Planning to buy an HDB flat soon? Are you planning to finance the purchase while the flat is registered under your parents’ names? Hold your horses. You might want to reconsider your options and get legal advice on this.
This is because HDB will only recognise your parents as the owners. Even if a trust deed says you’re the beneficial owner, HDB will regard this as null and void.
HDB does not recognise any trusts on properties (unless there’s written approval)
A law under the Housing and Development Act prohibits people from holding any protected property on trusts without prior written approval from HDB. It regards such trusts as null and void.
These protected properties include flats and shophouses that have been sold by HDB.
On top of that, with this prohibition, ineligible people cannot claim any interest in such a property. This includes those who already own a flat.
So for the example above, without any written approval from HDB, you cannot have an HDB flat registered under your parents’ name, and claim that your parents are holding it in trust for you because you’ve paid for it.
This law serves to prevent people from abusing public housing and profiteering from it. It also ensures that people do not own more than one HDB property.
Nevertheless, there have been cases where family members take each other to court to fight for their share of the property.
Parents tried to claim beneficial ownership of their son’s HDB flat (and failed)
In one case, during the son’s divorce proceedings, the parents had tried to stake a claim on the son’s flat at Kim Tian Road. They claimed that they’re the beneficial owners of the flat as it was bought using the proceeds of the previous flats.
Back in 1994, the parents had bought a flat in Choa Chu Kang under their joint names. In 2007, they sold it off and bought a flat in Silat Walk, which was registered under the son’s name. In 2012, the flat was chosen for SERS, so the Kim Tian flat was bought under the son’s name as a replacement flat.
However, the Court of Appeals ruled that the parents could not stake a claim on the flat. This is because the arrangement of the flats being registered under the son’s name was basically due to them trying to avoid the resale levy. The Silat Walk flat would have been the parents’ second subsidised flat if it were to be bought under their names, so they would need to pay the resale levy.
In other words, the trust was created to avoid paying the resale levy.
At the same time, it was noted that the parents could not prove their financial contribution to the purchase of the Kim Tian flat. Despite the parents’ claim, there was no clear evidence that their life savings and the sale proceeds of the Choa Chu Kang flat was used to pay for the Kim Tian flat.
Sisters tried to claim an interest in their mother’s flat but failed as they have their own flats
In another case, two sisters claimed they’re the beneficial owners of the flat registered in their mother’s name as both had jointly paid for the flat.
The flat was first co-owned by one of the sisters and their mother. This sister had made payments for the flat with her CPF savings. A few years later, she withdrew her ownership as she got married and owned another flat. Because of her withdrawal, she had her CPF monies used to pay for the flat refunded to her account.
This led the other sister to be listed as a co-owner with their mother. Likewise, she made payments for the flat with her CPF savings. And when she got married and owned another flat, her name was removed from the flat and her CPF monies refunded to her account.
After that, the first sister resumed paying for the flat with cash until it’s paid up. Meanwhile, their father became the co-owner with their mother until he died in 2009.
The mother then made a will, which stated that the flat was to be bequeathed to their brother who was living with her in the flat.
However, the sisters didn’t agree to this, and tried to claim a beneficial interest in the flat. They later changed the claim, with one sister claiming for the beneficial interest in the sale proceeds of the flat as she was the one who’s paid up the flat in the end.
Despite their financial contribution, the court ruled against the sisters. Since each of them owns a flat, they cannot claim an interest in another flat.
Essentially, this HDB prohibition on trusts aims to prevent abuse by people who try to own HDB properties through nominees and beneficial ownership. Which is why in these cases, the trusts were considered null and void, and the court dismissed the claims.
But there’s one case where the trust was recognised.
5 siblings sued their brother over HDB shophouse meant for retirement and won
Before we talk about the case, here’s some background to know.
The family’s farm was acquired by the government for redevelopment. This led to them buying two adjoining three-room flats in Yishun, with one of them paid with part of the compensation money. The other flat was financed with an HDB loan and registered under the names of the eldest brother and another sibling. This brother didn’t contribute to the loan for this flat.
The family then rented an HDB shophouse in Hougang, which they bought from HDB a few years later. It was registered under the eldest brother’s name out of convenience, with the purchase financed with a bank loan.
The commercial space of the shophouse was subdivided into four spaces and rented out to various sub-tenants. One of them was used as a hair salon where some sisters worked. Likewise, the business was registered under the eldest brother’s name for convenience.
After their mother died, this brother started asserting the sole beneficial ownership of the property. This was followed by a family meeting, which led to him signing an agreement stating he would share the properties under his name with all the siblings equally as they were “financially supported” by their late mother.
However, the brother sought legal advice afterwards, claiming that he was forced with threats of physical violence to sign the document.
This led the other five siblings to sue him, asking that the shophouse be sold and the proceeds divided equally. They had regarded the shophouse as a family asset held by the brother in trust for each sibling. It was meant to be for their retirement.
Common intention for the shophouse to be sold, with its proceeds shared equally
While the law states that people cannot acquire an interest in the HDB property under any trust, it doesn’t prevent the common intention constructive trust that the siblings had. The common intention was for the shophouse to be an “income-generating family asset” that would eventually be sold and its sale proceeds shared equally to provide for their retirement.
And there was sufficient evidence to show this common intention. For instance, the mortgage for the shophouse was paid using the sub-tenancy rental proceeds and earnings from the salon.
The salon was set up using their mother’s money and the compensation money. The intention has always been for it to be a family business to benefit all the siblings, with the profits shared equally.
On top of that, the compensation money served as a family fund for the family expenses, including setting up the family business.
It’s also said that all the siblings, including eldest brother, had shared this belief throughout the years that the shophouse was meant to be shared beneficially by all of them and sold at some point in future, with it proceeds to be shared equally.
So the High Court and Court of Appeal ruled in the five siblings’ favour that the shophouse be sold, and the proceeds shared equally.
At the same time, the judge highlighted that this was a unique case. Other cases in future may not have the same results.
Whether it’s HDB or private property, if you’re planning to allocate your assets to your beneficiaries, or if there are plans for you to be a trustee, be sure to get legal advice beforehand.
In particular, for HDB properties such as HDB flats and shophouses, keep in mind that unless there’s written permission from HDB, you cannot have someone else holding the property on trust.
As we’ve seen from the sisters’ case, you won’t be able to claim that you’re the beneficial owner of the flat even if you’ve paid the mortgage for it.
It’s better to get legal advice now than to have family members take each other in court. Because once it’s a court case, not only would the whole process be very tiring and expensive, but things could also get ugly.
Do you have any stories related to the HDB prohibition on trust to share? Let us know in the comments section below or on our Facebook post.
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