Wednesday, November 29, 2006
[RealEdge] BT : Major court ruling on contribution to renovation, ownership share
| Published November 28, 2006  | |
| Major court ruling on contribution to renovation, ownership share
By WEE LI-EN
(SINGAPORE) Contributions to renovation costs can be considered when determining various parties' shares in a piece of property, and this applies both to HDB flats and private property, a High Court ruling has determined. The decision by Judge Sundaresh Menon which was released earlier this month concerned a dispute between a son and his stepmother who were co-owners of a HDB flat. However, Judge Menon ordered that the proceeds of the sale of the flat be divided in the ratio of contribution of the parties to the purchase and renovation of the flat. Taking into consideration these contributions, this meant that the son, Tan Chui Lian, would get 53.4 per cent of the net proceeds and the stepmother 46.6 per cent. Lawyers say this decision is significant for several reasons: first, because it clarifies that parties can gain an interest in HDB flats according to their respective contributions to the purchase of the property even if they are not registered owners, provided that they are not ineligible to acquire an interest. 'This decision potentially applies even to persons who have contributed, are otherwise eligible to own an interest in the HDB flat, but are not named as joint tenants or tenants-in-common, The decision seems to run counter to a plain reading of section 51(6) of the Housing and Development Act, which states that no person shall be entitled to any flat under an resulting or constructive trust. Resulting and constructive trusts give contributing parties a share in the property according to the value of their contributions. However, Judge Menon examined parliamentary debates and said that Parliament's intention was to prevent parties who are ineligible to own an interest in HDB flats to do so, rather than to prevent people from being entitled to interests in HDB flats regardless of the circumstances. Lawyers also say the decision is significant as it says that in determining the shareholding of parties in property, the contribution towards renovation costs can be considered. Chandra Mohan, partner at Rajah & Tann, explains: 'If you contributed $10,000 to the purchase of the property and I contributed $5,000 to the purchase, but I also contributed another $5,000 to the renovations which went towards improving the value of the property, then it is possible both parties be deemed that they made equal contributions to the purchase of the property and hold the property equally.' However, the renovations must be done around the time that the property was purchased. Judge Menon said that especially where HDB flats are concerned, purchasers very often intend to spend considerable sums on renovations or improvements soon after a flat is bought. This is because it is possible to get longer terms and cheaper financing for buying a property than it is for the cost of carrying out renovations. Contributions towards costs of renovations done much later after the property is purchased may not affect the ownership ratio of parties in the property, but can merit compensation if they improve its value. |
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