Thursday, July 28, 2011

Wedding’s off, now here’s your $132k bill

Wedding’s off, now here’s your $132k bill

By Khalil Adis (courtesy of PropertyGuru)
Following the story of a couple who had to pay a hefty penalty for their Design Build and Sell Scheme (DBSS) unit after they broke up, PropertyGuru received an email from a reader who is undergoing a similar experience.
John (not his real name), had bought a DBSS unit for $660,000 in 2008 from a developer under the Fiancé/Fiancée Scheme.
John was supposed to submit his marriage certificate by 20 April 2011.
However, due to unforeseen circumstances, he is now unable to continue with the purchase as he has since broken up with his fiancée, who is a foreigner.
With the marriage now cancelled, he is ineligible for the scheme.
In addition, he will now have to pay a penalty of 20 percent of the purchase price.
The amount works out to $132,000.
Despite his appeals to the developer and seeing his MP twice, he was told to get married, failing which the developer will proceed to forfeit his deposit.
John is now harbouring suicidal thoughts as it means he will be thrown into debt.
"I will be destroying my life the next three years as I need to save up again for my marriage. This is too heavy a penalty for me," said the 29-year-old who is earning $2,500 a month.
HDB's or developer's responsibility?
When asked why he did not apply for a Built-To-Order (BTO) flat as it is more affordable, John said he and his then fiancée fell in love with the location.
"I was with my ex-girlfriend and the location is nice. I would say it has a lot of plus points. That's why we chose this DBSS flat," said John.
John also feels that he has been pushed around between the HDB and the private developer.
In his email correspondence to the developer, he mentioned how the HDB had asked him to talk to the developer.
In the meantime, the developer had said they will be talking to the HDB.
"I am very frustrated being pushed between HDB and the developer," John said in his email.
When contacted, the developer said it makes the final call.
"The developer reserves the rights to terminate the sales and purchase agreement by serving a 21-day notice and forfeit 20 percent of the deposit as stipulated in clause 20 of the agreement should the buyer be no longer eligible to buy the DBSS unit," said a spokesperson, who did not want to be named.
The spokesperson added that it is flexible before buyers exercise this right "by allowing the buyer to form another family nucleus as approved by the HDB."
Under the DBSS scheme, the HDB sells a piece of land to a private developer.
Subsequently, the developer will undertake the entire construction, pricing and selling of the flats.

Blurring the lines between public and private markets

With the line between public and private housing now blurred, problems are bound to occur.
In the case of a private property, a buyer has the option of reselling his unit to another buyer at any time.
Not so in the case of HDB flats.
Being a public housing project, buyers are required to fulfill the five-year Minimum Occupation Period (MOP).
In a HDB Built-To-Order (BTO) unit, buyers will only incur a five percent penalty.
However, for DBSS units, buyers will incur a whopping 20 percent penalty.
This is where problems may arise should unforeseen circumstances occur.

No way out?

In a bid to assist the reader in his difficult situation, the developer has offered a solution to avoid the hefty penalty.
To retain the flat, he can form a family nucleus.
However, he was informed by the developer that his brother's name is not allowed.
Meanwhile, his parents are ineligible, as they have a private property.
Those who own a private property must now dispose them after getting a DBSS unit, within six months of getting the key.
His ex-fiancée is also ineligible as her parents already have their names in another HDB flat.
Another solution is for him to get a new fiancé.
However, he is again thrown in a dicey situation.
As the ethnic ratio quota for Chinese had been filled, he can only marry a non-Singaporean.
"Now that the Chinese quota has been filled, I cannot find someone who is Chinese to get married to take over the flat. I have to find other races. This is really very stupid," said John.
John said he had asked the HDB and the developer to help him search for a new fiancée who fulfils this criterion, but they were unable to help.
Developers' hands tied
When contacted, the developer said it is unable to comment if the ethnic quota can be waived for John's case as it falls under the purview of the HDB.
In addition, the developer would have to incur costs in order to re-market the unit to a suitable buyer.
However, due to John's unique circumstance, the developer said there is a possible leeway.
"Under such circumstances, the developer can allow another buyer, provided there is an eligible one, to take over such a unit," said the spokesperson.
Interested buyers would have to comprise one Chinese and another non-Chinese applicant in order to be eligible.
So, until such a buyer is found, John would possibly be thrown into debt.

Some comments that I like/agree:

Sadly this problem had to come up.
I would look at it from 2 angles.
1. John seriously should have considered carefully before even plunging into this purchase. As mentioned, his salary is only S$2,500 per month (not sure if it's gross or nett) but even if so, it's hardly a figure that warrants anyone to be committing to such a pricey place to live in. Sorry for sounding dispassionate but it is a truth. I am not trying to given John a lesson but I think we should be more figure minded with our monies especially when it monies that we have yet to earn. We should live within our means and grow from strenghth to strength instead of getting into debt especially such a huge one and then having to work our guts out to repay. However, with the current housing prices John 'should not' be faced with this problem. My second point is aimed at the developer/HDB.

2. With the present price of public housing, the HDB/Developer would have NO problems in disposing off this unit which John had purchased. HDB should looked into John's case and do a careful and detail investigation into his causes. If it is the truth John so speak then HDB/Developer should let John off the hook perhaps with a small fine coupled with a no-purchase clause of say the next 3 years or whatever it's within their discretion. There is no need to slap the entire 20percent on John as it being too uncompassionate. I do agree that the HDB in particular have their set of rules but rules can be flexible depending on the circumstances.

The developer mentioned of costs incurred in marketing John's flat if they were to take back the unit, this costs can easily be offset by the fine HDB imposed on John, so this is a lame excuse.
And it's the worst joke ever by the developer to ask John to go get himself a new fiancee, especially a non-chinese - just right after he's been ditched by his ex? He must still be living in a night mare about women. What an awful suggestion.

My opinion , whether the penalty are reasonable or not have nothing to do with this case.
It's spell out clearly on the contract , we need to enter the contract with our eyes wide open.
Today , his made a loss due to unforeseen circumstances , the other way around he can also made a huge profit . He sign on the dotted line knowing if he is unable to fulfill the criteria he would have to pay a penalty , he still decided to go for it , so he have to paid for it . Unless he was con into buying it else we have to take responsibility for what we decide.
Now back to whether is it fair for 20% penalty , it is not fair. What can we do , we can walk away and buy normal HDB. I think all these bad decision are driven by Greed & MBT 's asset enhancement theory.

When I bought my 3-rm flat I had many acquaintances saying I was stupid... I could easily afford a 4 or 5 room flat but I'm now 35 and free from the shackles of debt from servicing a mortgage. I bought a unit of a size that I NEEDED and my mortgage was for 15 years. Every bonus month I pushed a large portion of the monies to paying off the mortgage. I sometimes think the powers that be wants us to be in a state of debt as it's one way of keeping the citizenry rooted to Singapore.

My Views:
Wahahahahaha! Have to find a wife, not only that, she cant be a chinese?!?! Muahahahaha. Sorry for coming across as dispassionate. But a contract is a contract. I do sympathize with his loss but he should have calculate his sums before committing to a flat. All the comments were mocking how he dare to buy a S$660K flat with a monthly salary of S$2500. Aiya. Actually, it's obvious he came from a well-to-do background with parents staying in private property. If he dont have the support of his family, how will he dare to buy such a property? There are tons of young Singaporeans out there staying in private property because of well-to-do family background. It's not uncommon. However, I suppose a penalty of S$132K for nothing, on top of an unsuccessful union is a pinch, no matter how rich his parents might be. I can almost imagine how his parents might be pulling his ears now. Even if he will be in debt, I suppose his parents will help him out every month.

Hmm.............thank god nothing happens between me and dearie when we decided to buy our resale DBSS flat. I never thought the implications can be so detrimental and unfair. =PPP

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