The Housing and Development Act which governs the resale of HDB flats stipulates that all resale transactions require the Housing and Development Board's consent. Therefore, all transactions involving HDB flats are subject to the Board 's consent. In the event such consent is not given, the transaction shall not take place. Whether any party can make a claim against the other will largely depend on whether the consent was withheld as a result of either party's default or due to no fault of both parties.

A pre-condition to the Board giving its consent, amongst others, is that the vendor must have occupied the flat for the prescribed "minimum occupation period". For flats which were purchased directly from the Board, the period is usually years and for flats bought earlier from the resale market, the period is usually 30 months.

Commonly, resale flats which are relatively new, attract higher demand and therefore command higher prices. There is often a pool of ready purchasers eagerly waiting for flats to "mature"; these are flats purchased directly from the Board and which the owners (sellers) have lived in for at least 5 years.

Often, estate agents would market these flats months before the flats "mature" in order to pre-empt other vendors/estate agents. Purchasers and vendors have to anticipate what the market conditions would be in the months ahead. However, even though agreements may be signed months before the flats "mature", these agreements can only be submitted to the Board only after the flats "mature". By then, changes in market conditions and valuations often result in change of minds by purchasers/vendors which then lead to unhappiness and allegations.

On the other hand, there are homeowners who when facing financial difficulties, pledge or "sell" their HDB flats to their creditors even though their flats cannot be sold yet as they have not fulfilled the minimum occupation period. The creditors sometimes obtain "options to purchase" while others make the debtors sign post-dated or even blank agreement forms. To address the problem of the sale and purchase of "unmatured" flats and also to tackle the issue of parties entering into all sorts innovative but potentially troublesome agreements, the Housing and Development (Amendment) Act 1998, particularly section 49A were enacted. This provision came into effect on the 20th November 1998.

SECTION 49A OF THE HOUSING AND DEVELOPMENT (AMENDMENT) ACT 1998 READS,

(i) Except with the prior written consent of the Board, no owner of any flat, house or other building which has been sold by the Board under the provisions of this Part shall, within the prescribed minimum occupation period, by contract, agreement or otherwise, sell or agree to sell his flat, house or other building or any estate or interest therein to any other person.

(2) Unless otherwise authorised by the Board, every contract, agreement or other document relating to the sale of any such flat, house or other building which is made between the owner of the flat, house or other building and a purchaser other than the Board shall be in the prescribed form.

(3) Any contract, agreement or other document which is made on or after the commencement of the Housing and Development (Amendment) Act 1998 in contravention of subsection (i) or (2) shall be null and void.

According to the Parliament Reports relating to the above provision, the Minister cited the curbing of speculation as the reason for the introduction of this provision. In the same Reports, the Minister clarified that the "prescribed form" is the Standard Sale and Purchase Agreement being in use presently. In the light of this provision, all agreements for the sale and purchase of "unmatured" flats entered into on or after the 20th November 1998 are null and void i.e. of no legal effect and thus parties shall be entitled to demand a full refund of any deposit paid thereunder and to treat the contract as cancelled. In effect, the above provision has reversed previous court decisions whereby the courts have generally recognized the validity of such contracts in the past.

However, if parties after having signed an agreement before the flat "matures" do something after the flat "matures" which is clear and in furtherance of the agreement, then they are deemed to have ratified the agreement. An example of this is when the parties execute a fresh Sale and Purchase Agreement after the flat "matures" or when the parties turn up for the first appointment at HDB and make the Statutory Declarations or sign the resale application forms.

In view of this provision, estate agents must be careful not to broker any transaction involving "unmatured" flats. This is because the party deprived of the transaction when the other party claims that the agreement is null and void will claim against the estate agent if he suffers loss.

In the example of improving market conditions, a vendor, after agreeing to sell his flat at a low price before his flat matures, finds that the market has improved and his flat can now fetch a higher price. He then seeks to annul the sale as the agreement in invalid under the provisions of section 49A. He returns the deposit money to the purchaser and that is the end of the matter as far as the purchaser is concerned.

The purchaser, in the meantime, is upset because he had forgone the opportunity to purchase another "matured" flat at a lower price earlier when he committed to purchase this "unmatured" flat upon the advice of his estate agent. As a result of the vendor's action, his only claim is against his estate agent for the extra dollars that he has to pay to purchase the "matured" flat.

In the other example of weakening market conditions, a purchaser decides to treat the transaction to purchase the "unmatured" flat as null and void when he realises that he can purchase a similar flat at a much lower price. He can also demand a refund of the deposit from the vendor. The vendor shall have no choice but to refund the deposit and treat the agreement as null and void by virtue of section 49A.

The vendor, having waited some weeks, or even months for the purchaser to submit the transaction to HDB for its consent, now finds that the market has moved against him and that his flat can now be sold for a lower amount compared to the time when his flat first "matures". He cannot claim against the purchaser for his loss. He can only make a claim against his estate agent for having misled him into thinking that the sale and purchase agreement is valid and legally enforceable.

It is therefore clear that the enactment of section 49A of the HDB (Amendment) Act is specifically to deal with the practice of transacting flats before these flats can be sold. This article has highlighted the consequences for estate agents involved in these transactions. Estate agents are well advised to re-consider when brokering such transactions. They should instead advise their clients to hold off entering into any contracts for the sale and purchase of "unmatured" flats until these have "matured" or else they may unnecessarily expose themselves to claims.