A divorcee's guide to buying and managing a HDB flat

by Stella Thng

They say love is blind. But, at the risk of sounding like a wet blanket, you shouldn’t be blind when it comes to facing the repercussions of a break-up on what could be your most expensive asset – your HDB flat. Being slapped with an exorbitant fine because of a relationship that has soured can be an expensive slap in the face.

“Our public housing policies are designed to help young families buy HDB flats and set up their first home,” explains a HDB spokesperson. “The Fiance/Fiancee Scheme (FS), introduced in the 1960s, is one such scheme. It allows young couples who are ready to commit to marriage to apply for a new flat first.” The number of couples who applied for a flat under HDB’s Fiance/Fiancee Scheme has grown from about 1,000 in 2009 to over 9,000 in 2012. However, the latest 2013 figures show that over one-fifth, or 22 per cent, of those who applied in 2009, subsequently cancelled in the next four years.

While we can never predict if a couple may be happily attached today but break up the next, one thing is for sure: Never base your relationship on the availability (and price) of a flat. Otherwise, you may find yourself paying off a hefty fine while nursing a broken heart. We examine various real-life scenarios and answer your FAQs.

Q: My boyfriend and I applied for a Build-to-Order (BTO) flat in 2013, but we’ve broken up and want to cancel. What happens to the 5 per cent down payment?
: If you back out of your application, you’ll never see that money again. “For buyers whose flat applications are cancelled after they have signed the Agreement for Lease (which sets out the sale terms of the HDB flat for buying a flat) and paid the down payment, an amount equivalent to 5 per cent of the flat purchase price will be forfeited,” says the HDB.

In addition, you will not be allowed to apply or be included as an essential occupier for a new HDB flat/DBSS flat/Executive Condominium unit or a resale flat with housing grants, within one year from the date of cancellation. Effective for sales exercises from March 2012 onwards, this is to prevent “frivolous” flat-buyers from hogging spots in the queue.

If you and your boyfriend are first-timers and had been given an Additional CPF Housing Grant (AHG) and/or Special CPF Housing Grant (SHG), you also have to return the full amount of the AHG/SHG with interest. This has to be paid up before you can apply or be included as an essential occupier for a new HDB flat/DBSS flat/ Executive Condominium unit or a resale flat with housing grants, in future. Also, your household status (i.e. first-timer or second-timer) will be assessed at the time of your application for a new HDB flat/DBSS flat/Executive Condominium unit or a resale flat with housing grants.

Desiree Lim, 23, and her boyfriend Jason Ong, 25, had applied for a BTO flat near her parents’ place, but broke up months later. That decision will cost them a five-figure sum as they’d already chosen their flat and made their down payment. “We should have considered more carefully before we applied. Since new housing projects don’t come by often, especially near my parents’ place, we felt the pressure to quickly apply for it,” reflects Desiree. “The sad thing is that this is pretty common among couples.”

Q: We’ve registered our marriage but decided to get an annulment. Do we have to give up our right to buy our new HDB flat?
If a couple annuls their marriage – which in Singapore typically means they’ve officiated their marriage at the Registry of Marriages but not held their wedding dinner – one party can still choose to retain the flat. But this is only possible if his or her parents were originally listed in the application, either as co-applicants or occupiers, to purchase the flat together.

Fortunately, Martha Lim, 30, was able to do that when she and her husband annulled their marriage. “I was reluctant to give up our five-room flat, at a great location near Bukit Merah. Luckily, my ex-husband agreed to let me continue the purchase, as we’d already included my parents’ names in our original application as we’d previously planned for them to live with us.”

Like Desiree and her boyfriend, Martha and her ex-husband had applied for the flat in a rush as they wanted to take advantage of the lower prices then and the favourable location. If none of the owners are eligible to retain the flat, it may have to be returned to the HDB at the prevailing compensation price. “The compensation for the surrender of flat will take into account the mode of purchase, the occupation period, the purchase price and the valuation of the flat. The compensation amount will be determined and conveyed to the flat owners whose request to surrender the flat will be approved by the HDB,” adds the HDB spokesman. The good news is there are no charges imposed for the surrender of the flat; however, the usual legal/stamp and conveyance fees will need to be paid.

Q: My husband and I have filed for a divorce. Must we sell the flat? If I want to keep it, how much must I pay my husband?
The HDB explains that in divorce cases, the court will decide on how to settle the matrimonial home. “For example, the court may order one party to transfer the flat ownership to the ex-spouse or sell his/her share of the flat to the ex-spouse at market value. In a situation where neither is eligible to retain the flat (such as when the Minimum Occupation Period isn’t met), the court may order the flat to be returned to the HDB at the prevailing compensation price.” The HDB will then handle the case based on the orders of the court.

Should one party be allowed to retain the flat, he/she can do so only if one of the following requirements is met:
A) He/she has the custody of the child;
B) He/she includes another person in the flat ownership, for example the parents, if there is no child from the marriage;
C) He/she retains the flat alone under the Single Singapore Citizen (SSC) Scheme, being a Singapore citizen and at least 35 years old. The person still needs to fulfil the balance of the MOP before he/she is allowed to sell the flat in the open market. Do note that after the divorce, if one party is eligible to retain the existing subsidised flat, the other can only apply for a subsidised flat after three years. But if the other party chooses to buy a non-subsidised flat from the open market, there’s no three-year ban.

Q: I’m a divorcee who previously bought a BTO flat with my ex-wife. Can I buy a new BTO flat with my new wife?
Yes. A divorced person who has enjoyed one housing subsidy previously (e.g. via sale of a resale flat bought with CPF Housing Grant or a direct-purchase flat bought from the HDB) can apply for a new flat from the HDB with his/ her new spouse, as long as they both meet the eligibility conditions such as the income ceiling, citizenship and so on.

In fact, starting from the July 2013 BTO exercise, couples comprising both a first-timer and second-timer applying for a new flat will now enjoy the same priority in flat allocation as families comprising two first-timers.

Q: What happens if my ex-girlfriend and I cancel our application for an Executive Condominium (EC) or a Design, Build and Sell Scheme (DBSS) flat?
As ECs and DBSS flats are sold by private developers, the Sale and Purchase Agreements are signed between the flat buyers and the developers. You will incur a financial penalty meted out by the respective developers. This includes a mandatory Minimum Occupation Period (MOP) before you are allowed to sell the property. However, the penalty for cancelling an EC or DBSS application is a whopping 20 per cent of the apartment’s value – much higher than the 5 per cent for an HDB flat. As the buyers did not fulfil the five-year MOP, they are not allowed to resell the flat to recoup their losses.

In 2012, a couple made the news when they cancelled their $610,000 DBSS flat in Ang Mo Kio, which resulted in a 20 per cent penalty of over $120,000. After adding the interest, stamp duty and legal fees which they had already shelled out, they ended up some $140,000 out of pocket.