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Judge rules HDB laws meant to look after family members in financial hardship 

When her husband died in February last year, a widow not only had to pay off the outstanding mortgage on his HDB flat but also faced unrelated debts he chalked up from several creditor banks.

These banks wanted to recover their loans in the event she sold the four-room flat which was her husband’s sole asset and in his name only.

She decided to apply to the High Court to declare that the money from the sale of the flat should not go to the creditors as it should be protected - just as HDB flats are protected under the law from any such claim.

On Sept 20 this year, Justice Andrew Ang agreed, based on the circumstances of the case.

He held that the purpose behind the HDB laws was to protect not only the owner but the family as well and took into account the financial hardship faced by the widow and her two children.

Unlike private property which can be seized to settle outstanding debts, HDB flats are protected and cannot be the subject of a sale by creditor banks.

Industry players said the case clarified the law in going a step further to state the monies from the sale of such a flat cannot be touched by creditors as well.

The only exception is the HDB which has to be repaid the amount of the unpaid mortgage from the proceeds.

‘The case is rare and based on genuine circumstances of a hardship case,’ said independent financial adviser Joseph Chong.

He noted HDB home owners were well protected unlike elsewhere, and private property owners with debt problems were known to move to HDB flats to evade their creditors. Added Mr Chong: ‘The banks then may have to seek other ways of seeking to recover the money owed.’

But this particular case is more a matter of substance over form and a debt remains a debt, said Mr James Huan, head of estate succession at wealth management firm Providend. In this case, the woman had two children aged six and seven and her application would give her the means to find another roof over the family’s head.

But a different scenario involving a woman with two grown children may arguably draw a different outcome.

Mr Huan noted the widow had indicated that if her application had not been allowed, she would let HDB acquire the flat compulsorily which meant the banks would not get any money anyway.

The banks - Standard Chartered, Citibank and DBS Bank - had sued for money owed because the $300,000 flat was what remained of the man’s estate.

Their lawyers conceded the banks could not touch the property ‘as long as it is not sold’.

But to allow her application to sell and keep the monies would be ‘to open the floodgates’ to others like those not taking up the Dependants’ Protection Scheme and Home Protection Scheme to run up debts, they argued.

But the widow’s lawyer, Mrs Margaret George, cited a case decided 10 years ago where it was said the issue ‘raised a matter of grave importance concerning more than 90 per cent of the population of this country - Is the roof over their heads protected or not?’

She said the widow’s case raised an issue of ‘equally grave importance,’ as the widow and her two small children would lose the roof over their heads and have no means of obtaining another flat.

‘I am going to follow its lead,’ said Justice Ang, referring to the 10-year-old case.

Source : Straits Times - 6 Dec 2006

 Source : Reuters

HONG KONG’S Park Hotel Group has revealed the design for a proposed project on the Collyer Quay site. It was one of eight bidders that made submissions for the site at a state tender which closed on Oct 17.

Park Hotel’s scheme, designed by DP Architects, comprises a hotel development and food and beverage outlets fronting the sea.

Park Hotel director Allen Law declined to reveal how much the group bid, but said its bid was based on a 60-year lease for the site. He would only say that based on the bid price, Park Hotel’s overall investment in the project would cross $150 million.

The eight bids for the tender are currently being evaluated by the authorities. Under the two-envelope system for the tender, bidders had to submit concept proposals and tender prices separately. Only concepts approved by the Urban Redevelopment Authority will enter the next stage of the competition - where the best price wins.

The tender site includes two conservation buildings - Clifford Pier and the former Customs Harbour Branch Building - as well as two adjoining land plots. The successful bidder may build new structures and buildings within the demarcated water space around the existing buildings.

Park Hotel group is investing about $650 million in the Singapore hotel market, excluding the Collyer Quay project.

The group bought Crown Hotel at the Orchard/Bideford roads junction last year for $300 million (and will spend a further $80 million refurbishing the property, including adding a retail gallery), and Parkroyal hotel at Coleman Street for about $141 million in October.

It also clinched a site (next to Robertson Quay hotel) for hotel development at a state tender which closed in August.

Source : Business Times - 6 Dec 2006

Chyau Fwu Development, which is jointly headquartered in Hong Kong and Singapore, yesterday announced plans to enter the residential property market in Singapore with a new luxury development in Grange Road.

Chyau Fwu will be building ‘no more than 40′ units on the 59,000 sq ft site it bought more than three months ago for about $135 million. The site has a plot ratio of 2.1, which brings the price to $1,100 per sq ft per plot ratio (psf ppr).

The site, which is at present occupied by six bungalows, was acquired through private treaty, said Eddie Chow, a senior executive with the company.

The number of units planned is small as the development will contain large luxury apartments ranging from 3,000 sq ft to a super-penthouse at 10,000 sq ft, he said. The project will be launched in the first quarter of 2007, and is expected to fetch prices of about $2,000 psf, market watchers said.

Construction is expected to cost about $500-600 psf, bringing Chyau Fwu’s break-even cost to $1,600-1,700 psf.

‘We believe that the Singapore market is ready for the kind of building we are planning, and, of course, this property will also have tremendous appeal to wealthy international property buyers,’ Mr Chow said.

‘Chyau Fwu has been looking for an opportunity to enter the residential market for some time and we have now identified a location that provides us with a rare opportunity to develop a building with unobstructed views, unparallelled spaciousness, and a unique design.’

Design will no doubt play a large part in the new project. Chyau Fwu is the company behind the iconic Art Deco development Parkview Square. For this latest project, the design will be unveiled in the new year, said Mr Chow.

Renowned United States-based architect James Adams, who designed Parkview Square, has been commissioned to oversee the new development.

Source : Business Times - 6 Dec 2006

Income tax review board says profit is capital gain, overruling taxman  

A Firm will be able to treat the $4.6 million profit it made from selling a property as a capital gain - and so non-taxable - due to the success of its appeal.

The unusual case saw the Income Tax Board of Review overule the taxman.

Normally such a gain would be seen as part of a firm’s profit and taxed.

Lawyer Thanga Velu, who acted for the firm which does not want to be named, said: ‘The case is unusual because the unique set of circumstances allows the gain to be considered as a capital gain, even though it was made over a very short period of time.’

The case began in March 2000 when the Comptroller of Income Tax taxed the firm on the $4.6 million it was deemed to have gained from selling a 30,000 sq ft leasehold property almost immediately after acquiring it.

But the firm claimed that the amount was a capital gain and lodged an appeal.

The firm had initially rented the two-storey property from the HDB. It used the first floor itself and rented out the second.

In September 1994, it bought the property for $9.9 million. A month later, a buyer offered the firm $14.5 million for the building. This was later raised to $15.5 million.

The firm sold the property and made a net profit of $4.6 million.

During the firm’s appeal, the taxman argued that the circumstances of the sale indicated that the firm was driven by short-term profit gains.

It pointed out that buying and selling leasehold properties for gain was common in Singapore.

And the firm had placed advertisements for short-term lets on the second floor and had made use of short-term financing arrangements such as overdrafts.

These were telltale signs indicating that the firm was only in it for the short term, the taxman argued.

The firm also needed 100 per cent bank financing to buy the property. It was offered a secured loan of $8.8 million, to be repaid in 114 monthly instalments of $107,000.

The taxman suggested that the firm’s earnings would not have allowed it to buy such an expensive property and that the real reason for the deal was to make a profit on the resale.

The firm had lost $500,000 for the year ended Aug 31, 1995.

The company told the appeals tribunal it had wanted to buy the property despite the high monthly instalments, because HDB could raise the rental at each renewal.

In May 1994, HDB raised the monthly rent to over $20,400 - an increase of 35 per cent over the previous year.

The firm said the rental payable to HDB would have been more than the interest payable to the bank in the long run.

It also argued that it had wanted the assurance that it could operate on the premises for the foreseeable future. The business was established on the site in 1986.

In its appeal judgment, the review board said it was satisfied that the ‘attractive offer of $14.5 million and the unexpected difficulties encountered in putting the second floor to productive use were the catalysts for the firm to start thinking of selling the property’.

It said: ‘The price offered was so exceptionally high that it made sense to take the profit…the short period of ownership did not negate the fact that the company was buying it for its own long-term use.’

The board concluded that the property was bought as a long-term investment and the profit was therefore of a capital nature and thus non-taxable.

Attractive offer

The firm had initially rented the two-storey property from the HDB. It used the first floor itself and rented out the second.

In September 1994, it bought the property for $9.9 million. A month later, a buyer offered the firm $14.5 million for the building. This was later raised to $15.5 million. The firm sold the property and made a net profit of $4.6 million.

In its judgment, the Income Tax Board of Review said it was satisfied that the ‘attractive offer of $14.5 million and the unexpected difficulties encountered in putting the second floor to productive use were the catalysts for the firm to start thinking of selling the property’.

Source : Straits Times - 5 Dec 2006