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Property: 6 rules for renting out your HDB flat

HDB flats, singapore, landscape, singapore skyline,
(Photo: Caroline Chia)

In 2013, Minister for National Development Khaw Boon Wan revealed that some 40,000 entire HDB flats in Singapore are being sublet while up to another 40,000 owners rent out their spare bedrooms. Last year alone, the HDB granted over 27,000 approvals for subletting whole units. Some HDB flat buyers, frustrated at being priced out of the resale market, have blamed these non-occupier HDB owners for partially contributing to the supply crunch.

Fair allegation or not, these non-occupier HDB flat owners could include retirees who depend on rental income for a living, people who work overseas who do not have a CPF contribution to help cover the monthly payment, and yes, upgraders who now live in private property. Whatever the reason may be, if you’re thinking of monetising your flat or spare room, make sure you’re treading on the right side of HDB regulations.

1. CHECK YOUR ELIGIBILITY AND SEEK APPROVAL TO SUBLET YOUR ENTIRE HDB FLAT

Firstly, only Singaporean citizens are allowed to sublet their entire flat; a recent policy change announced in January 2013 now bans Permanent Residents (PRs) from doing so, which should soothe some ruffled feathers among disgruntled Singaporeans.

Secondly, Singaporean flat-owners need to fulfil their Minimum Occupation Period (MOP). If you bought a non-subsidised resale flat (without a CPF housing grant) before Aug 30, 2010, your MOP is three years. If it’s after Aug 30, 2010, your MOP is five years, regardless of whether it’s a new flat bought directly from the HDB or a subsidised or non-subsidised resale flat. Thirdly, seek the HDB’s approval before you lease out your whole flat by submitting an application at www.hdb.gov.sg/subletting. Each application costs $20 and lasts a maximum of three years.

2. INFORM THE HDB EVEN IF YOU’RE SUBLETTING BEDROOMS

Although subletting bedrooms does not require the HDB’s approval, you must register your room tenant’s particulars within seven days. The HDB must also be kept informed of any changes, or if you renew or terminate the subletting. For repeat offenders who fail to do so, your flat may be compulsorily acquired by the HDB.

3. CHECK YOUR TENANTS’ ELIGIBILITY, TOO

You can rent your entire flat or bedrooms to Singapore citizens, Singapore PRs or noncitizens who are holding Employment Passes, S Passes, Work Permits, Student Passes, Dependant Passes, or Long-Term Social Visit Passes. Strictly no tourists are allowed. If someone wants to rent your whole flat, they cannot be a tenant or owner of other HDB flats unless they are divorced or legally separated (even then, only one party may be a sub-tenant). A person who has met his own MOP and is eligible to sublet his whole HDB flat can rent your flat, but he needs to do so within a month of moving into your home. Owners of HDB Executive Condominiums who haven’t met their five-year MOP aren’t eligible to rent another HDB flat.

The minimum period of rental for each tenant per application is six months, to a maximum of three years. However, subletting to non-citizens (excluding Malaysians) is capped at 1.5 years; after which you have to reapply for approval. If you’ve hired a property agent, he should show you proof of your tenants’ immigration status. You can also check it at the Immigration & Checkpoints Authority website (http://ienquiry.ica.gov.sg), and your tenant’s Employment Pass and S Pass validity at the Ministry of Manpower website (www.mom.gov.sg).

Make sure the passes are valid for at least six months at the date of the subletting application. If your tenant’s company decides not to renew his employment pass, you might have to incur an extra sum of commission to the property agent to find a new tenant. Also note that two-year leases usually come with a diplomatic clause. If the tenant is no longer employed in Singapore or is transferred to another country, he can terminate the lease after 12 months by giving two months’ notice.

4. LAY DOWN THE GROUND RULES

Tenants who rent a whole unit pay their own utility bills separately from the monthly rent. However, for room tenancy contracts, the landlord usually accepts an agreed sum of, say, $700 for a bedroom, which covers the utilities. Some tenants abuse this by perhaps leaving the air-conditioner on the whole day, even when they are out. To prevent this, some landlords include a clause in the tenancy agreement that states that the tenant can only use the air-con at say, between 9pm to 8am every night.

Also put down in writing if you disallow overnight guests who might incur extra utility costs, as they aren’t registered tenants. If you’re open to your tenants doing “light cooking”, spell out exactly what you mean. Does it mean daily meals or a few times a week? Simple dishes like instant noodles or four-course meals?

Most tenants do their laundry separately but this could mean using the washing machine every night for just three or four pieces of clothing. To prevent this, homeowner Lily asks her tenants to pay a nominal sum of $20 monthly; in return, her domestic helper will machine-wash, fold their clothes and iron their clothes together with the family’s load. “It’s a small sum that they don’t mind paying but more importantly, it cuts down on my washing machine’s wear and tear, and running costs,” she says.

5. DON’T SQUEEZE IN MORE TENANTS THAN YOU’RE ALLOWED TO

You can sublet your entire one-room or two-room flat to a maximum of four people; three-room flats to six people; and four-room or bigger units to a maximum of nine. Note that only owners of three-room or bigger flats can rent out spare bedrooms. You can rent out one bedroom in your three-room flat (subject to a maximum of six occupants in each flat), while owners of four-room flats and larger units can sublet two bedrooms (maximum nine persons per flat).

The same “maximum nine tenants” rule applies to executive flats or jumbo flats even though you may have four or five bedrooms. Also, you can only sublet bedrooms – the utility room, living room and bomb shelter doesn’t count. One savvy owner of a five-room flat installed sliding doors to carve out an extra bedroom in his living room for his daughter, while renting out the other two common rooms to tenants. Also, be wary of main tenants who may illegally sublet your HDB flat.

6. DON’T FORGET YOUR TAX COMMITMENTS

Once you’ve sought approval from the HDB to sublet your entire flat or bedrooms, it’s only a matter of time before the Inland Revenue Authority of Singapore (IRAS) catches up with you if you don’t voluntarily declare your rental income, so don’t be tempted to cheat. Don’t forget to keep receipts such as agent’s commission, air-con servicing and replacement of furniture to claim for your expenditure. Currently, owner-occupiers who sublet bedrooms continue to enjoy the concessionary tax rate, which is calculated at zero for first $6,000 of the Annual Value of the flat, four per cent for the next $59,000 and six per cent for the first $65,000 exceeding that. Owners who rent out their entire flat, however, are taxed at the standard rate of 10 per cent. Come 2014, all residential properties will be subject to Progressive Tax Rates.

If you currently own and stay in a private property, don’t forget to notify IRAS to transfer the owner-occupier property tax (granted to your HDB flat by default) to your private property. Otherwise, your private property will automatically be charged the higher tax rate!

DID YOU KNOW?

HDB landlords who haven’t met the MOP, and so can’t get HDB approval to lease out their entire flat, try to “lock one bedroom” while renting out the rest of the unit. This is illegal. Last year, homeowner Chew Teck Fatt sued the HDB for wanting to seize his five-room flat on the charge that he wasn’t occupying it. He had previously informed the HDB when he rented two of the bedrooms and said the third was for his own use. However, HDB surveillance caused them to suspect he didn’t stay there and was illegally subletting the entire unit. The landmark case was eventually settled when HDB reviewed more evidence and “decided to give him the benefit of the doubt”.

Text by Stella Thng (First published in The Straits Times)

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