Sale of HDB flat to repay debts not allowed

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AsiaOne

Flat owners will no longer be allowed to use their HDB flat or the sales proceeds as security or collateral for any debt or loan.

The Housing and Development (Ammendment) Bill 2010 was passed in Parliament today.

Currently, HDB flat owners are not allowed to use their HDB flat as security or collateral for any debt, obligation or claim.



Under the revised legislation, this prohibition will be extended to include the sales proceeds from the HDB flat.

The purpose of the Bill is to help strengthen the protection of HDB flats from creditors. It also deters HDB flat owners from raising cash by selling their flats prematurely, and ensure that HDB flats remain as long-term assets for Singaporeans and their families.

However, approved financial institutions can continue to grant mortgage loans on the security of flats.

There has been an increasing trend of flat owners using their HDB flats as security to borrow money from licensed moneylenders.

Many enter into agreements to assign the sales proceeds from their HDB flats as repayment of monies owed. The moneylenders then lodge caveats against the borrower's flat to claim an interest in the sales proceeds.

This allows the moneylenders to demand repayment before they agree to withdraw the caveat for the sale transaction to go through.

The legislative amendments also introduce a new rule that voids any contract or agreement to use HDB flats, including the sales proceeds, as security or collateral.

In addition, caveats against HDB flats for the payment of debt can no longer be lodged after the Bill is enacted.

Minister Mah Bow Tan said in a press release that HDB homeowners should meet their financial obligations without resorting to selling their flats, if they enter into agreements with moneylenders.

He said: "HDB flats are meant for owner occupation and they should remain a store of value for retirement. They are not meant to be used as collateral or security for repayment of debts or loans, except for financing the flat purchase."