This article addresses a common concern in short marriages: what happens to a Built-to-Order (“BTO”) flat if the couple divorces before the Minimum Occupation Period (“MOP”) has been met? It is a question frequently raised by our clients, particularly where the BTO flat is one of the couple’s most significant assets.
In This Article
– Understanding MOP
– Can One Spouse Take Over the Flat?
– What Happens to the Sale Proceeds?
– Can We Surrender the Flat to HDB?
– What Should We Consider Before Deciding?
Key Points
- Divorcing before the Minimum Occupation Period (MOP) does not automatically mean there is only one outcome for your HDB flat.
- Depending on eligibility, one spouse may be able to take over the flat, subject to HDB requirements and financing.
- You may be able to appeal to HDB for permission to sell the flat before MOP, but approval is considered case by case and is not guaranteed.
- Another possible outcome is surrendering the flat to HDB.
- Any proposed solution should consider the outstanding housing loan, CPF refunds, accrued interest and any resulting profit or loss.
- Before agreeing on what happens to the flat, understand the financial and legal consequences of each option.
Understanding the Minimum Occupation Period (MOP)
The Minimum Occupation Period (MOP) is generally calculated from the date the owners collect the keys to their flat.
For flats purchased directly from the Housing & Development Board (“HDB”), the MOP is generally five years from the date of key collection.
Where a couple is contemplating divorce before the MOP has been met, one option may be to wait until the MOP has passed before selling the flat. However, this may not always be practical. Some couples may prefer to deal with the flat earlier so that they can bring greater financial and practical closure to their separation or divorce.
There may be several options for dealing with an HDB flat before the MOP has been reached. The appropriate approach will depend on the circumstances of the marriage, the parties’ eligibility and HDB requirements.
Below, we look at some of the possible options parties may consider before proceeding with their divorce.
As every situation is different, our Divorce Lawyers can advise you on the options available and the implications of each for your HDB flat.
Read more: The Cost of Defaulting on a BTO: Breakdown of a Breakup
Can One Spouse Take Over the Flat?
If either party is eligible to retain the flat before the 5-year MOP is fulfilled under the Single Singapore Citizen (SSC) Scheme, and also successfully obtains the bank’s approval (for the party’s eligibility for loans) in retaining the flat solely, the other party may elect to transfer his or her share, in the matrimonial property to the eligible party.
It is useful to note that fulfilment of HDB eligibility rules and approval for bank loans are not automatic. Some other considerations that parties should take note of are cash considerations, issues on Central Provident Fund (“CPF”) refunds, and the existing mortgage loans if any.
Rear More: Understanding Property Settlements in Divorce
What Happens to the Sale Proceeds?
In most cases, the sale proceeds are used to redeem the outstanding HDB mortgage loan, refund parties’ CPF monies used for the purchase of the flat, together with accrued interests, and for the payment of costs and expenses of sale.
It may also be useful for parties to consider:
- What will happen to the balance of the sale proceeds if there are any;
- The situation that the flat is sold at a loss and net sales proceeds after repayment of the outstanding HDB mortgage loan is insufficient to fully refund to parties’ withdrawn CPF monies.
Parties should consider the proportions of which parties should share the losses and profits if any is incurred.
Read more: Can I Force the Sale of my House in a Divorce?
Surrender of Flat to HDB
If the MOP has not been met and neither party is eligible or able to retain the flat, the parties may write to HDB to request that the flat be returned to HDB once the divorce has been finalised.
This is different from selling the flat on the open market. HDB will assess the circumstances and determine the compensation amount for the flat.
Parties considering this option should therefore understand the likely financial consequences before agreeing to surrender the flat, particularly where substantial CPF savings or other monies have already been used towards the purchase of the flat.
Importantly, where the MOP has not been met, HDB states that the parties should submit their divorce documents to HDB so that their individual circumstances can be assessed.
Read more: What Happens to my HDB Flat when I Divorce?
What Should We Consider Before Deciding?
Before deciding what should happen to the HDB flat, first establish whether either spouse is eligible to retain it after the divorce. HDB allows a flat to be retained following divorce under certain arrangements, depending on the circumstances and the prevailing eligibility requirements.
You should also establish whether the MOP has actually been met. HDB states that the MOP is based on the period of physical occupation and certain periods of non-occupation may be excluded. The applicable MOP can also differ depending on the type and classification of the flat.
If the MOP has been met by the relevant time, the flat may generally be sold on the open market, subject to HDB’s requirements. If the MOP has not been met and neither spouse can retain the flat, HDB states that the parties may write to HDB to return the flat once the divorce is finalised, with HDB determining the compensation amount.
The practical decision therefore involves more than simply asking, “Do we want to sell the flat?” Consider:
- whether either spouse is eligible and financially able to retain the flat;
- whether the MOP has been met and an open-market sale is permitted;
- the outstanding housing loan and CPF monies used towards the flat;
- the financial consequences of one spouse taking over the other’s interest;
- what will happen if neither spouse can retain the flat; and
- how the proposed arrangement for the flat fits into the overall division of matrimonial assets in the divorce.
The right solution will depend on both HDB’s requirements and your wider divorce settlement. Before agreeing on what should happen to the flat, our Family Lawyers can advise you on the legal and financial implications of the available options and how the flat should be addressed as part of the ancillary matters.
How Our Divorce Lawyers Can Help
If you are divorcing before the MOP has been reached, one of the first questions is often very simple: what can we actually do with the flat?
Our divorce lawyers can help you understand the options available based on your circumstances, including whether one party may retain the flat, whether an early sale may be possible, or whether the flat may need to be surrendered to HDB.
We can also advise you on the financial implications, including the outstanding housing loan, CPF monies used for the flat and how the value of the property should be dealt with as part of the divorce settlement.
Where you and your spouse disagree about what should happen to the flat, we can help negotiate a practical solution or, where necessary, address the issue as part of the matrimonial asset proceedings.
The important thing is not to agree to a solution simply because it appears convenient. Understand what each option means financially and legally before deciding what happens to the flat.
We’re here for you
When you contact our matrimonial law team, we will provide you with a consultation, tailored to your specific circumstances and goals in mind.
Our goal is to help you find a resolution that works for you.
