In Singapore, the Housing Development Board (HDB) offers heavily subsidized flats to its citizens, making them an attractive option for both homeowners and investors. However, purchasing an HDB flat for investment purposes while already owning real estate, or seeking to hold it on trust through a relative or friend, requires a deep understanding of the legal implications and restrictions. In this comprehensive guide, we will delve into what it means to hold a property on trust, the permissibility of holding an HDB flat on trust, the legal implications of doing so, and what you can do to have a legal interest in an HDB flat.
What Does It Mean to Hold a Property on Trust?
Holding a property on trust involves appointing a person to hold the legal title of the property while another person, the beneficiary, has equitable interest in it. The legal title holder is responsible for managing the property on behalf of the beneficiary. In simpler terms, the beneficiary benefits from the trust, while the legal title holder ensures its management. A resulting trust comes into play when a property is transferred to a nominee who hasn't fully paid for it, signifying no intent to benefit the nominee. In such cases, the property's true owner remains the person who made the significant financial contribution, despite the property being registered under the nominee's name.
Are You Permitted to Hold an HDB Flat on Trust?
HDB flats in Singapore are protected assets under the Housing and Development Act. They require prior written approval for the creation of a trust to prevent those who do not meet the eligibility criteria from benefiting from public housing. Without written approval, any claim to hold an HDB flat on behalf of another party is legally unrecognized, rendering such trusts null and void.
Legal Implications of Holding an HDB Flat on Trust
Even if you obtain written approval to hold an HDB flat on trust, the legal implications may not work in your favor. HDB recognizes only the person whose name is on the title as the flat's true owner. This means that even if you are the actual purchaser or the main contributor to the purchase, your nominee is legally considered the owner. Consequently, if your nominee chooses to disregard your claims to the property, there are limited options for recovery, as the legal title belongs to them.
In the unfortunate event of your nominee's passing, the situation becomes even more complicated. If the nominee left no will or excluded you from it, you might have no way to reclaim the property. Even if the HDB flat was bequeathed to you, the "one property" rule stipulates that you must sell your existing property before claiming the HDB flat. This potentially forces you to sell the HDB flat as well.
Case Studies Illustrating the Challenges
Case Study 1: Son claims interest in mother's HDB flat
In the case of Cheong Yoke Kuen v Cheong Kwok Kiong, a dispute arose over the ownership of a flat held in both the son and mother's names. The son transferred his interest in the flat to his mother, claiming a resulting trust due to his contributions. However, the court rejected his claim, highlighting the absence of prior written approval from HDB and the son's clear intention to benefit from the trust.
Case Study 2: Daughters claim mother's flat as theirs
In another case, two sisters who fully paid the mortgage of their mother's flat were denied a claim over the property. Even though they were the apparent beneficiaries due to a resulting trust, their ownership of separate HDB flats rendered them ineligible to claim their mother's property.
What Can You Do If You Wish to Have a Legal Interest in an HDB Flat?
If you are determined to have a legal interest in an HDB flat, it is crucial to consult with a conveyancing lawyer. Remember that in Singapore, citizens can apply for a new HDB flat twice, eliminating the need for a nominee if you decide to sell your first flat. However, selling your flat is not without additional costs, such as a resale levy.
A conveyancing lawyer can help you navigate these complexities, ensuring you understand the consequences of your decisions and avoid future disputes with your nominees. They will provide tailored advice based on your unique circ*mstances, helping you protect your interests and make informed choices.
Conclusion
While the prospect of investing in HDB flats for lucrative returns is appealing, it's vital to understand the legal intricacies, limitations, and potential risks involved. Engaging a conveyancing lawyer is a wise step to ensure that you navigate the complex landscape of HDB flat ownership, protect your interests, and make informed decisions. Remember, the key to success lies in comprehensive knowledge and expert guidance.
