SSD –Call a Spade a Spade

In Singapore, property prices shot up so fast over the last one year that the Government was alarmed. Home owners look with envy at those who reaped enhanced rewards from a collective sale of their development. This refers to a special law which allows a special majority of owners in a development to sell ALL the strata unit in the development, notwithstanding that there is a small minority who do not wished to sell. 

However, in the last half a year, many owners in collective sale development are crying murder! This arose because the Government implemented a tax called Seller’s Stamp Duty (or “SSD”). Owners who sell their property within four years have to pay SSD. For the lucky (or some say unlucky) owners, this can amount to fifty thousand dollars to hundreds of thousands of dollars.

The most unhappy are the owners (the “Unhappy Owner”) who moved into their dream home only to find that within two or three months, a collective sale committee (the “CSC”) is formed, and the Unhappy Owner’s dream home may be sold without their consent. The Unhappy Owner may protest. He may apply to Court to block the sale. But if the CSC has observed all the requirements required by the law, the sale will proceed. And when the Unhappy Owner refuses to sign the Transfer of his dream home, the CSC can apply to Court for the Registrar to sign the Transfer. Then as if to add insult to injury, the CSC may pay SSD on the Unhappy Owner’s strata unit and deduct the SSD from sale proceeds due to the Unhappy Owner.

To be fair, this is not a criticism of the collective sale procedure. Singapore is a democracy that believes in the rule of the majority. Hence, even in a strata development, a small minority may have to give way to a special majority. There are in place sufficient safeguards to ensure that the small minority, such as our Unhappy Owner, will not suffer a financial loss from the collective sale. But such assurances are insufficient balm to soothe the said injury (or lighten the said insult).

This begs the question. Does the law really require minority owners to pay SSD?

The Government implemented SSD ostensibly to curb property speculation (“SSD Purpose”). This purpose is achieved when home owners faced with the prospect of paying SSD, decides to postpone the sale of their home. In the case of our Unhappy Owner, he has acted in line with the SSD Purpose by protesting against the collective sale. Thereafter if despite his protests, a special majority proceeds to sell his dream home, there is nothing that this Unhappy Owner can do to prevent the sale. How will it serve the SSD Purpose to impose SSD on this Unhappy Owner? It smacks of double jeopardy first, for the law to empower a CSC to sell the Unhappy Owner’s dream home, and secondly to impose SSD liability on the Unhappy Owner. Imposing SSD liability on this Unhappy Owner appears to extend the law beyond its original SSD Purpose. 

The Inland Revenue Authority of Singapore (“IRAS”) website contains a guide that says that collective sale owners have to pay SSD – even minority owners such as our Unhappy Owner. If the original SSD Purpose does not cover our Unhappy Owner, is he an unintended victim of an ambiguous law?

This brings us back to the law. The Devil is in the details.

The Stamp Duty Act says that sellers who sell their property within four years of its purchase have to pay SSD. And this is our Eureka! moment.

Therein lies the answer that our Unhappy Owner is looking for. He is not a seller and he did not sell his dream home. It is the majority owners who sold his dream home despite his protests. The collective sale agreement says that the majority owners are selling ALL the strata units in the development. It does not say that the minority owners are sellers. Even the Order of Court does not say that the minority owners are sellers. There is no reason for anyone to treat our Unhappy Owner as a seller and to impose SSD liability on him. This is so especially when the original SSD Purpose of the law does not extend to our Unhappy Owner.

Finally, it is trite law that stamp duty is imposed on instruments, rather than on transactions. In the case of our Unhappy Owner, if he has not signed any Sale Agreement or Transfer Instrument, there is no document signed by him to attract SSD liability. Hence, it is ultra vires for IRAS to collect SSD from our Unhappy Owner. And if SSD has been paid, our Unhappy Owner is entitled to its refund from IRAS.

So, the moral of the story is this. Call a spade a spade. Call a seller a seller. Just don’t call our Unhappy Owner a seller and don’t collect SSD from him.

By Mr. Eric Ng Yuen
Partner at Malkin & Maxwell LLP