Are you the owner of a leasehold property? Does the term 99-year lease confuse you? Read ahead to know what to expect from your leasehold lands.
Owning private properties in Singapore comes with several rules and regulations attached. This is especially true in the case of 99-year leasehold properties. This basically means that all commercial and residential properties will have a limited lease period of 99 years.
As we all know, Singapore is a city-state with limited land options for residential and commercial housing. With a meager land area of 728.6 km², it becomes challenging to house its entire population of 5,934,277 people. To tackle this situation, the government adopted the leasehold project.
The regulation was adopted to prevent land-scarce Singapore from ultimately running out of options. While this ensures the availability of land for future generations, it comes at the expense of ordinary landowners.
What kind of lease is my house on?
Every property owner in Singapore should know that 75 % of the land is owned by Singapore Land Authority. That leaves only 25 % of freehold land available for the rest of us.
If you’re a property owner in Singapore, chances are you fall under one of the following three categories. The 99-year lease, 999-year lease, and freehold contract.
All properties purchased from the Housing development board usually come with a 99-year lease. So if you’ve bought a condo or a piece of land from HBD, it means you have a 99-year leasehold condo or 99-year leasehold land.
999-year leasehold properties are a much better option than the former. However, this option has been discontinued by the government.
On the other hand, buying the property directly from freehold property owners ensure permanent ownership under a freehold contract. However, those options are extremely difficult to come by as the percentage of freehold land owned by private individuals is minuscule.
Who does the leasehold revert to, and what happens then?
99-year leasehold property owners in Singapore are faced with a tough and inevitable question. What happens after the 99-year lease runs out?
Well, according to the regulations, any land under a 99-year leasehold will automatically be taken back by the original owner after the completion of said lease. This means that the original owner, be it a private individual or the SLA, will have full ownership of the property once again.
But what does that mean for you, the former property owner? Well, you’re in for a disappointing turn of events.
Once the 99-year lease tenure runs out, former property owners will no longer have any right to the property. To put things simply, your ownership of the property expires along with the lease expiry. The property’s overall value will be reduced to zero, and the SLA or previous owner will have full control of those assets.
As a former property owner, you will no longer have ownership rights over the concerned asset. What’s even more riveting is that you will have to vacate the premises immediately or else be charged with trespassing. Ouch!
What options do I have as an HDB flat homeowner?
Homeowners of HBD flats have two options to consider once the 99-year lease runs out. The first option is to sell the flat before the lease expiry date and purchase another subsidized flat. But don’t get too excited; as always, there are certain conditions that you must factor in.
Selling your current flat and purchasing a Built To Order flat or an Executive condo is possible after paying a resale levy. This levy depends on the size of the apartment and the type of property. For example, a 5-room flat amounts to a levy of 45,000 $, whereas a leasehold condo will cost you 55,000 $.
Single occupants have some good news, as they will only need to pay half the original amount of the levy. However, this option is not available for a leasehold condominium.
Another option is to apply for SERS, which basically refers to collective sales of all properties in a unit. Qualifying for SERS means that you will be compensated with the property’s actual market value. Also, you will get the option to shift to a new HBD apartment.
Although this is obviously the better deal, it is quite difficult to qualify for this category. Statistics show that only around 5 % of HBD properties qualify for SERS.
What options do I have as a private property homeowner?
A viable option for private property owners is to top up the lease by paying a sum of money determined by the SLA. However, this is easier said than done, as the lease extension fees are often too steep for common households to pay. This makes the idea of paying for a lease top-up an expensive affair. And did we mention that it’s also really difficult to convince the SLA for an extension?
An alternative option is to band together with all the homeowners in the unit and opt for an en-bloc sale to private developers. This is the best outcome as homeowners will be handsomely compensated for their properties.
However, a process of this size requires total cooperation from each and every homeowner in the unit, which is not an easy task.
99-year leasehold properties: Yay or Nay?
The 99-year leasehold plan is a terrible structure for private homeowners as it prevents them from gaining permanent ownership. The system removes any possibility of permanent homeownership for a household. This means that each generation will have to repeat the cycle of leasing, vacating, and leasing again.
However, it is a decent option for people who are looking for temporary residence in an urban center.
Frequently Asked Questions
What does it mean to buy a leasehold property?
It means that you only have temporary ownership of the property and will have to find new housing options upon lease expiry.
What are the disadvantages of buying a leasehold property?
The primary disadvantage is that the state will reclaim the property after the lease period.
Is it hard to sell a leasehold property?
That depends on the property’s age and location. Older properties are definitely harder to sell, especially if they are situated in non-urban areas.
How long should you hold on to 99-year lease property or flat?
Property owners should consider moving out before the completion of 60 years of the lease.
The loan to value ratio may be decreased when the lease remaining is low?
Bank loans are lowered to 55 percent of the property value if the remaining lease amount is 40 years. What’s more, securing a bank loan for a property with less than 30 years remaining lease is absolutely impossible.
How can I find out how many years are left on the lease?
You can refer to the lease agreement and calculate the remaining years from the date of the original lease.
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