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Singapore – Transfer Of Property By Way Of Gift.

4 November, 2014

 

Legal News & Analysis – Asia Pacific – Singapore –  Construction & Real Estate

 

Typically, a property is transferred by way of gift when the owner grants his property to another person without any monetary consideration. The gift of a property, especially between family members, is not uncommon but many laypersons may not be aware of the risks and implications arising from gift transactions. This article provides a brief outline of some of the issues involved for both the owner and the buyer of a property affected by a gift transaction.

 
Some Considerations For The Owner

 
Distinction Between A Gift And A Trust

 
An owner should exercise care before making a gift of a property to another person (“the transferee”). In particular, an owner should understand the distinction between a gift of a property (which if validly made, cannot be subsequently revoked) and a trust (where the transferee holds the property on trust for the owner).

 
Failing to distinguish between a gift and a trust at the outset may result in litigation down the road. For example, in a Singapore Court of Appeal decision issued in June 2014, Chan Yuen Lan v See Fong Mun [2014] SGCA 36, a dispute arose between husband and wife over the beneficial ownership of a private property, for which both of them had made financial contributions to the purchase price. Although the property was registered in the wife’s sole name, the husband denied that it was a gift and asserted that he was the true owner. The Court of Appeal decided on the evidence that the wife held a significant percentage of the beneficial interest in the property on a resulting trust for the husband.

 

Is The Property Subject To An Outstanding Mortgage And/Or CPF Board Charge? 

 
If the property is subject to an outstanding mortgage and/or CPF Board charge, the owner should check with the bank or the CPF Board before attempting to transfer the property by way of gift. A transfer by way of gift may be effected without difficulty if the property is unencumbered, i.e. the mortgage is discharged and the CPF Board charge (if any) is also discharged.

 

 

Some Considerations For The Buyer

 
Issues may also arise when a buyer purchases a property which had been the subject of a gift.

 
Under the Bankruptcy Act, the gift may be set aside by the Court on the ground that it is a “transaction at an undervalue” if the owner is adjudged bankrupt within 5 years from the date that the gift has been made. If the Court sets aside the gift, the buyer may thereby lose his rights to the property.

 
In view of such dire consequences, it will be difficult for the buyer to procure a bank loan if the property is affected by a gift.

 
Where CPF monies are used to buy a property affected by a gift transfer under the Residential Properties Scheme, the CPF Board would, before releasing the CPF monies within 5 years from the date of the gift transfer, normally require, among other things, a statutory declaration from the donor of the gift to state that he was solvent at the time of making the gift and he has not become insolvent as a result of the transaction.

 
For transactions governed by the Law Society Conditions of Sale 2012, Condition 10.2 requires the seller to represent and warrant to the buyer that the property has not been the subject of any transaction at an undervalue (including a gift) under the Bankruptcy Act within 5 years before the date of the contract. This Condition may offer some comfort to a buyer who is unable to ascertain whether the property is affected by a gift transaction, as he could rescind the purchase if the seller breaches this Condition.

 
Conclusion

 
A decision to transfer a property by way of gift should not be lightly made by an owner; a buyer of a property affected by a gift transaction should likewise be mindful of the potential risks and implications.

 

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For further information, please contact:

 

Sandra Han, Partner, RHTLaw Taylor Wessing
sandra.han@rhtlawtaylorwessing.com

 
Chen Yiyang, RHTLaw Taylor Wessing
yiyang.chen@rhtlawtaylorwessing.com

 

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