Introduction

It is well-known that property prices in Singapore have been soaring for the past 2 decades. The HDB market is no exception. Unsurprisingly, many people have come to see property (including HDB flats) as not just homes, but investments.

This has spurred the government to enact a host of laws and regulations designed to control prices and make it easier for Singaporeans to own a home. One example can be found in sections 50(1)(a) and 50(1)(b) of the Housing and Development Act (“HDA”). By way of brief summary, s 50(1)(a) of the HDA prohibits persons from purchasing HDB flats if they already own other property. S 50(1)(b) prohibits the purchase of a HDB flat by someone who has sold off another property in the last 30 months.

Unfortunately, there have been cases where people attempted to get around this rule by purchasing HDB flats in the name of a relative or friend. The idea was to get a nominee to legally hold the HDB flat while beneficial ownership would be retained by the purchaser actually putting up the money – in other words, a trust. These attempts to circumvent s 50(1)(a) were unsuccessful. However, as we shall see from the case studies below, in exceptional circumstances, the courts may come up with solutions to achieve a just and fair outcome.

Case study one – [2021] SGCA 28

In this case, the parents sought to claim beneficial ownership over the son’s HDB flat. The son had purchased the HDB flat using funds that essentially had been provided to him by his parents. The parents had previously owned another HDB flat. Years later, when the son was going through divorce, his ex-wife made a claim on the HDB flat, which led the parents to intervene and assert their own claim over the flat.

The issue was whether the HDB flat was being held by the son on trust for his parents. If it was, then the son’s ex-wife had no basis to stake a claim in the flat. But if the HDB flat was not held on trust by the son for the parents, then it would mean the son was essentially the owner of the flat, and ownership of the flat could be divided up in the divorce proceedings.

The Court of Appeal decided that there was no trust over the HDB flat. Sections 58(9), (10) and (11) of the HDA essentially prohibit trusts from being created over HDB flats in order to circumvent s 50(1)(a) or 50(1)(b).

S 58(9) states that the owner of a HDB flat cannot create a trust over it without the approval of the Housing Board. S 58(10) further fortifies the prohibition by providing that every such trust created without the approval of the Housing Board is invalid. Lastly, s 58(11) makes the prohibition airtight by stating that no person can become entitled to an interest in a HDB flat through a trust.

Thus, the Court of Appeal held that the son was the only owner of the flat, and this in turn meant that it could be divided up in his divorce proceedings.

Case study two – [2021] SGHC 119

This case concerned 2 daughters who tried to claim that their mother held a HDB flat (“the relevant flat”) on trust for them. The relevant flat had been jointly paid for by the daughters, and both daughters had even been registered as co-owners at earlier points in time. When the daughters got married, they removed their names from the relevant flat in order to buy HDB flats for their own families.

Later, they found out that the mother had, in her will, bequeathed the relevant flat to her son (i.e. their brother). This prompted the 2 daughters to seek a court declaration that the relevant flat was held on trust for them.

The High Court held that because the 2 daughters both owned their own HDB flats, they could not claim an interest in the relevant flat. Thus, the daughters’ case was dismissed.

The court remarked that the daughters should be commended for paying for their mother’s flat, taking care of their parents and providing their brother with a home. The court also remarked that the daughters both had their own HDB flats, and so they could not also claim the first flat.

Third case study – [2021] SGHC 76

This case involved 6 siblings who all contributed towards the purchase of a HDB shophouse. The shophouse was registered in the name of 1 of the siblings. The shophouse was bought with a common understanding that it would be held on trust, with all 6 of them each having a one-sixth beneficial ownership in it.

The dispute arose when the other 5 siblings started to suspect that the sibling in whose name the shophouse was registered might try to claim that he solely owned the entire shophouse. Thus, the 5 of them sued him.

The High Court decided that the prohibitions in the HDA applied equally to HDB shophouses, and so the other 5 siblings could not claim any beneficial ownership or interest in the shophouse.

However, the court then went on to note that the 6 siblings had always had a common intention for the shophouse to serve as their “retirement fund”. The court further noted that all of the siblings were already quite old and had no more or no more significant income.

Hence, the court decided that it was fair and just to order the sibling in whose name the shophouse was registered to sell the shophouse and then distribute the proceeds equally. In legal terms, this is known as an “equity”. This is essentially a means for the court to achieve justice, as it would have been quite crushing and oppressive if the other 5 siblings were denied any remedy whatsoever.

Concluding thoughts

From the above case studies, it is noteworthy that all 3 cases involved a family context, where the parties were relying solely on a relationship of trust and understanding. If you are thinking of relying on a similar “under-the-table” understanding with someone who you think would be a trustworthy nominee to hold HDB properties on trust for you, you may want to think twice.

The parties in the above 3 cases had probably all thought that their nominees were very trustworthy too.

You may wish to first seek legal advice before proceeding, so that you do not later end up with a rogue nominee trying to claim the entire HDB property for himself or herself. It will save you much headache down the road.

How SMTP may be of assistance

At SMTP, we provide a suite of bespoke services, which includes advising and assisting on real estate and wealth management matters. Tapping on our well of experience and resources, we can guide you through the process of achieving your objectives, be it advising on purchases, handling the paperwork, and liaising with the relevant institutions on your behalf.

We also believe in close engagement with our clients, paying close attention to their individual facts and circumstances, and tailoring our advice and courses of action to cater to their specific needs and requirements.

SMTP’s core philosophy is to provide bespoke legal advice based on our private clients’ specific needs and requirements, as cases always differ on their fine details. Our team of dedicated staff are ever eager and prepared to assist interested parties.

Should you or your clients require any assistance in trust or real estate matters, please feel free to contact our Business Development Team to schedule a consultation. We look forward to working with you.