100% to Government / State (escheat)

The Intestate Succession Act does not work for certain families where:

• The man has a second family

• Illegitimate children

• Cohabitating couple but never married

• Step-children

• Undergoing separation en route to a divorce, final judgment not out yet, broken down relationship

Valid Will - formalities of a Will:

• The will must be committed to writing

• Testator must be at least 21 of age with sound mind.

• Testator must sign the will at the food or end of the will. Good to initial on every page to safeguard against any possible problems.

• A will must be witnessed by 2 or more witnesses, and they also must sign the will in the presence of the testator. The witness must sign on the last page.

• The 2 main witnesses cannot be beneficiaries of the will, or spouses of the beneficiaries.S5 of Wills Act.

For Muslims, witness can be non-Muslim but there must be 2 male witnessess or 2 female to 1 male.

Witnesses need not know the content of the Will. But preferable a copy of the Will is given to the Executor who acts as the trustee to administer the property according to the Will.

What to include in the Will:

• List of all your assets, joint account or house cannot be devised by a will.

• List of all your liabilities, state how you want your debts to be paid off before your assets are distributed to the beneficiaries.

• The beneficiaries and guardians (if beneficiaries are too young). May want to include reserve beneficiaries, in the event of simultaneous death.

• The executors. Beneficiary may also be executor.

• The advisors. E.g. lawyers and accountants.

• A revocation clause to revoke any and all previous wills.

• A residuary clause. To distribute any remainder of your estate according to your wishes. For example, if a beneficiary dies before you, the asset bequeathed to him becomes the remainder.

For a Will to be valid:

• Person must be of legal age to make a Will

• Must have a sound mind and has internet to make a Will at the time of signing.

• Must not be coerced or under duress.

• In writing, can be handwritten on a single piece of paper or elaborately typed within multiple pages.

When should you review your will?

• Marry or remarry.

• Change your name or anyone mentioned in the Will changes name.

• Executor or trustee dies or becomes incapable of carrying out his duties owing to ill-health.

• Beneficiary dies.

• Sell or part with any property mentioned in the Will.

• When there is a significant change in circumstances, acquire property or assets which have not been mentioned.

Residuary property and residuary devise

• Residuary property - refers to property owned that has not been specifically provided for in a will.

• Residuary devise - a residuary clause in the Will that is a catch all clause. If there is no residuary clause, the Intestate Succession Act applies, as if the Will is absent.

• Residuary beneficiaries = remainder beneficiaries.

• Escheat: real property goes to the state when there is no heirs or will.

Muslim Intestate law, faraid. In Singapore, Muslim Inheritance Law is administrated by the Syariah Court and provided for under the Administration of Muslim Law Act (AMLA).

When there is a Will, a maximum of a third, ⅓ of estate, can be willed. The Syariah Court will issue an Inheritance Certificate according to the Will and the balance are distributed according to Islamic inheritance laws (Faraid).

When there is no Will, the Syariah Court will issue the Inheritance Certificate, stating the distribution of the estate according to Islamic inheritance laws (Faraid), and will establish the share of each beneficiary accordingly.

Useful reference:

https://pto.mlaw.gov.sg/deceased-cpf-estate-monies/information-for-next-of-kin-cpf-monies/

https://www.muis.gov.sg/-/media/Files/OOM/Resources/Faraidh.pdf

Property Financing

The typical sources of financing for a property, whether private residential, HDB or non-residential property, are: cash, loan and CPF (residential only). Additionally grants may apply for eligible purchasers of HDB and ECs.

December 2021 Rules for New Housing Loans

The Monetary Authority of Singapore (MAS) restrictions, on bank loans for private residential and HDB are as follows:

• Maximum tenure

• Loan-to-value (LTV) limits

• Mortgage Servicing Ratio (MSR)

• Total Debt Servicing Ratio (TDSR)

  • individual borrowers: TDSR applies for residential, commercial and industrial loan

  • non-individual borrowers: no TDSR for commercial and industrial loan, but max of 15% loan for residential properties

Medium-term interest rate as the stress test interest rate

A rate of 3.5% for residential property and 4.5% for non-residential property is required by MAS for Financial Institutions to calculate the monthly interest payable as a stress-test to exercise financial prudence.

TDSR framework

As of 16 December 221 the Total Debt Servicing Ratio (TDSR) rate is capped at 55% of the borrower's monthly income. This was lowered from 60% on 15 December 2021 as part of a package of measures to cool the property market and keep prices in line.

Loan tenure

• HDB maximum of 30 years

• Non-HDB maximum of 35 years

Age calculation for joint borrowers:

Income weighted average age = (Age * monthly income of borrower 1 + Age * monthly income of borrower 2) / total monthly income

Income & variable income

Fixed income= fixed income * 55%

Fixed + variable income: (fixed income + 30% hair-cut on variable) * 55%

Variable income = (30% hair-cut on variable) * 55%

HDB Housing Loan To Value up to 85%

Bank Loan To Value and minimum downpayment for individuals:

Number of outstanding home loans LTV limit Minimum cash downpayment

0 75% or 55% 5% for 75% LTV, 10% for 55% LTV

1 45% or 25% 25%

2 or more 35% or 15% 25%

LTV for shell companies: 15%

HDB loan Bank loan

LTV limit Up to 85% Up to 75%

Downpayment 15% upfront Depends on number of property loans you have.

Mortgage servicing ratio 30% 30%

Total debt servicing ratio N.A. 55%

Interest rates Pegged at 0.1% above the Fixed/floating

prevailing CPF interest rate &

reviewed quarterly

Maximum loan period Up to 25 years Up to 30 years for HDB flat and

35 years for private property

Loan switch Can switch to bank loan Cannot switch to HDB loan

Chargeable fees No penalty for early repayment May incur fees for:

Early repayment

Refinancing within lock-in period

Useful references: https://www.moneysense.gov.sg/articles/2018/10/buying-a-property-how-much-can-you-afford

MSR framework

The MSR framework applies to the purchase of a HDB flat or an executive condominium where the minimum occupation of the executive condominium has not expired. The MSR is capped at 30% of the borrower's gross monthly income.

TDSR/MSR exemptions:

• refinancing of owner-occupier loan.

• refinancing of investment property loans subjected the Financial Institution's credit assessment and a debt reduction plan with the Financial Institution comprising a repayment of at least 3% of the outstanding balance over a period of not more than 3 years.

• Loans secured by a pool of collateral where the market value of property in the pool is less than 50% of the credit limit of the loan.

• Bridging loans where the outstanding balance will be repaid within 6 months.

• Mortgage equity withdrawal loan, - loans secured by a property with LTVs under 50%

A Singapore Accredited Investor can be exempted from the TDSR if the loan is from a registered private funder as a registered private funder is not hindered by MAS even though they are licensed by them. These loans are usually secured by collateral for risk management reasons even though these private funders can do so without collateral.

Requirements to become an Accredited Investor under the Singapore Securities and Futures Act:

• An individual whose net personal assets exceed in value of $2 million or equivalent in foreign currency

• An individual whose financial assets net of liabilities exceed in value of $1 million or equivalent in foreign currency

• An individual whose income in the preceding 12 months is not less than $300,000 or equivalent in foreign currency

• A corporation with net assets exceeding $10 million in value or equivalent in foreign currency

• A trustee of such trust as the Authority may prescribe

• Other person as the Authority may prescribe

CPF withdrawal for housing

CPF can be used for the downpayment of a property, monthly instalments, stamp duty and legal fees (purchasing only), upgrading costs for (HDB HIP/LUP) or construction loan/cost for private properties. Prior to 1st July 2006, CPF could be used to buy non-residential properties for investment and/or own-use. However this has change since and as of 1st July 2006, CPF cannot be used for non-residential properties.

individuals below 55 years old may use all of their CPF Ordinary Account (OA) up to 100% of the Valuation Limit (VL) for their first property. To use CPF for 2nd or subsequent property, the individual must set aside applicable Basic Retirement Sum (BRS) in Ordinary and Special Accounts before doing so.

Individuals at 55 years old or more with no housing loan must have the Full Retirement Sum (FRS) or have BRS with sufficient property pledged. Individuals with outstanding housing loan must have savings applied to reserve in OA (which will not be transferred to RA), or new contributions to OA/SA/MA for those who are working, RA savings must be above the BRS.

CPF housing limits

• HDB loan

  • New HDB - no limits

  • Resale HDB - valuation limit

• Bank loan - valuation limit and withdrawal limit

CPF valuation limit refers to the valuation or purchase price whichever is lower at the time of purchase or date of refinancing whichever later.

An individual cannot withdraw CPF for property with lease <20 year. This was implemented from 10th May 2019, to safeguard Singaporeans' retirement adequacy. Formula: (Remaining lease of property - 20 years) / (95 - Age of youngest buyer using CPF - 20)

Example: a property with a remaining lease of 35 years and the age of the youngest buyer is 30 years old:

(35-20) / (95-30-20) = 33.33%

Useful references:

https://www.moneysense.gov.sg/property?sc_lang=en

Taxes on Property

Types of property tax in Singapore

• Stamp duty - Buyers Stamp Duty, Additional Buyers Stamp Duty, Sellers Stamp Duty, mortgage agreement, lease/ tenancy agreement, trust deed.

• Property Tax - a tax on ownership of property regardless occupied or vacant based on Annual Value (AV).

  • Residential, non-residential, owner occupied, non-owner occupied.

    • Non-residential: 10%

    • Residential: Progressive rate

• Income Tax

• Goods and Services Tax (GST), applicable to a GST taxable person (taxable supplies exceeding $1million for the past 1 year or expecting at least $1million in the next year

  • Non-residential properties - commercial and industrial

  • Estate agents, commissions

  • Movable furniture and fittings

Annual value (AV) is reviewed yearly based on annual rent less furniture, furnishing and maintenance, considering the rentals of comparable properties in the area, size, location, condition, and other attributes of the property.

Owners of the property, including joint owners, Power of Attorney, Trustee, Lessee (>3 years lease with the government) or anyone whose name is on the valuation list is liable to pay.

Reference: https://www.iras.gov.sg/taxes/property-tax/property-owners/property-tax-rates

Residential owner-occupied tax rates

Annual Value ($) Effective 1 Jan 2015 Property Tax Payable

First $8,000 0% $0

Next $47,000 4% $1,880

First $55,000 - $1,880

Next $15,000 6% $900

First $70,000 - $2,780

Next $15,000 8% $1,200

First $85,000 - $3,980

Next $15,000 10% $1,500

First $100,000 - $5,480

Next $15,000 12% $1,800

First $115,000 - $7,280

Next $15,000 14% $2,100

First $130,000 - $9,380

Above $130,000 16%

Annual Value ($) Effective 1 Jan 2023 Property Tax Payable

First $8,000 0% $0

Next $22,000 4% $880

First $30,000 - $880

Next $10,000 5% $500

First $40,000 - $1,380

Next $15,000 7% $1,050

First $55,000 - $2,430

Next $15,000 10% $1,500

First $70,000 - $3,930

Next $15,000 14% $2,100

First $85,000 - $6,030

Next $15,000 18% $2,700

First $100,000 - $8,730

Above $100,000 23%

Annual Value ($) Effective 1 Jan 2024 Property Tax Payable

First $8,000 0% $0

Next $22,000 4% $880

First $30,000 - $880

Next $10,000 6% $600

First $40,000 - $1,480

Next $15,000 10% $1,500

First $55,000 - $2,980

Next $15,000 14% $2,100

First $70,000 - $5,080

Next $15,000 20% $3,000

First $85,000 - $8,080

Next $15,000 26% $3,900

First $100,000 - $11,980

Above $100,000 32%

Residential non-owner-occupied tax rates

Annual Value ($) Effective 1 Jan 2015 Property Tax Payable

First 30,000 10% $3,000

Next $15,000 12% $1,800

First $45,000 - $4,800

Next $15,000 14% $2,100

First $60,000 - $6,900

Next $15,000 16% $2,400

First $75,000 - $9,300

Next $15,000 18% $2,700

First $90,000 - $12,000

Above $90,000 20%

Annual Value ($) Effective 1 Jan 2023 Property Tax Payable

First 30,000 11% $3,300

Next $15,000 16% $2,400

First $45,000 - $5,700

Next $15,000 21% $3,150

First $60,000 - $8,850

Above $60,000 27%

Annual Value ($) Effective 1 Jan 2024 Property Tax Payable

First 30,000 12% $3,600

Next $15,000 20% $3,000

First $45,000 - $6,600

Next $15,000 28% $4,200

First $60,000 - $10,800

Above $60,000 36%

Non-residential: commercial and industrial

10% of Annual Value

Buyer's Stamp Duty (BSD)

Before 20 Feb 2018

Purchase Price or Market Value Property BSD Rates

First $180,000 1%

Next $180,000 2%

Remaining Amount 3%

On or after 20 Feb 2018

Purchase Price/Market Value Property Residential BSD rates Non-residential BSD rates

First $180,000 1% 1%

Next $180,000 2% 2%

Next $640,000 3% 3%

Remaining Amount 4% 3%

Reference: https://www.iras.gov.sg/taxes/stamp-duty/for-property/buying-or-acquiring-property/buyer's-stamp-duty-(bsd)

Additional Buyer's Stamp Duty (ABSD)

ABSD is also applicable for beneficiary, donee, transferee of a different property, purchaser of a whole block or project with multiple units, developers buying residential land, shophouse and HDB shop with dwelling units. This applies whether it is wholly owned, partially or jointly owned with others.

Abbreviation and definition: Singapore Citizens (SC), Singapore Permanent Residents (SPR), Foreigners (FR). Entities refers to a person who is not an individual which includes an unincorporated association, trustee, trustee-manager, partners of a partnership.

ABSD Rates from ABSD Rates from Rates on or after

Profile of Buyer 12Jan13-5Jul18 6Jul18-15Dec21 16Dec2021

SC buying 1st residential property Not applicable Not applicable Not applicable

SC buying 2nd residential property 7% 12% 17%

SC buying 3rd & subsequent residential property 10% 15% 25%

SPR buying 1st residential property 5% 5% 5%

SPR buying 2nd residential property 10% 15% 25%

SPR buying 3rd and subsequent residential property 10% 15% 30%

FR buying any residential property 15% 20% 30%

Entities buying any residential property 15% 25% 35%

Housing Developers buying any residential property 15% 25% 35%

(Plus Additional 5% (Plus Additional 5%

(non-remittable)) (non-remittable)

ABSD is to be rounded down to the nearest dollar, subjected to a minimum of $1.

Reference: https://www.iras.gov.sg/taxes/stamp-duty/for-property/buying-or-acquiring-property/additional-buyer's-stamp-duty-(absd)

ABSD for properties held on Trust and remission

Profile of Buyer ABSD Rates on or after 9 May 2022

Trustee6 buying any residential property1 35%

From 9 May 2022, any transfer on sale of residential property, conveyance or assignment to a trustee to hold on trust and will be subjected to a ABSD rate of 35%. Remission might be allowed when one or more individual beneficiaries is identified for the trust. The amount will be based on the difference between the ABSD (Trust) of 35% and the corresponding ABSD rate applicable to the beneficiary. The ABSD (Trust) of 35% is to be paid upfront first and an application for the refund must be made within six months after the date of execution of the instrument.

Reference: https://www.iras.gov.sg/taxes/stamp-duty/for-property/buying-or-acquiring-property/additional-buyer's-stamp-duty-(absd)

Seller's Stamp Duty (SSD)

Date of Purchase or SSD Rate

Date of Change of Zoning / Use Holding Period (on the actual price or market value, whichever is higher)

Between 20 Feb 2010 & 29 Aug 2010 Up to 1 year 1% on first $180,000

(all inclusive) 2% on next $180,000

3% on remainder

More than 1 year No SSD payable

Between 30 Aug 2010 &13 Jan 2011 Up to 1 year 1% on first $180,000

(all inclusive) 2% on next $180,000

3% on remainder

More than 1 year & up to 2 years 0.67% on first $180,000

1.33% on next $180,000

2% on remainder

More than 2 years & up to 3 years 0.33% on first $180,000

0.67% on next $180,000

1% on remainder

More than 3 years No SSD payable

Between 14 Jan 2011 & 10 Mar 2017 Up to 1 year 16%

(all inclusive) More than 1 year & up to 2 years 12%

More than 2 years & up to 3 years 8%

More than 3 years & up to 4 years 4%

More than 4 years No SSD payable

On and after 11 Mar 2017 Up to 1 year 12%

More than 1 year & up to 2 years 8%

More than 2 years & up to 3 years 4%

More than 3 years No SSD payable

Reference: https://www.iras.gov.sg/taxes/stamp-duty/for-property/selling-or-disposing-property/seller's-stamp-duty-(ssd)-for-residential-property

Stamp Duty on Mortgage

0.4% of Mortgage loan, maximum of $500.

Basic contracting in Real Estate

An overview of contracting in Real Estate

A contract is a binding agreement enforceable by law which can be done verbally, in writing or by conduct made voluntarily by parties and is based on common law in Singapore. Although contracts can be formed verbally as long as all the elements are present, Real Estate Contracts must be in writing [S6(A)(d) Civil Law]. Conveyance of any estate or interest in land which includes mortgage, must be made by way of a deed in the English language. [S53 of Conveyancing & Law of Property Act (CLPA)].

Contracts we commonly see in Real Estate include Option to Purchase (OTP), Sales & Purchase Agreement (S&P), Lease/ Tenancy agreement, Real Estate Agency Agreement, Commission Agreement, just to name a few.

Essential elements that constitute a valid contract:

• Intention to create legal relations - usually exist for business and commercial agreements, but does not for social and domestic arrangements.

• Acceptance - must be communicated and conveyed, unqualified and no condition attached, on same terms as offer. It will become a counter-offer if it is conditional.

• Consideration - something of value, usually money in business context. Must be monetary for Real Estate contracting. Consideration must be sufficient, need not be adequate, e.g. $1, but cannot be $0. Consideration must move from buyer to seller. Past consideration is no consideration - a promise without consideration is not legally binding.

• Offer - must be communicated and conveyed. Invitation-to-treat is not an offer. Offer terminates when offeror revocates, during expiry, upon offeror’s death, rejection or when offer is subjected to condition.

  • Offer is also unilateral - there is only 1 person who makes the offer at any given time. Contract is bilateral.

For Real Estate contract, Property address, Parties’ names, Price agreed and any Provisions, must be present as well.

Subject to contract = no intention of creating a legal relation at this stage. Parties should mark ‘subject to contract’ in correspondence if they have no intention to bind themselves until they agree to all the terms. Hence removing the element of ‘intention to create legal relations’.

Valid vs Enforceable

Valid: means contract is recognised under common law, 4 essential elements of a contract; intention to create legal relations, offer, acceptance and considerations, and Property address, Parties’ names, Price agreed and any Provisions, must be present.

Enforceable: means the written documents can be presented to court.

In Singapore, only written documents that are stamped as required in the Stamp Duties Act, are enforceable. Otherwise, cases with contracts that are not stamped will be based on common law (equity) and not based on the written document which has the express covenants/ terms between the parties. If not stamped = not enforceable.

Option to Purchase (OTP)

The OTP is an offer from seller to buyer for buyer’s acceptance. Seller’s offer is irrevocable if consideration is paid. Buyer is not compelled to accept the offer, but the terms in the OTP will mean that the buyer will be forfeiting the option money by doing so.

General terms in OTP:

• 1% option money; note, the 1% option money is issued to Seller, Seller’s lawyer, Conveyancing account or the Singapore Academy of Law

• Option period of usually 14 days

• 4% exercising fee

• Forfeiture of 1% option money during if buyer does not exercise the option

• Stakeholder clause - if any. To allow someone to hold the money in the meantime before the completion of sale, usually the Conveyancing Account of the seller’s law firm or with Singapore Academy of Law (SAL). Seller shall decide whether to have this clause in the OTP if this is not requested by the buyer.

• Nominee/s - if any. Note HDB & Developer’s OTP does not have ‘and/or nominee’. This allows buyers to nominate someone to exercise the option or pass the option to another person to buy the property. But if the OTP does not have this ‘and/or nominee’, the buyer will have to complete the purchase unless otherwise agreed by the seller.

Any changes will require the consent of all parties. If changes are made without consent, this will be a counter offer and is considered a rejection of the earlier offer.

Procedure for sale of completed private property:

• Buyer pays 1% option money

• Seller issues OTP, and a timeframe to confirm purchase (option period).

• If buyer did not exercise OTP, option money is forfeited and contract is discharged.

• If buyer exercises OTP and pay the exercising fee, contract is made.

• Buyer pays Stamp Duty within the next 14 days, buyer’s lawyer lodge caveat, conduct requisitions and searches. Usually 8 to 12 weeks from OTP exercise date.

• At this stage, the buyer has equitable interest in the property. The caveat lodged by the buyer’s lawyer protects the buyer’s interest before the completion of sale. Seller is holding the property on trust (unregistered trust) for the buyer during this stage. Seller’s lawyer will arrange to discharge seller’s mortgage so that the property is free from encumbrances. Buyer’s lawyer will also write to the relevant government agencies to check on legal requisitions. Should there be any unsatisfactory replies, buyer is entitled to rescind the contract and take back all monies paid without any interest, compensation or deductions.

• With the 4 elements of contract present at this stage, both parties have entered into a legally binding contract and cannot voluntarily abort the sale at this stage.

• Seller’s lawyer will prepare the Sale and Purchase Agreement to finalise the transfer and prepare the completion statement.

• The completion statement shows the disbursement details such as balance proceeds that will be issued to the seller, details of balance purchase price that buyer has to pay and other costs involved in the conveyancing.

• Buyer’s lawyer will do a final bankruptcy and title search and complete the registration of buyer’s interest and transfer of title.

• Buyer pays the final payment.

• Seller hands the keys to his lawyer and his lawyer delivers the keys to the buyer’s lawyer. Buyer picks up keys from his lawyer.

• Seller no longer has interest in the property and buyer has present interest in the property.

Common Terms in a Contract, condition vs warranty

• Terms: details of the contract that set out rights and obligations of parties, statements which are actually part of the contract.

• Representations: statements which induce contract but are not treated as part of it.

Express and Implied Terms

• Express term: terms which parties agreed on, may be written or verbal.

• Implied term: terms assumed by law.

Condition and Warranty

• Condition: major term in the contract, if breached, the party may rescind the contract and/ or claim damages.

• Warranty: minor term in the contract, if breach, it will not affect the contract but the parties can claim damages.

Discharge factors

• Performance, completed

• Agreement, agree to rescind.

• Non-performance, could not be executed due to certain conditions like LDAU

• Frustration, not within the control of party

• Seller bankrupt, before completion of sale

• Act of God, force majeure

• Impossibility of performance, buyer passed away before legal completion

Termination of Contract

• Performance: parties fulfil contract

• Agreement: parties agree to end contract

• Frustration: outside event that cause the basis of contract to be removed

• Impossibility of performance: death

• Non performance: breach

What happens if Seller passes on? Contract NOT discharged. Buyer can wait after Seller’s family have obtained Grant of Probate or LoA. If Buyer is not willing to wait, Buyer can rescind the contract under impossibility of performance.

Remedies for a breach of contract, either of the following, not all, claim within 6 years:

• Damages. Usually not pre-agreed but determined by court, Restitution. No punitive damage. LD - pre-agreed by parties to rescind contract, can be found in indemnity clause.

• Specific Performance. Does not apply to service contracts. To perform obligations.

• Injunction. To prevent or restrain a party from doing a certain act, or committing a breach of contract. Stop order till a certain date. Caveat is a form of injunction.

Caveat Emptor - buyer beware.

Caveat emptor does not apply if there is negligence or fraudulent misrepresentation, if the product or services does not meet reasonable level of practice standards, and if title is defective.

Consumer Protection (Fair Trading) Act & property

The Consumer Protection (Fair Trading) Act by CASE and Spring SG aims to facilitate a fairer trading environment for both consumer and businesses. Consumers can seek civil remedies, for claims <=30k, and within 2 years from the date of discovery of the unfair practice or occurrence of the last event on which the claim is based.

The sale and purchase of a property is EXCLUDED from this Act. However, claims against real estate salesperson (property agent) for services rendered and rental disputes are covered under this Act.

Dispute resolution process: negotiation with real estate sales person or the estate agency -> seek CASE's assistance on negotiation and mediation -> file a claim with small claims tribunal for amounts up to $30,000 or civil suits for larger amount above small claims tribunal.

Real Estate Agency work in Singapore

In Singapore, Estate Agency Work can only be performed by a licensed estate agent and registered sales person (RES, Real Estate Salesperson). An agency relationship is created bilaterally and cannot be created unilaterally in order to be representing and doing work for another, like a “middle man” between two other parties forming a tripartite relationship also known as Agency Relationship. An agent differs from an independent contractor. An independent contractor is a person representing himself and acts independently on his own. E.g. Seller selling his own property - representing himself - not an agent.

A person cannot wear 2 hats at the same time, the RES is either an agent representing his/her principal or representing himself, not both. If a RES transacts a property for himself, the salesperson is a party to the transaction, and shall disclose upfront that he is an interested party in the transaction and must not accept an appointment by or act on behalf of the other party to the transaction. RES can only represent him/herself and cannot collect a commission from the other party and cannot collect a co-broke commission from the other party’s RES.

Salesperson must not collect commission from co-broker and client; can only collect fee from 1 party. Any sharing of fee between to representing estate agents/salespersons should be mutually agreed upfront. Dual representation is not allowed, one agent cannot represent both Seller and Buyer in one transaction. CEA does not determine how the co-brokerage fee should be shared between the 2 estate agents. Small Claim Tribunals (SCT) does not handle claims on co-broking and disputes will have to be resolved amicably or through other courts.

Principal and Agent relationship - Agency arises when one person (agent) acts on behalf of another person (principal). The agent may act on behalf of the principal to enter into a contract or to carry out certain acts. A legal relationship is created between the principal and the third party with the agent dropping out of the scene. The creation of an Agent-Principal relationship (Agency relationship) may arise from an express or implied agreement between the principal and the agent. Agency may also arise in the absence of an agreement between the principal and agent.

An estate agent or a salesperson who is unable for any reason to perform the estate agency agreement shall inform the client immediately.

Agency by agreement - appointed expressly by written agreement. Some common agency agreements:

• Non Exclusive Agency agreement

• Exclusive Agency agreement

• Sole Agency agreement

Non-exclusive appointment

• Owner appoints more than 1 agent to market the property. Owner is willing to deal with any agents who can introduce buyer/tenant. No limit to the maximum number of agents to appoint.

• Agent who effectively cause the deal to go through or agent who has instrumented the deal ges the commission, successful closing.

• No expiry date for non-exclusive agreements. Automatically terminated once the property is sold/rented or upon withdrawal by client

Exclusive Agency agreement

• Owner appoints only 1 estate agent to market the property.

• Owner agrees not to sell the property himself. Owner will still need to pay commission or reimbursement or compensation to the exclusive agent if owner sells the property himself.

• Maximum 3 months, renewable upon expiry with each renewal not exceeding 3 months.

Sole Agency appointment

• Owner appoints 1 estate agent to market the property but owner reserves the right to market the property himself.

• Owner need not pay commission if he were to sell the property himself.

• Often used by developers for uncompleted projects, should the developer sell some units themselves, e.g to their business partners, they need not pay the sole agent commission.

Agent's fiduciary duty to client:

Fiduciary duty/relationship - special position of trust and confidentiality

• Act in the best interest of the client; uberrimae fidei (utmost good faith)

• Act in accordance with the lawful instructions of the client;

• Act only within the scope of the authority given by the client;

• Advise the client to seek independent professional advice on matters outside the expertise of the estate agent or salesperson;

• Maintain the confidentiality of information respecting the client;

• Disclose to the client all material information in respect of the real estate services and the property to which the services relate;

• Communicate all offers or expressions of interest to the client in a timely, objective, and unbiased manner;

• Make reasonable efforts to discover relevant facts in respect of any real estate that the client is considering acquiring or disposing (of); ie. Salesperson shall exercise due diligence;

• Take reasonable steps to avoid any conflict of interest or potential conflict of interest; and promptly and fully disclose to the client any conflict or potential conflict of interest that does arise.

Examples of fiduciary duties:

✓ Agents are obliged to safeguard client’s property and interest;

✓ Agents should never profit from this position of trust beyond the agreed commission and expenses;

✓ Agents must act strictly in accordance with the terms of the agency agreement;

✓ Agents must explain clearly the agency agreement signed with client; cannot simply assume that client knows the content of the agreement (caveat emptor does not apply to signing of agency agreement; uberrimae fidei applies).

✓ Agents should disclose all the relevant information, imputed knowledge and material facts that may influence his client’s judgment in the course of the transaction;

✓ Agents should not allow their duties to the client to be in conflict with their own personal interests (e.g. if agent himself is interested to buy his client’s house, he must not be acting for client).

Remedy: Damages/ Restitution

Termination of Agency

• Mutual termination.

• Expiry of term of appointment. E.g. 3 Months exclusive.

• When Agent fulfilled his duty.

• Frustration.

• When Principal terminates the agent’s service, following the terms in the contract. Revocation.

• Renunciation by Agent; when Agent terminates his/her own service.

• By operation of law when there is a death, insanity or bankruptcy of either client or agent.

Upon termination of Agency

• All authorities given to the agent are terminated immediately.

• Agents must remove all advertisements when the property is no longer available for sale or lease, or when the agency agreement is terminated or expired, whichever is earlier. The advertisement must be removed promptly upon the buyer exercising of the OTP or when the S&P Agreement is signed.

• If the agency relationship is formed by estoppel, the third party needs to be informed to the termination of agent’s apparent authority.