HDB Flats — Resale and Transfer

Legal work involving Housing and Development Board (‘HDB’) flats may not form the bread and butter of many Singapore lawyers. Nevertheless, the HDB flat is an asset close to the minds and pockets of the Singapore heartland, and solicitors may need to advise on issues relating to HDB flats from time to time. Lina Chua, Legal Officer with HDB, explains the differences between the resale and transfer of HDB flats and what these processes involve.

Ownership of HDB Flats

The majority of Singapore citizens reside in HDB flats owned either by themselves or their families. Most of the leases granted by HDB are for a term of 99 years. HDB also provides 30-year leases of studio apartments for elderly residents. Owners of these flats are usually referred to as ‘lessees’.

The conditions governing the leasehold interest in HDB flats may be found in the Housing and Development Act (Cap 129) (the ‘H & D Act’), and in the title and related documents to each flat such as the Agreement for Lease, Supplemental Agreement, Lease, Variation of Lease and the relevant Memorandum of Lease and Variation of Memorandum of Lease.

HDB also grants loans to its lessees for the purchase of the flats. Where the lease to a flat has not been issued, the HDB loan will be secured by a Deed of Assignment and Mortgage-in-escrow. For flats sold by HDB before 1989, there may not be a Deed of Assignment but the loan terms will be reflected and mortgage terms incorporated in the Agreement for Lease. Where the lease to the flat has been issued, the loan will be secured by a Mortgage of the flat. The terms of the mortgage may be found in these documents, as well as the relevant Memorandum of Mortgage and Variation of Memorandum of Mortgage.

Apart from the 99-year and 30-year leases, HDB also provides rental flats under various schemes involving short-term and monthly tenancies. The holders of these rental flats are generally referred to as ‘tenants’.

Processing Departments within HDB

The initial purchase of flats from HDB is handled by the Sales Unit. These flats are usually referred to as ‘direct-purchase flats’ or ‘DP flats’. Resale flats purchased with the CPF Housing Grant and flats sold to existing tenants under the Sale of Flats to Sitting Tenants Scheme are also classified as ‘direct-purchase’ or ‘DP’ flats as they are deemed to be subsidised flats. The Sales Unit also processes transfer applications made before the purchasers take possession (referred to as ‘before TP’ stage) of the flat.

After the lessees have taken possession (referred to as ‘after TP’ stage) of the flat, the lease administration of the flat will be handed over to the relevant Branch Office. The Branch Office implements policies relating to the lease administration of the flat, including processing transfer applications.

As its name suggests, the Resale Section handles the resale of flats.

The Legal Department vets the legal documentation relating to HDB flats and acts for lessees in certain transactions when appointed to do so.

For information on HDB policies and procedures, the public may visit the HDB InfoWEB at http://www.hdb.gov.sg. HDB also runs the following telephone enquiry lines:

Sale of Flats:        1800-273 2121
Resale of Flats:     1800-273 1441

Distinction between Resale and Transfer

There are two main categories of conveyancing transactions relating to HDB flats: resale and transfer. This is an administrative rather than legal distinction, with its attendant administrative effects. In general, a resale of HDB flat refers to the open market sale of the flat with consideration, which is processed at the Resale Section. A transfer of HDB flat refers generally to the assignment of the flat to immediate family members, blood relatives or ex-spouses without cash consideration (unless stipulated in a divorce court order), which is processed at the Sales Unit before TP or at a Branch Office after TP. Notwithstanding the absence of cash consideration in most transfer cases, the CPF moneys used by the outgoing transferors must be refunded to their CPF accounts.

Some differences between resale and transfer

Resale Transfer
Incoming lessees need not be related to outgoing/remaining lessees Incoming lessees are usually related to outgoing/remaining lessees
Minimum occupation period applicable Transfer may be effected before expiry of minimum occupation period
Cash consideration No cash consideration unless specified in divorce court order
Subject to credit assessment and loan ceiling, loan may cover consideration stipulated in  divorce court order (if any). Loan will not cover  consideration stipulated in divorce court order (if any).
Processed at Resale Section Processed at Sales Unit or Branch Office

In the drafting of divorce court orders disposing of the matrimonial flat, the relevant administrative terminology should be used for the avoidance of doubt.

Section 49 of the H & D Act

HDB may, by its duly authorised officer, act in conveyancing transactions of HDB flats as specified in section 49 of the H & D Act. The fees chargeable by HDB are based on the Housing and Development (Conveyancing Fees) Rules (the ‘H & D (Conveyancing Fees) Rules’). This prescribed scale is at a lower rate as compared with the fees prescribed under the Legal Profession (Solicitors’ Remuneration) Order (the ‘SRO’). The H & D (Conveyancing Fees) Rules only apply to fees chargeable for work done by HDB. Work done by solicitors in relation to HDB flats is still governed by the SRO.

Resale Procedure

The HDB Resale Section conducts seminars on resale procedures on a regular basis. Details of these seminars as well as information on HDB resale policies and procedures can be found in the HDB InfoWEB. In addition, HDB publishes a Resale Handbook, which may be purchased at a nominal price from the Reception Counter at the 1st storey of Tower A, HDB Centre.

Pre-Contract

Eligibility

Intended sellers of HDB flats should check with the HDB as to whether they are eligible to sell their flats in the open market before entering into the Sale and Purchase Agreement (S & P) with the buyers. In general, DP flats must be occupied for 5 years before the application for resale may be submitted. Flats purchased from the resale market without a CPF Housing Grant must be occupied for 2 1 /2 years prior to submission of the resale application. The period of subletting of the whole flat will not be included in the computation of the requisite occupation period. Section 49A(1) of the H & D Act prohibits the sale or agreement for sale of the flat before expiry of the minimum occupation period. Any contract made in contravention of section 49A(1) is void by virtue of section 49A(3). A prescribed form for confirmation of eligibility to resell a flat in the open market (enclosed with the resale application form package) may be obtained from the Resale Office’s Reception Counter or from any of HDB’s Branch Offices.

Resale levy

On the sale of a first DP flat, the lessees must pay a graded resale levy based on the declared resale price or 90% of the market value of the flat, whichever is higher. If the resale levy is not paid at the time of resale, and if the lessees wish to purchase a subsequent flat directly from HDB, they will have to pay the resale levy with interest at the time of the subsequent purchase.

Buyers’ checks

Notwithstanding the sellers’ duty to ensure that they are in a position to sell the flat, intended buyers of HDB flats are advised to confirm that the sellers are the owners of the flat and that the sellers are eligible to sell the flat. This is especially so where any of the lessees have passed away or where there are court orders in respect of the flat. In addition, the buyers should ensure that they are eligible to purchase the flat. The HDB InfoWEB also contains a programme to assist buyers in their financial planning.

Title search

Where the lease to the flat has not been issued but there is an existing Agreement for Lease with the lessees/purchasers, a title search on the flat may not show who the owners are. HDB will only release information regarding the ownership of the flat with the consent of the lessees.

Bankruptcy

Section 51(2) of the H & D Act states that the HDB flat will not vest in the Official Assignee on bankruptcy of the owner. With effect from 20 November 1998, flats belonging to Singapore permanent residents are not sheltered against bankruptcy of their owners. A letter of consent from the Official Assignee is required for the sale of a flat by an undischarged bankrupt. Intended buyers of 5-room and larger flats who are undischarged bankrupts are required to also produce a letter of consent by the Official Assignee for the purchase.

Upgrading

Where the flat is affected by upgrading, the intended sellers should check whether they are liable to pay the upgrading levy. The intended buyers should check whether the upgrading bill has been served. Parties should take the upgrading bill into account in deciding the resale price. Renovations

Notwithstanding the usual duty on lessees to obtain HDB’s prior written consent for renovations to the flat, both the intended sellers and buyers are advised to check, before entering into the resale transaction, that all renovations to the flat have been authorised/permitted by HDB.

S & P and Application

The resale package contains the Resale Application Form, the standard S & P and information leaflets. Parties to the resale and their solicitors should read the contents of the resale package carefully.

HDB’s standard S & P must be used. There must be no amendments to the standard S & P and parties must not enter into any other Option, S & P or Supplemental Agreement. Under sub-sections 49A(2) and (3) of the H & D Act, any contract, agreement or other document for the sale of a flat not in the prescribed form is null and void. The deposit paid by the buyer in favour of the seller on the signing of the S & P must also not exceed $5,000.

Under section 50 of the H & D Act and the terms of the lease, lessees are required to obtain HDB’s prior written consent to the sale of their flats. HDB also requires spouses of sellers to endorse the application form, as the spouse constitutes an integral part of the family nucleus.

If the buyers wish to obtain a housing loan from HDB or to withdraw their CPF savings to purchase the resale flat, the application must be supported by a valuation report or request for valuation. The valuation report is valid for a period of 3 months.

The types of supporting documents required are set out in the information leaflets in the resale package. Where court orders in languages other than English are to be submitted, HDB requires an official translation by a court interpreter.

The Power of Attorney in relation to HDB flats should be prepared in accordance with the standard forms circulated via The Law Society’s letters dated 19 March 1998 and 30 November 1998. Where the standard forms are not applicable or any amendment is required, solicitors should submit the draft Power of Attorney to HDB’s Legal Department for vetting. As the Power of Attorney submitted pursuant to the resale may be retained by HDB pending completion of resale or lodgement of the lease, parties may submit the Power of Attorney certified as a true copy by the Registrar of the Supreme Court rather than the original Power of Attorney if the Attorney requires the original Power of Attorney for management or subletting of the flat in the meantime.

Applications for resale may be submitted through post or through HDB ResaleNet (by agents in the Listed Housing Agents Scheme). It costs less to submit an application through ResaleNet and earlier appointment dates may be given.

First Appointment

During the first appointment, HDB will assess the eligibility of the sellers and buyers. The Resale Officer will enquire whether the sellers and buyers are represented by private solicitors or will be appointing HDB’s legal officers to act in the resale. If private solicitors are acting for the parties in the resale, the parties are to bring a letter from their solicitors confirming that they are so acting. The Resale Officer will then explain the resale procedures to the parties.

If the buyers wish to apply for a HDB loan, they must use all available funds in their CPF Ordinary Accounts for the purchase before any loan can be granted. The loan together with the CPF funds must not exceed 100% of the market value of the flat or 100% of the resale price, whichever is lower. The maximum loan ceiling is the lower of 80% of the market value of the flat or 80% of the resale price.

Credit assessment will be conducted at the First Appointment and the loan amount to be granted to the buyers will be determined. The maximum loan period is 65 years minus the age of the youngest buyer at his last birthday, or 30 years, whichever is shorter. The maximum monthly loan instalment cannot exceed 40% of the gross income of the buyers.

The buyers’ application for withdrawal of CPF savings will be processed at the First Appointment. The buyers are required to pay 10% of the resale price within 10 days of the First Appointment. The remaining sum will be paid on completion. Notwithstanding the appointment of solicitors to act in the resale, the full purchase price, less cash deposit not exceeding $5,000, must be paid by the buyer to HDB.

The effective date of resale will be fixed. The sellers should produce their title deeds at the First Appointment, if available. If the sellers have an existing loan with HDB, the title deeds are kept with HDB as security for the loan. The buyers and sellers would receive the approval letter after the First Appointment if the resale is approved.

Legal documentation

Where the lease to the flat has not been issued, the resale documents consist of:

For sellers

  1. Deed of Reassignment (if the sellers have an outstanding loan to be discharged);
  2. Deed of Assignment from the sellers to the buyers; and
  3. Letter of Authority by the sellers directing HDB to enter into a fresh Agreement for Lease with the buyers;

For buyers

  1. fresh Agreement for Lease in favour of the buyers;
  2. Deed of Assignment in favour of HDB as security (if HDB loan is granted);
  3. Lease-in-escrow; and
  4. Mortgage-in-escrow (if HDB loan is granted).

For flats first sold by HDB before 1989 where the loan/mortgage terms are reflected in the Agreement for Lease, the Deed of Reassignment and Deed of Assignment in respect of the HDB loans are not applicable. Also, the lease and mortgage are not signed in escrow by the buyers at the time of the completion of the resale, but only when the lease plan is ready.

Where the lease to the flat has been issued, the resale documents consist of the Total Discharge of Mortgage (where sellers have an outstanding HDB loan to be discharged), Transfer instrument and Mortgage (where an HDB loan has been taken).

Second Appointment (Completion)

At the Second Appointment, the parties will sign the resale documents if HDB is acting for the parties and the handover of keys will take place. The buyers will pay the balance cash amount and the sellers will receive their net sales proceeds. The sellers’ CPF moneys will be refunded to their CPF accounts within 7 days from completion of the resale transaction.

Notwithstanding that parties are represented by solicitors, the refund of CPF moneys and repayment of HDB loan will be effected by the Resale Section. If so authorised by the sellers, HDB will prepare a cheque for the net sales proceeds to be made in favour of the sellers’ solicitors. The solicitors’ clerks may attend the completion in place of the parties. For resale of flat pursuant to matrimonial proceedings, solicitors should take into account the provisions of the Stamp Duties (Matrimonial Proceedings) Remission Order when stamping the resale documents.

Transfer Procedure

Transfers of HDB flats may involve:

  1. inclusion (eg A to AB);
  2. withdrawal (eg AB to A);
  3. substitution (eg AB to AC);
  4. outright transfer (eg A to B).

The usual reasons for transfer applications include:

  1. parties wanting to include a particular family member (eg spouse) in the flat ownership;
  2. inclusion of working children so that their CPF may be used for payment of loan instalments;
  3. withdrawal of married children from the flat ownership when they cease to occupy the flat or wish to purchase another flat; and
  4. divorce.

Some Differences in Eligibility Criteria

  Flat purchased directly directly from HDB Flat purchased from open market
Citizenship One of the transferees must be a Singapore Citizens The remaining transferees may be residents. Transferees may be Citizen or Singapore permanent residents.
Income Assessment of income is required. Total gross family income cannot exceed $8,000. Total gross family income can exceed $8,000.
Ownership of Private Property A private property owner can take over the ownership of the flat if the flat has been occupied for 5 years or more. A private property owner can take over the ownership of the flat at any time subject to specified conditions.

An application form for the transfer may be obtained from Sales Unit if the transfer is made before TP, or any Branch Office if the transfer is made after TP. The form may also be downloaded from the HDB InfoWEB.

The following procedure only applies to transfers of flats after TP.

Criteria

There are a few differences in the eligibility criteria for the transfer depending on whether the flat was purchased directly from HDB or the open market (see table at the bottom left of this page).

Approval of transfer

If the transfer is approved, the Branch Office will send an approval letter to the transferors and the transferees. The transferors and transferees will then attend at the relevant Branch Office to confirm the financial plan and sign various forms in respect of the transfer. The parties may also appoint solicitors to act in the transfer.

Loan

Subject to credit assessment and full utilisation of the incoming/ remaining lessees’ CPF moneys, transferees may obtain a fresh loan from HDB for the discharge of the transferor’s outstanding loan and the outgoing transferor’s CPF refund. The maximum monthly loan instalment cannot exceed 40% of the gross income of the transferees. The maximum loan period is 65 years minus age of youngest transferee/occupier included in credit assessment, or 30 years, whichever is shorter. Credit assessment will not be conducted if the fresh loan required does not exceed the outstanding loan. The loan ceiling for a DP flat is 80% of the original selling price of the flat. For a flat purchased from the resale market, the loan ceiling is 80% of the transacted resale price or 80% of the market valuation at the time of transfer, whichever is lower. For divorce cases where a cash consideration is stipulated in the court order, the fresh loan granted by HDB will not cover the cash consideration.

Legal documents to be prepared

The legal documents to be prepared are similar to that of resale cases. The fresh Agreement for Lease, lease and mortgage documents (where applicable) will be prepared. Refund of CPF moneys and repayment of HDB loan will be arranged by HDB regardless of whether the parties are represented by private solicitors. Solicitors acting for the parties are nevertheless to ensure that the cash consideration (if any) is paid. When stamping the transfer documents, reference should be made to the Stamp Duties (Transfer of HDB flats within the Family) Remission Order and Stamp Duties (Matrimonial Proceedings) Remission Order, where applicable.


Lina Chua
Legal Officer, Housing and Development Board

A broad-brush approach has been adopted for this article. Only general policies/procedures have been set out. HDB’s rules, regulations and policies are subject to change from time to time and solicitors are advised to confirm the prevailing applicable policies/procedures with the relevant HDB department. The usual conveyancing precautions/procedures should be applied in accordance with the circumstances of each case.