DECOUPLING
WLAW LLC
What is decoupling?
•
One owner transferring his share in the property to the
other owner such that he/she will no longer be the owner
of the property.
•
A common example is where a spouse transfers his/her
share to the other spouse, making one spouse the sole
owner of the property.
•
Decoupling is possible for both private properties and
HDB flats.
EXAMPLE
BEFORE DECOUPLING
Husband and wife joint owners
of the property.
AFTER DECOUPLING
Property in wife’s/husband’s sole
name.
Why decouple?
Why decouple? ADDITIONAL BUYER STAMP DUTY
•
Additional Buyer Stamp Duty is payable by:
1. Singapore Citizens and Singapore Permanent Residents buying the
second and subsequent residential properties.
2. Foreigners buying residential properties in Singapore.
• By decoupling, the outgoing owner of the property can purchase
another property without having to pay ABSD or paying lesser ABSD.
• Note that ABSD only applies to residential properties.
• Buyer Stamp Duty continues to apply and ABSD applies in addition to
the prevailing Buyer Stamp Duty rates.
WHO TRANSFERS?
• Spouses often decide to ‘decouple’ so that one spouse
purchases a subsequent property without being subject to
ABSD/ subject to a lower ABSD rate.
• Therefore, the spouse who will be subject to a lower stamp
duty rate should be the outgoing owner.
• There may also be couples who hold the property in unequal
shares (tenants-in-common). In such cases, it may be wise for
the owner with a lesser share in the property to be the
outgoing owner.
WAYS OF DECOUPLING
1.TRANSFER BY WAY OF GIFT
1.PART SHARE SALE
TRANSFER BY
WAY OF GIFT
TRANSFER BY WAY OF GIFT
•
Transfer by way of gift is where one owner transfers
his share of the property to another on the grounds
of love and affection, without monetary
consideration.
• Only advisable where the property is not subject to a
Mortgage or a CPF Charge.
• Stamp Duty is still payable even if the transfer is
made by way of gift.
PROCESS
TRANSFER BY WAY OF GIFT
Is there an existing bank loan/ CPF Charge?
YES
Able to discharge CPF
Charge or redeem
Mortgage?
NO
Transfer by way of Gift
Advisable
(Property unencumbered)
PROCESS
Able to discharge CPF
Charge or redeem Mortgage?
YES
If redeeming mortgage, serve
redemption notice.
If there is a CPF Charge, the
Charge must be discharged.
Transfer by way of Gift
Advisable
(Property
unencumbered)
NO
The Bank/ CPF Board will
unlikely consent to the Gift
Transfer.
Consider Part
Share Sale
PROCESS
• Note that transfers by way of gift is advisable only where the
property is encumbered, i.e. No existing mortgage/ no CPF
Charge.
• If the outgoing owner of the property intends to make a
transfer by way of gift, the mortgage should be redeemed and
all CPF monies refunded.
• As stamp duty payable will be based on the market value of the
property, valuation of the property is still required.
PROCESS - E-STAMPING
BANKRUPTCY ACT
•
A transfer by way of gift is also a transaction at an under-value.
•
The Bankruptcy Act will apply.
•
Under s98(2) of the Bankruptcy Act, the court may ‘restore the
position to what it would have been if that individual had not
entered into that transaction’ if the outgoing owner becomes
bankrupt 5 years from the transfer.
•
The transfer may be VOIDABLE.
•
It is therefore important to ensure that the outgoing owner is
financially stable. It is also equally important for the co-owners to
understand the risks and implications of transferring ownership by way
of a gift.
CASE 1
Background
• Private Property
• Husband transferring to Wife by way of gift
• Existing CPF Charge
Brief outline of the work done by the Solicitors
• Drafting and executing a Deed of Gift.
• Letter to CPF Board seeking their consent to the gift transfer and also stating that
the donor is aware that he/she has to make a full refund of the monies withdrawn
from his/her CPF account.
• CPF Board may then require a confirmation that the owners of the property have
been properly advised of the legal implications of the gift transfer.
• CPF Board will also require the donor to make a statutory declaration that he is
solvent at the time of the transaction and would not be insolvent as a result of the
gift transaction.
PART SHARE SALE
PART SHARE SALE
•
Where one owner sells his share in the property to another coowner for consideration.
•
The purchase/sale price will be based on the valuation of
the property.
•
Example: X and Y co-own Property A and valuation of the
Property A is at $1m. If X were to sell his share in Property A
to Y, the selling price will be $500,000.
•
This is advisable where the property is subject to an existing
mortgage or CPF Charge.
PROCESS
PART SHARE SALE
Is there an existing bank loan/ CPF Charge?
YES
1. Sale and Purchase Agreement – The
Deposit (usually 5%) is paid to the seller
directly.
2. Serve a Notice of Redemption to the Bank
3 months before completion date.
(***Take this into account when
deciding on completion date!)
3. Or if there is a CPF Charge, to discharge
the CPF charge wholly or partially.
4. Stamp Duties will be payable.
5. Valuation of the property.
NO
An alternative to a gift
transfer.
Key parts to the
process:
1.Stamp Duties payable.
2.Legal Fees
3.Valuation of the
property
PROCESS
Is financing required for the Part
Share Purchase?
NO
Ready for
Completion
YES
Part Share Purchaser may opt to:
1. Refinance the loan with the
existing Bank; or
2. Obtain financing from another
Bank.
***In BOTH situations, both the part
share purchaser and seller MUST be
represented by different law firms.
PROCESS
IMPORTANCE OF THE VALUATION PRICE OF THE PROPERTY:
•
Recall the provisions of the Bankruptcy Act.
•
If property is sold at a price below the valuation price, then the
Bankruptcy Act applies (as in the case of a transfer by way of gift).
•
Where these provisions apply, the transaction is voidable if the
seller becomes bankrupt within a 5 year period from the date of
the transaction.
•
Carrying out the part share sale in accordance with the valuation
price thus prevents the provisions of the Bankruptcy Act from
applying.
CASE 2
Background
• Condominium
•Selling price ½ of Valuation price
•Existing mortgage and CPF Charge
Brief outline of the work done by the Solicitors
• Drafting and executing Sale and Purchase Agreement.
• Serving Notice of Redemption to the existing Mortgagee and obtaining an
estimated redemption statement.
• Obtaining the valuation report.
•Applying for CPF usage on behalf of the part share purchaser.
• Partial discharge of CPF Charge.
•Obtaining the final redemption statement on completion. Redemption of the
existing loan will usually be split between the part share purchaser and the seller.
HDB
DECOUPLING
TRANSFER BY WAY OF GIFT
•
Generally, ownership of an HDB flat can only be transferred by
way of a gift.
•
The process of transferring ownership by way of gift is generally
similar to that for private properties except that the donee must
be an eligible person defined by the Housing Development
Board.
•
Sample Application Form available on HDB’s website:
http://www.hdb.gov.sg/cs/infoweb/residential/living-in-an-hdbflat/changing-owners-occupiers/transfer-of-flatownership/application-form
Guide from HDB’s website
PART SHARE SALE
•
Resale part share is not allowed between married couples or where the
purpose of the transaction is solely to include another family member
as a co-owner of the flat.
•
In the case of a divorce, a co-owner of the property may choose to buy
his/her ex-spouse’s share of the flat by way of a part-share sale ONLY if
he/se meets the eligibility criteria and the divorce is finalised after
meeting the Minimum Occupation Period of the flat.
•
In the case of a part share sale of an HDB flat, the selling price is at a
mutually agreed price, rather than based on the valuation price in the
case of a private property.