When is it illegal to hold private and public property interests in Singapore?

Avoiding legal issues around concurrent ownership of private property and HDB flats

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When is it illegal to hold private and public property interests in Singapore

When is it illegal to hold private and public property interests in Singapore?

Avoiding legal issues around concurrent ownership of private property and HDB flats

October 10, 2017

Family or friends jointly investing in real property often begin with the best intentions. However, without clear agreements, these deals may end up in lengthy (and costly) disputes. Further complications may occur especially if one of the parties owns an HDB flat.

Dentons Rodyk has twice successfully represented a property owner against his younger brother’s attempt to divest him of his legitimate property interests. Most recently, in Cheong Kok Leong v Cheong Woon Weng [2017] SGCA 47, the younger brother filed an appeal meant to unravel an agreement he had reached with the elder brother.

The elder brother had agreed to invest SG$200,000 towards the purchase of a private residential property, and for the property to be registered under his younger brother’s name. In an earlier case, the High Court had already recognized the elder brother’s beneficial interest in the private property, even though he was not the registered owner.

In the appeal, however, the younger brother claimed that it was entirely illegal for the elder brother, as the owner of an HDB flat at the time, to have invested in the private residential property. On this basis, the younger brother sought to have the agreement with the elder brother set aside. Regardless, the Court of Appeal ruled conclusively in favour of the elder brother – not only could he enforce his beneficial interest, but it was also not illegal for him to invest in a private property while owning an HDB flat.

Below, we illustrate how your property interests may be affected as a result of owning a private residence and an HDB flat in Singapore.

A. Present scenario of “illegal” concurrent property ownership

In the present case, the brothers invested in a condominium unit as agreed co-owners and equal partakers in any sale proceeds. But at the time, the elder brother owned an HDB flat – not knowing fully his legal position, he opted to be a beneficial instead of registered co-owner of the condominium unit, which was ultimately registered in the younger brother’s sole name. The Court enforced the elder brother’s beneficial interest in the private property.

Attack on elder brother's interest	The Court's ruling
The elder brother was accused of illegally circumventing a law which grants HDB the power to compulsorily acquire the HDB flat of an owner who acquires an interest in a private property.	The Court found difficulty in seeing how it was illegal to merely complicate the efforts of HDB to re-acquire an HDB flat of an owner subsequently acquiring an interest in a private property.
Allegedly, the elder brother deliberately excluded his name from the title to the private property to avoid being subject to HDB’s power to acquire his HDB flat.	Nevertheless, any alleged illegality would have been “attached” to the HDB flat. His interest in the private property remained “untainted” by the illegality, if any.

As an HDB owner co-investing in private property or vice versa, consider if any illegality might potentially bar you from enforcing a sale, a right to rental proceeds, evicting a non-owner or retaining ownership of the HDB flat, amongst other interests you may hold in the HDB flat.

B. Other potential scenarios of concurrent property ownership

In another potential scenario, a Friend and his Buddy may seek to co-invest in a condominium unit which they intend to rent out under the home rental service “Airbnb” and to split the proceeds equally.

However, Buddy, a newly-wed, is unsure if his interest in the condominium unit will affect his eligibility to apply for an HDB flat. They register the condominium unit in Friend’s sole name. If a dispute arises, Buddy may consider enforcing his interest in the condominium unit, but may be concerned if any interest acquired by Buddy in an HDB flat is enforceable.

Potential disputes	Buddy’s possible options
Buddy and Friend disagree over ongoing renovations in the condominium unit and Friend wishes to sell the unit.	Buddy may consider enforcing his interest in the unit to resist the sale.
Buddy’s HDB flat application is denied as a private property owner may not buy a new HDB flat unless the private property is sold at least six months prior.	Buddy may consider selling his interest in the condominium unit and in order to apply for an HDB flat six months later.
Buddy’s application to co-own an HDB flat with Wife is approved. They eventually divorce each other and Wife claims sole entitlement to the HDB flat sale proceeds.	Buddy may face potential difficulties in relying on his interest in the HDB flat to assert his entitlement to the HDB flat sale proceeds, given that he also holds beneficial interests in a condominium.

Conclusion

The potential ripple effects of concurrent property ownership may jeopardise your right to your HDB flat or to material sums of money relating to properties you own. In the present case, Dentons Rodyk, acting on behalf of the elder brother, successfully deflected the younger brother’s “illegality” attack. However, steps should always be taken pre-emptively to ensure your home and personal finances do not hang precariously in the balance.