What happens to property at end of lease?

While there are many different tenures for leasehold property, 999-year and 99-year leasehold are the most common.
While there are many different tenures for leasehold property, 999-year and 99-year leasehold are the most common. PHOTO: ST FILE

Land ownership in Singapore falls under two categories: freehold and leasehold.

Freehold owners will hold on to the land title in perpetuity. This means there is no expiry date.

While there are many different tenures for leasehold property, 999-year and 99-year leasehold are the most common. At the end of the leases, the rights of the leasehold owner are effectively nullified.

For 99-year leasehold Housing Board flats, the unit will be returned to HDB, which will then surrender the land back to the state.

Some flats in older estates may be selected for redevelopment under the Selective En bloc Redevelopment Scheme (Sers), but a majority will likely see the end of their leases. Sers is done by the Government - the HDB homeowner cannot initiate any collective sales.

But for private property owners who want to continue living in their homes, they can apply to the Singapore Land Authority (SLA) to top the lease back up to 99 years. It requires SLA's approval and the premium will be determined by its chief valuer.

Private property owners can also collectively sell two or more units to willing buyers, such as property developers, in what is known as an en bloc or collective sale. The most common collective sale is that of all the units in a strata or flatted development. Owners of two adjoining developments or landed properties can also collectively sell their properties to a single buyer. The sale proceeds are divided among all the unit owners. But there is no guarantee of success for both options.

Owners must first reach consensus. If the property is older than 10 years, at least 80 per cent of the owners must agree to the sale or the lease top-up.

In a collective sale, the incoming developer will have to pay to take the remaining lease back up to 99 years. This makes it more difficult for owners with shorter remaining leases to find a willing buyer.

A version of this article appeared in the print edition of The Sunday Times on April 09, 2017, with the headline 'What happens to property at end of lease?'. Print Edition | Subscribe