You May Not Know About This Rule for HDB Flats…

Good morning! Just last week, I had discussions with some clients about setting their wills and then I read this article published in the yesterday’s Sunday Times Invest section, “Why some cannot have a share in their relatives’ HDB flats”. So, it is just nice that we can take this chance to learn about inheritance rules about HDB flats for today’s 93rd week of our #SundayTimesRecap series. You may have heard of this real-life scenario quite often, whether in the news or among your circle of friends: An owner of a private real estate – either land, residential or commercial property - cannot buy a HDB flat, and so he or she buys it through a “nominee”, putting a relative’s or friend’s name as the owner of this HDB flat. This method is commonly used in the private market where it is allowed to put another person’s names on the title deed.

However, there is a little-known law in the Housing and Development Act, which governs HDB flats, specifically deems “trusts”, or an arrangement to hold assets for another person’s benefit, as “null and void”. This is because HDB flats are considered “protected” assets and ineligible owners cannot try to profit from the scheme, which provides affordable housing to most families in Singapore. Therefore, even if you pay for the entire cost of the HDB flat, but you have put the name of the ownership of this property under someone else, HDB will only recognize the name registered on the title as the only owner and he or she can choose to ignore any claims you might later make.

Let us understand more details of this rule stated in Housing and Development Act:

1. The law states that no trust in respect of any HDB property shall be created by the owner without the prior written approval of the Housing Board. This means that an owner cannot on his own make any claim that he is holding the property on behalf of others.

2. Every trust which purports to be created for any HDB property without the prior written approval of the Housing Board will be deemed as null and void. This means that unless permission is given, any arrangement that purports to give an interest to a non-owner will be deemed as invalid.

3. The Act also states that no person shall become entitled or have any interest in any HDB property under any form of legal trust. The Court of Appeal rules that its purpose is to prevent “ineligible persons” from claiming any interest in such properties.

Therefore, be careful about trying to work around the above rules. Some tussles that could arise include parents buying a HDB flat under their son’s name, but their son went into a divorce and his former wife obtained an order for the sale of his flat. Even if the parents had been paying for the flat, the Court of Appeal ruled that the parents could not have any interest in the flat. There is another case where two sisters jointly paid for their mother’s HDB flat over the years, but they removed their names subsequently so that they could buy their own respective flats after getting married. A dispute arose after the mother noted in her will that the flat would go to her son, and the court ruled that as existing owners of HDB flats, the two sisters could not claim any interest in their mother’s flat.

So, what should owners do? First, understand that every citizen has the right to apply for new HDB flats twice, by being able to buy another one after selling the first one. So, there is really no need to risk losing your money by trying to beat the system through getting a nominee to buy another flat on your behalf. Even if the nominee is a trustworthy relative who will not dispute your claim, nominees may also sacrifice their own chances of owning affordable homes. Many families end up in court battles because they wrongly assume the working of the law, thinking that their beneficiaries will simply abide by their wishes. Therefore, it is better to spend some money to seek legal help in planning your distribution of assets so that beneficiaries will not fight over your properties and money later. ?

If you have been thinking for some time on how to plan your estate matters, then let’s get in touch to go through the details.

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