WHEN her husband died in February last year, a widow not only had to pay off the outstanding mortgage on his HDB flat but also faced unrelated debts he chalked up from several creditor banks.
These banks wanted to recover their loans in the event she sold the four-room flat which was her husband's sole asset and in his name only.
She decided to apply to the High Court to declare that the money from the sale of the flat should not go to the creditors as it should be protected - just as HDB flats are protected under the law from any such claim.
On Sept 20 this year, Justice Andrew Ang agreed, based on the circumstances of the case.
He held that the purpose behind the HDB laws was to protect not only the owner but the family as well and took into account the financial hardship faced by the widow and her two children.
Unlike private property which can be seized to settle outstanding debts, HDB flats are protected and cannot be the subject of a sale by creditor banks.
Industry players said the case clarified the law in going a step further to state the monies from the sale of such a flat cannot be touched by creditors as well.
The only exception is the HDB which has to be repaid the amount of the unpaid mortgage from the proceeds.
'The case is rare and based on genuine circumstances of a hardship case,' said independent financial adviser Joseph Chong.
He noted HDB home owners were well protected unlike elsewhere, and private property owners with debt problems were known to move to HDB flats to evade their creditors. Added Mr Chong: 'The banks then may have to seek other ways of seeking to recover the money owed.'
But this particular case is more a matter of substance over form and a debt remains a debt, said Mr James Huan, head of estate succession at wealth management firm Providend. In this case, the woman had two children aged six and seven and her application would give her the means to find another roof over the family's head.
But a different scenario involving a woman with two grown children may arguably draw a different outcome.
Mr Huan noted the widow had indicated that if her application had not been allowed, she would let HDB acquire the flat compulsorily which meant the banks would not get any money anyway.
The banks - Standard Chartered, Citibank and DBS Bank - had sued for money owed because the $300,000 flat was what remained of the man's estate.
Their lawyers conceded the banks could not touch the property 'as long as it is not sold'.
But to allow her application to sell and keep the monies would be 'to open the floodgates' to others like those not taking up the Dependants' Protection Scheme and Home Protection Scheme to run up debts, they argued.
But the widow's lawyer, Mrs Margaret George, cited a case decided 10 years ago where it was said the issue 'raised a matter of grave importance concerning more than 90 per cent of the population of this country - Is the roof over their heads protected or not?'
She said the widow's case raised an issue of 'equally grave importance,' as the widow and her two small children would lose the roof over their heads and have no means of obtaining another flat.
'I am going to follow its lead,' said Justice Ang, referring to the 10-year-old case.
vijayan@sph.com.sg
