Mother Has No Claim on Daughter’s Home Despite Paying Over S$1 Million, High Court Rules It Was a Loan

When her daughter got married, the woman helped to pay almost half of the S$2.4 million for the matrimonial home. When the daughter’s marriage hit the rocks, she went to court to stake a claim to the property.

The daughter had forked out S$150,000 for the down payment, while the mother paid S$450,000. They claimed there was an understanding that the mother would own 75 per cent of the property. To date, the mother has spent over S$1 million on the property, including helping with the monthly mortgage and other expenses.

The woman asked the High Court to declare her the primary owner of the house so that her share would be excluded from her daughter’s divorce.

The court found that the mother did not own any share in the house because she was merely giving a loan to her daughter to buy it. As the mother had signed a loan agreement with her daughter, High Court Judge Pang Khang Chau found that she had the right to demand that her daughter return the money. As the daughter is the sole owner, the entire property could be deemed a matrimonial asset since the couple had lived there during their marriage.

The mother has filed an appeal against the decision.

The mother said that when she handed her money to her daughter, she was investing in the property as part owner and that they would both own the house. But there was no discussion of how the property would be shared.

It was only later that both of them signed an agreement which stated that the daughter could continue to keep the house after the death of the mother, but that if the house were to be sold, the daughter would have to share the proceeds with her siblings.

The judge found that the agreement set out how the daughter should repay the loan by distributing the sales proceeds to the siblings, thus showing that the mother did not have an interest in the house. As the parties also described the payment from the mother as a loan, the judge ruled that the daughter was the sole owner and that her mother had no share of it.

Making the ownership claim would have got the woman into trouble with the taxman, because the house would have been her second property and subject to Additional Buyer’s Stamp Duty. By having her daughter hold her share in secret during the 2019 purchase, the taxman could claw back the applicable ABSD for the whole property plus penalties, which could amount to over S$400,000.

Although the court ruled that the mother had no share in the house, it went on to analyse the tax implications she would have faced if she had indeed bought it.

The mother, who owns an HDB flat in Bedok, initially wanted to sell it before co-buying the house, but later changed her mind for sentimental reasons, as the unit was near another daughter’s flat. Despite this, she claimed she had no intention of avoiding ABSD, even though she maintained she would own a 75 per cent stake, and said the issue of ABSD was not on her mind at the time.

The judge disbelieved her, especially as she had planned to buy the house jointly with her daughter but later changed her mind and withdrew her name so as not to be liable for the ABSD as an existing home owner.

The judge noted that the mother was a successful business owner with the financial resources to fork out more than S$1 million in cash upfront for the house. This comprised the S$450,000 down payment, S$80,600 for the regular stamp duty, S$110,000 for renovations and furnishings, and a S$432,000 deposit for the bank loan.

“It was therefore extremely unlikely that she would not have considered tax implications such as ABSD at the material time,” the judge noted.

As a rule, existing property owners who use a first-time buyer to purchase another property on their behalf without paying the applicable ABSD would be committing an unlawful act to circumvent the tax law. So the mother’s failure to pay the ABSD was an illegal purpose, whether or not she was aware of the law.

The judge noted that even if the appeals court were to hold that the woman is a co-owner of the house, his analysis of the unlawful transaction would apply and she would have to answer to the taxman for skipping payment of the ABSD. The taxman is empowered by law to look into suspected tax dodging cases to make home buyers pay the appropriate ABSD and the penalties for not being upfront about their transactions.

First, if parents intend to own a property jointly with their children, they should do it legally as joint owners and pay the applicable ABSD if they own other properties. Otherwise they could end up like the mother in this case, having to file a lawsuit to stake a claim if there is a family dispute. Even if they manage to prove their share, they would be liable to pay the applicable ABSD plus penalties for not being upfront about their ownership during the purchase.

Second, parents should know that if they buy properties that their children use as matrimonial homes, their children’s spouses may get a share in them if the marriages break down. One of the starkest examples of spousal claims involves a S$6 million property that a woman had inherited and used as her matrimonial home. When her marriage ended, her husband, who was the main breadwinner, was given a 40 per cent share of the asset as he had spent a substantial sum improving and renovating the home.

The broader point from the report is to be clear about the rules that govern property transactions when buying additional properties for relatives or as an investment. Because such purchases involve large sums, misunderstanding the rules can be very costly, potentially incurring hundreds of thousands of dollars in additional costs or, in a dispute, the loss of the property itself.