Decoupling or Part Share

Decoupling or Part Share

 

1.        What is Part-Share Purchase/decoupling about?

a.       The process of buying a share of an existing property between 2 or more parties.

 

b.      Parties usually involved between spouses like Husband & Wife, Siblings, friends

 

2.        Why conduct part-share purchase/decoupling?

a.       To provide a party the opportunity to own his/her 1st property in their own name.

 

b.      Friends who have invested a property together back then decides to get married and purchase their 1st matrimonial home and not incur ABSD in the process.

 

c.       Paying ABSD straight VS conducting of decoupling à Which will be cheaper?

 

d.      Getting maximum loan entitlement, I.e. 75% for 1st property.

 

3.        What needs to be taken into consideration when conducting part-share purchase/decoupling?

a.       Option to Purchase (OTP) / Sales & Purchase Agreement (S&P)

                                                               i.      Purchaser to exercise to indicate formally they are purchasing the share.

 

b.      Additional buyer’s Stamp Duties (ABSD) / Seller’s Stamp Duties (SSD)

                                                               i.      Required to pay the 3% BSD within 14 days of exercising OTP/S&P.

 

                                                             ii.      If at the point of purchasing share, client has more than 1 property, ABSD applies.

 

                                                            iii.      If at point of purchasing share, client bought property less than 5 years, SSD applied.

 

c.       CPF

                                                               i.      Must repay whatever they use via CPF, back to CPF in cash.

 

d.      Bank Loans

                                                               i.      If property is encumbered, purchaser of share must do refinancing to takeover full remaining loan.

 

                                                             ii.      Banks to check on buyer’s TDSR whether buyer capable of handling full loan purchase alone.

 

                                                            iii.      3 months redemption period applies, so if client wants to complete fast, will incur interest by the bank.

 

e.      Legal Fees

                                                               i.      2 law firms to represent 1 seller and 1 buyer.

 

                                                             ii.      Law firms to draft OTP/S&P

 

                                                            iii.      Application of CPF

 

                                                           iv.      Mortgage stamping fee and application documents to bank

 

4.        How to transfer the share of an existing property?

a.       Step 1: Purchaser need to sign OTP/S&P agreement (Note: Timeline of 6-8 weeks for completion of part-share purchase/decoupling process)

 

b.      Step 2: Purchaser to pay BSD (or ABSD/SSD if any), 14 days from exercising

 

c.       Step 3: CPF will be repaid to seller upon completion, which is reflected in their CPF one(1) – four(4) weeks after completion

 

d.      Step 4: Seller to take note of the following before doing the refinancing for the loans:

                                                               i.      Breakage fees

                                                             ii.      Clawback of subsidies like legal fees, insurance premiums

                                                            iii.      Late payment charges if any

                                                           iv.      Bank Redemption date

 

5.        Practical illustration as follows:

 

 

Part share of 1st property as follows:

  • $1,000,000 current property value bought under joint Tenancy (Both Singaporean Citizens)
  • Therefore, Sale price of 50% share is $500,000.
  • Buyer’s Stamp Duty amount: $9,600 (Payable within 2 weeks of exercising of OTP/S&P)
  • Check if any Seller’s Stamp Duties incurred
  • Legal fees to act for both parties, est. $5,500
  • Therefore, total expenses = $15,100
  • *Note: CPF and bank loans needs to be repaid

 

 

New Property Purchased with Part-Share Purchase as follows:

  • E.g. $2,000,000 new property value
  • Buyer’s Stamp Duty amount: $54,600
  • Legal Fees: $2,500
  • Therefore, total expenses = $57,100
  • *Note: if use CPF, from completion date of 1st property have to wait 1-4 weeks to reflect in CPF account  + 2 – 4 weeks to disburse for new property again

 

 

Alternatively, for new property purchased WITHOUT part-Share Purchase:

 

  • E.g. $2,000,000 new property value
  • Buyer’s Stamp Duty amount: $54,600
  • Additional Buyer’s Stamp Duty (7% as SC) amount: $140,000
  • Legal Fees : $2,500
  • Therefore, total expenses = $197,100
  • *Note: May not get full 80% loan entitlement if 1st property is encumbered, min sum in CPF applicable as well

 

 

 

6.        Anything special to take note of?

a.       Upon exercising S&P and paid total Stamp Duties, The seller (Already deemed to have indicated sold his sharecan actually proceed to sign new OTP to buy the new property, without waiting for the full completion.

 

b.      Clients must be clear on whether they have enough cash in hand to:

 

                                                               i.      Pay back their CPF used for current property or not?

 

                                                             ii.      Capabilities to have refinancing on their own? (inclusive of all TDSR compliance)

 

                                                            iii.      For 2nd property, if purchasing a new completed property, stamp duties to be paid solely by cash.

 

                                                           iv.      For 2nd Property, if purchasing a new launch property (BUC), stamp duties can have a leeway to be paid by CPF, subjected to bank’s abilities to provide in time:

1.       Bank Letter Offer

2.       Letter of instructions

3.       Valuation report

 

Otherwise, to pay via Cash.

 

With these, I hope that I had helped you to understand better on part-share purchase / decoupling process.

 For more detailed discussion kindly contact us.

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