Let's talk about Collective Sales & SSD...

Consider this scenario: You have just bought a resale apartment in an old estate in February 2011, spent $150K on renovations and for all intention and prupose, have decided to make this your home for the foreseeable future (or more than 4 years at least).

But less a year after your purchase, your estate decides to commence a collective sale process and managed to garner the necessary 80% approval in a relatively short time. And before you know it, your estate is about to be sold to a developer in less than two years after you purchased the apartment.

You decide to do a search on the IRAS website and discover that you are liable to pay the Seller's Stamp Duty (SDD), which equals 12% of your collective sales proceeds. This is irrespective of whether you have objected to the sales or otherwise. And when you sit down to do the maths, you realize that the proceeds you will be receiving from the collective sale is actually less than the purchase price plus SSD. Your situation is made even worse if you take into account the $150K that you have spent renovating the apartment less than 2 years ago.

Two questions come to mind here:
• Can you include the renovation cost (prorated at least) as part of your unit purchase price?
• If you suffer a financial loss because you have to pay the SSD, can you file an objection with STB on such basis?

While the answer to the first question is quite straight forward (i.e. NO, although I am in the opinion that the renovation cost should be pro-rated, say based on a 4-year depreciation scale of 96% for Year 1, 92% for Year 2, 88% for Year 3 and 84% for Year 4, in line with the SSD. This is applicable for those who bought a property on/after 14th Jan 2011 and provided he has all the necessary paperwork to substantiate the renovation claim), the answer to the second question is not so forthcoming.

According to the Strata Titles Board's (STB), a unit owner who has not agreed to the sale can file an objection with the board. He has to do so in writing, within 21 days of the date of the notice for sale.

The board may not approve the sale if it is found that the transaction was not entered into in good faith, after taking into account:
• The sale price for the whole development
• The method of distributing the sale proceeds
• The relationship of the purchaser to any of the flat owners.

Other factors for non-approval: If the objecting unit owner suffers a financial loss, or the sale proceeds are not enough to redeem any mortgage or charge against the flat.

The Act also says that an owner in an estate subject to an en-bloc sale will be deemed to have incurred a financial loss if the sale proceeds, after any deduction allowed by the board, are less than the price paid for the property.

So the question becomes: Is SSD considered a deduction that is "allowed" by the STB??

The wife and I have combed the websites of STB, MND and IRAS for an answer, but have came out none the wiser. Any property/legal expert out there that can help enlighten us on this matter will be much appreciated.

Click on below to read the official press release from MND on the latest round of cooling measures:
http://www.mnd.gov.sg/newsroom/newsreleases/2011/news13012011.htm

Click on below to read the IRAS FAQ on SSD:
http://www.iras.gov.sg/irasHome/page04.aspx?id=10208

We also welcome your views on the subject!

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