Buying private homes in trust not a way for HDB owners to get around MOP rule

Tan Ooi Boon

May 21, 2023

The desire to live the Singapore dream of upgrading to private property has driven some newer owners of Housing Board flats to jump the gun in investing in a second home, even when they are still barred from doing so.

Owners of HDB flats are prohibited from investing in any private residential home during the minimum occupation period (MOP), which is five years for most flats now.

Most people know this, but many who broke this rule mistakenly thought they could bypass the time bar by using a trust scheme to put the new properties under their children’s names.

Between 2018 and 2022, HDB caught some 150 flat owners for investing in private homes even though they had lived in their own flats for less than five years.

Most were apparently ignorant or were wrongly advised by their real estate agents that there was no restriction for purchases under the trust schemes since they were supposedly not buying the properties for themselves.

Those who did so probably had ample cash too because bank loans are usually not available for trust properties.

Prior to May 9, 2022, the purchase of properties under trust was popular among cash-rich buyers because no additional buyer’s stamp duty (ABSD) would be payable, since these properties were listed in the names of beneficiaries who were non-property owners.

But since then, buyers of trust properties had to pay upfront ABSD of 35 per cent, and this was further increased to 65 per cent from April 27, 2023.

While buyers can apply for a refund of the levy if strict conditions governing trusts are met, the ABSD aims to deter speculators because they still have to foot the hefty duty first.

An HDB spokesman says flat owners are not allowed to buy any private residential properties during the MOP and this prohibition covers the purchase of private residential properties on trust for another person.

Similarly, they are also not permitted to become the beneficial owners of any trust properties themselves.

The MOP restriction applies to flats bought directly from HDB and the resale market.

“HDB takes the violation of MOP regulations seriously and will not hesitate to take enforcement action against errant owners,” the spokesman adds.

Depending on the severity of the infringement, HDB may issue a written warning, impose a financial penalty of up to $50,000, or compulsorily acquire the flat.

The board did not give a breakdown on the types of penalties that were meted out to the 150 MOP offenders.

It notes that HDB flats are primarily meant for owner-occupation and buyers have to physically occupy their flats during the MOP before they are allowed to sell their flats on the open market, rent out the whole unit, or buy a private residential property.

The rule helps to ring-fence HDB flats for households with genuine housing needs and deter their speculative purchase.

It is hard for such owners to plead ignorance of these rules because such information, especially on the MOP, is stated on the HDB online portal.

Moreover, flat buyers are also informed and reminded that they must comply with all such rules at various points during the flat purchase process.

Mr Alfred Chia, chief executive of financial advisory firm SingCapital, says he has recently come across such cases because his company helps insurers promote professional indemnity policies to real estate agents.

He cites an HDB flat owner who was recently ordered to pay $50,000 because he had bought a condominium unit under a trust for his child even though he had yet to fulfil his five-year MOP obligation.

This case came to Mr Chia’s attention because the owner filed a claim against the real estate agent, who apparently gave the wrong advice that the owner could proceed with the trust because the property was bought for the child and not for himself.

In such cases, real estate agents may turn to their indemnity policies, which may cover mistakes or misrepresentations that are made in good faith as part of their job.

But the policies will not offer protection to rogue agents who act outside the scope of their job or are blatantly dishonest and have used fraudulent means to deceive their clients.


Anyone buying property on trust for their children must be able to pay for it fully in cash because banks would usually not approve a mortgage in such cases as the beneficiaries are under 21 and unlikely to have any income.

Mr Chia notes that some HDB flat owners who took part in such schemes could afford to pay for the second property in cash because they were lucky to receive a windfall, whether through an inheritance or even winning the lottery.

After all, there are at least two draws per week here that offer a top prize of at least $1 million.

“There was also a case involving an HDB flat owner who was granted a huge payout as a result of his company’s executive performance scheme and so had extra cash to invest in another property,” Mr Chia adds.

Pitfalls of trust

Parents should use such trusts only if they genuinely want to make long-term plans to benefit their children. Just like in other legal arrangements, there are important implications to note.

1. Impact of ownership

By putting the property in their children’s names, parents are effectively depriving them of the chance to apply for an HDB flat when it is time for them to start their own families.

This is because some of these properties may be studio or small apartments that may not be suitable for them.

While these properties can be sold, there is no guarantee that they would yield a profit if market conditions are not favourable.

If the child then has to buy a new home, they will have to pay the prevailing ABSD as it would be deemed their second property.

2. Reason for the trust

Once parents create a trust property for their children, the real estate will belong to the latter.

The parents cannot simply reverse the ownership and reclaim the residence. Even if they could do so, they could be prosecuted for possible tax evasion.

Saying that the trust properties actually belong to the parents is almost as good as confessing to using a sham trust to evade the ABSD.

3. Rights over trust properties

As the children come of age, the property will eventually vest in their names and parents will no longer have any control over the asset.

If the relationship between the parties turns sour before that, the beneficiaries of the trust can even apply for court orders to remove their parents as the trustees if they are found to be acting against the interest of their children.

Just like for other assets, once the homes vest in the children’s names, their future spouses will also have claims over them if the couples treat them as part of the matrimonial assets.

While it is prudent to do long-term planning for your children, do so for the right reasons.

Avoiding taxes should not be one of them because those who do so will eventually discover that they can risk losing a lot more.