CEHA Real Estate Exam for Agents in Singapore (Q&A)

Question 1

(I) A collective (enbloc) sale:

(a) Can only be carried out in condominium which are at least 10 years old.

(b) May require 80% or 90% consent, depending on the number of people owning units in the development.

(c) Must obtain approval from the High Court

(d) None of the above

Answer: ( d )

(II) Which statement is TRUE?

(a) There is no privity between the original landlord and original tenant

(b) There is privity of contract between subsequent landlords and tenants upon assignment by the respective parties

(c) In general, the doctrine of caveat emptor applies to all contractual transactions

(d) There are no exceptions to the doctrine of caveat emptor

Answer: ( b )

(III) In a tenancy in common:

(a) The shares of the co-owners are demarcated.

(b) The shares between co-owners are divided equally

(c) There exists the Unity of Possession

(d) (a) and (c)

Answer: ( d )

(IV) Where there are construction works being carried out on Mary’s land and the adjoining neighbour’s land sinks as a result, the following property right is involved:

(a) Licence

(b) Easement

(c) Natural right of support

(d) covenant

Answer: ( c )

(V) The leasehold title

(a) Is the type of title ordinarily issued by the State in Singapore today

(b) Is no longer issued by the State

(c) In Singapore is always for a fixed period of 99 years only

(d) Is equally valuable as the freehold title

Answer: ( a )

(VI) Where land is bought from the State:

(a) The use and intensity are stipulated as conditions in the State title

(b) The use and intensity may be altered by the purchaser

(c) Planning approval may be obtained for the land for a proposed development where the approved use and/or intensity exceed that stated in the State Title

(d) (a) and (c)

Answer: ( a )

(VII) Where a person enters a mall’s food court and is injured due to a defective ceiling fan which falls, he may be able to obtain compensation on the basis of:

(a) Negligence

(b) Nuisance and/or the rule in Rylands v Fletcher

(c) Occupier’s liability*

(d) (a) and (c)

Answer: ( d )

Occupier’s liability concerns the duty of care that those who occupy (through ownership or lease) real property owe to people who visit or trespass. It deals with liability that may arise from accidents caused by the defective or dangerous condition of the premises.

(VIII) (a) Differential premium is computed based on the Development Charge Table of Rates. (b) Where the tenure of the land is leasehold, the DC rates will be adjusted to reflect the remaining tenure of the land using the Leasehold Table.

(a) Both statements (a) and (b) are true

(b) Both statements (a) and (b) are false

(c) Only statement (a) is true

(d) Only statement (b) is true

Answer: ( a )

(IX) Which statement is FALSE?

(a) Under the standard Sale & Purchase Agreement provided for housing developers, purchasers are required to make a total of fourteen instalments payments of the purchase price

(b) The instalment payments are referred to as progress payments

(c) The instalment payments up to the issue of Temporary Occupation Permit are to be paid into a special Project Account

(d) None of the above

Answer: ( a )

(X) Which statement is TRUE?

(a) An owner of an Executive Condominium unit is not required to fulfil any minimum occupation period before purchasing a private residential property

(b) Non-Singapore citizens have to obtain approval from the Controller of Residential Property before they may purchase landed properties

(c) When purchasing a property the only costs involved are the purchase price and legal fees

(d) It is not compulsory to provide a valuation report to banks and the CPF Board on the value of the property to be purchased.

Answer: ( b )

Question 2 – In February 2010, an 11-year old block of apartments in Siglap was being considered for collective (or enbloc) sale. The site is zoned for residential development and the GFA allowed is 70,000 square feet.

(a) What is a collective sale? (4 marks)

(b) When is a collective sale feasible? (4 marks)

(c) What is meant by ‘GFA’ and how can this be increased? (4 marks)

(d) What is the legal requirement before an application can be made for collective sale? (4 marks)

(e) Name ONE ground on which the owners of the apartments can object to the collective sale. (4 marks)

[2.a] The majority or all the unit owners in the residential project sell their units to one buyer. The majority rule applies in a collective sale. However, if 100% of the owners agree, there is no need to apply for Sale Order from the Strata Titles Board (STB).

[2.b] A collective sale becomes viable for the sellers when economic obsolescence and/or functional obsolescence of the property set in. Economic obsolescence refers to the fact that individual unit cannot fetch a price higher than if they sell the land collectively. In other words, the value of the land is higher than the aggregate sale prices of all the individual units.

When physical and/or functional obsolescence set in, the costs of maintaining and repairing the property are high, leading to high cost of ownership. On the other hand, due to the poor state of repair, the rental income of the property is low and insufficient to generate positive cash flow for the owner.

[2.c] GFA means ‘gross floor area’ which is the sum of site area multiplied by the plot ratio. For the GFA to be increased, the plot ratio of the site must be increased first. The URA reviews the plot ratio in the Master Plan every five years.

[2.d] For landed houses, the law require 100% consent from the house owners. The house owners can opt out of the collective sale and others cannot compel them to sell. However, the majority of the property owners in a strata-titled project i.e. 80% or 90% of them can compel the minority dissenting owners to sell by way of obtaining the Sale Order from the Strata Titles Board (STB). The 80% or 90% majority is decided by the age of the project from the date of Temporary Occupation Permit (TOP).

If the age of the project is older than 10 years from the TOP date, the majority consent is 80% of the share values and gross floor area of the project. Any project younger than 10 years of age from the TOP date requires 90% majority consent.

[2.e] The ONE solid ground for objection to the collective sale is financial losses. However, the financial loss does not refer to negative sale where the seller is unable to enjoy positive cash proceeds after making full refund with accrued interest to his CPF Ordinary Account. Financial loss refers to the seller suffering from a loss in absolute price quantum, e.g. he had paid $1.5 million for the condo unit but the collective sale price is now $1.45 million.

Question 3 – Write short notes on the following:

(a) TWO key features of a Limited Liability Partnership. (8 marks)

(b) ONE exception to the principle of separate legal entity for incorporated business entities. (4 marks)

(c) TWO duties owed between partners. (8 Marks)

[3.a] A LLP gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company. It protects members from personal liability, except to the extent of their investment in the LLP. As long as losses are incurred by a particular partner, he may be held personally liable for claims from the losses resulting from his own wrongful act or omission.

A LLP has perpetual succession, which means any change in the partners of a LLP will not affect its existence, rights or liabilities. Income, losses and gains are passed through to the general partners according to the partnership agreement.

Professional organizations (e.g. architect firms) often form as LLP to limit malpractice claims against uninvolved partners. Partners are liable for debts and obligations created as a result of their own negligence, malpractice or misconduct, as well as those of any person under their direct supervision.

[3.b] When there is evidence to prove that the corporation has been formed for the purpose of defrauding the public or when the director(s) continues to run the business and chalk up debts after he or she has been declared insolvent, the veil of incorporation will be lifted against the corporation owners. When the cases occurred, the owner(s)/director(s) of the corporation must be personally liable for the debts incurred and/or face the consequences of whatever court judgement against them.

[3.c] Two duties owed between partners include fiduciary duty and accountability of private profits.

§ Fiduciary duty – a partner is an agent of the firm and his other partners and therefore owes the fiduciary duty. This means that partners must tell the full information of all matters affecting the partnership to another partner.

§ Accountability – every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership. The partner must also disclose to the other partner if he is carrying on a business of the same nature or is competing with the firm. He must account for and pay over to the firm all profits made by him in that business.

Question 4 – Your clients Johnny and Mary Tan are interested in purchasing a HDB resale flat. They are unsure about certain matters and ask you about the following:

(a) What is the duration of the option period? (3 marks)

(b) How much is the option fee? (3 marks)

(c) How much is the deposit? (3 marks)

(d) TWO matters that they may wish to consider during the option period. (8 marks)

(e) When is the option expiry time? (3 marks)

[4.a] The duration of the option is 14 days from the day of the granting of the option.

[4.b] The option fee is between $1/- and $1,000/-.

[4.c] With the option exercise fee of between $1/- and $4,999/-, the deposit for a resale flat can be from $2/- to $5,000.

[4.d] One matter is whether the buyer intends to take the subsidised home loan from the HDB or using a private home loan from a bank. The second matter is whether he intends to go through with the purchase or not. In the event that he does not intend to go through the purchase, the purchaser loses only the option money.

[4.e] 4pm on the expiry date of the option.

Question 5 – Jerry appoints you to market and sell his apartment at #12-37 Octagon Square. His apartment has been left vacant since 1/6/09 when he was posted to his company’s head office in New Zealand. You introduced a prospective buyer Wartono, (an Indonesian) to him and the sale was concluded on 15^th December 2009.

(a) Name two duties you owed to Jerry as his agent. (8 marks)

(b) Advise Jerry on ONE of his potential tax liabilities with regard to his apartment. (3 marks)

(c) Advise Jerry on ONE of his potential tax concessions with regards to his apartment. (3 marks)

(d) Explain whether Wartono (as a foreigner) has any liability to pay tax on the apartment. (6 marks)

[5.a] The two duties are: (a) fiduciary duty and (b) competent service. As the agent, Jerry must disclose material facts about price offers to the principal and not hide any facts including any personal interests in the price offers.

Competent service means that the agent must be adequately trained to undertake the marketing and sales of the subject property, including handling all enquiries about the subject property, all factors concerning the subject property such as the market condition, closing the sale and handle all administrative details after the sale.

[5.b] Mr Jerry still has to pay his property tax on the apartment even though he is not using his property. This is because his apartment is meant for sale though it is left vacant. Only investment properties are entitled to tax refund when they are left vacant with valid reasons.

[5.c] However, Mr Jerry is still entitled to his 4% concessionary rate because his property is not an investment property.

[5.d] A foreigner who owns a residential property in Singapore is liable to pay the same property tax as a Singaporean home owner. In this case, Wartono must pay the pro-rated property tax of half a month for 2009. By the first month of 2010, Mr Wartono will have to pay the full year’s property tax in advance.

Question 6 – (a) Discuss FOUR factors which will be taken into account when deciding whether the tort of private nuisance has been committed. (12 marks) (b) What do you understand by ‘vicarious liability’? (8 marks)

[6.a] Private nuisance is a tort whereby a landowner’s land or the use of that land has been interfered by a continuous and annoying activity or state of affairs. Unlike public nuisance, private nuisance is a tort. The four factors include the following:

(i) The claimant must show that the defendant's actions caused damage, interference, annoyance, e.g. physical damage, or discomfort and inconvenience.

(ii) The test for remoteness of damage in nuisance is reasonable forseeability, if the defendant was using their land unreasonably and causing a nuisance, the defendant is liable even if they used reasonable care to avoid creating a nuisance. The test is whether or not the nuisance was reasonably foreseeable; if it was, the defendant is expected to avoid it.

(iii) Under the principle of vicarious liability, an occupier of land can also be liable for the actions of their employees, it was also established that they could be liable for the activities of independent contractors under certain circumstances.

(iv) Only those who have a legal interest in the land affected by the private nuisance can sue for damages. After a property has been leased out, the landlord is not liable for nuisance committed by the tenant.

[6.b] An employer is vicariously liable for the torts of his servant committed during the course of his employment. For example, the bus company will be vicariously liable for the negligent acts of its bus drivers, committed while they are on duty. To prove vicarious liability three elements must be present:

§ There must be an employment relationship between the worker who committed the tort and the defendant employer.

§ The employee must commit a tort.

§ The employee must commit the tort in the course of his employment.

Question 7 – Mr Raja made an offer to purchase Mr Mohan’s property through Mr Mohan’s agent, Jackie.

Mr Mohan responded to Jackie by email confirming his intention to sell the property at $1 million. Mr Mohan instructed Jackie to receive the buyer (Mr Raja’s) cheque for 1 per cent of the purchase price and deposit into his (Mr Mohan’s) bank account, which Jackie did. On the back of the cheque were written details which fully identified the property. Other terms pertaining to the sale of the property were contained in earlier email correspondence. Mr Mohan has changed his mind and is attempting to renege from the contract.

(a) What are the ingredients necessary to the formation of a valid contract? (5 marks)

(b) Based on the above info can the contract to grant the option become binding and if so, why? (5 marks)

(c) What are the formalities pertaining to actions to enforce such a contract and do you think they were fulfilled in this case? (6 marks)

(d) Discuss the doctrine of part performance and whether it applies. (4 marks)

[7.a] The ingredients necessary to the formation of a valid contract include:

(i) Offer – this was made by Mr Raja through Mr Mohan’s agent, Jackie. Mr Raja also issued a cheque for 1% of the purchase price and handed over the cheque to the agent.

(ii) Acceptance – Mr Mohan instructed Jackie to deposit the cheque into Mohan’s bank account

(iii) Consideration – the 1% cash was handed over together with the price offer.

[7.b] Yes, based on the email correspondence and the subsequent actions of giving and receiving of the deposit, it can be seen that the parties had the intention to transact. Indeed, they had entered into a valid contract for the grant of an option for the sale of the property.

[7.c] There was the fulfilment of the requisite legal elements of offer, acceptance, and sufficient consideration furnished by the buyer Mr Raja to Mr Mohan. The contract to grant the OTP for the property was binding between the parties when the 1% cheque was deposited into Mohan’s bank account. The final requirement relating to the formation of a valid and binding contract was also present. The subsequent signing of the option was only a formality. The contract to grant the OTP has already been formed.

[7.d] Section 6(d) of the Civil Law Act provides that an action to enforce a contract for the sale of immovable property may only be brought if the contract, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith.

In a recent Court case similar to Mohan’s situation, the High Court found that the payment of the 1% cheque, on the back of which the Property was fully identified, into the seller’s bank account was an act referable to the contract to sell the Property and there was thus part performance.

Question 8

(I) The Planning Act:

(a) Divides up Singapore into 32 Residential and 16 Industrial ‘Use Classes’ Zones

(b) Prescribes 16 ‘Use Classes’ and the Green Mark Scheme for environmentally-safe buildings

(c) Allows movement freely between any of the Use Classes

(d) Does not allow movement between the Use Classes without written permission from URA.

Answer: ( c )

(II) Compensation awarded in every land acquisition case:

(a) Will be publicised in the Government Gazette prior to the award by notification.

(b) Is pegged retrospectively to what the market value was at 1 January 1995

(c) Would depend on the current ‘market value’

(d) Would depend on the difference between current ‘market value’ and the value at 1 January 1995

Answer: ( c )

(III) Which statement/s is/are FALSE?

(a) The dual system of registration in Singapore refers to the Registration of Deeds Act and the State Lands Act

(b) The Registration of Deeds Act is the current system of land registration in Singapore

(c) The Land Titles Act is the current system of land title registration in Singapore

(d) (a) and (b)

Answer: ( d )

(IV) A misrepresentation arises when:

(a) A seller includes an untrue statement in the documented contract with the buyer

(b) When the buyer agrees to enter into a contract with the seller

(c) When the seller pressurises the buyer to sign an agreement

(d) None of the above

Answer: ( a )

(V) The following are examples of vitiating factors:

(a) Misrepresentation and Mistake

(b) Duress and Undue Influence

(c) Frustration and Discharge of the Contract

(d) (a) and (b)

Answer: ( d )

(VI) In a mortgage transaction,

(a) The borrower’s rights are safeguarded by the Banking and Finance Act

(b) The lender’s rights are protected by the Monetary Authority of Singapore’s Guidelines for Banks on mortgages

(c) The borrower’s position is protected by the Equity of Redemption

(d) The borrower’s assets may be sold by the lender at any time if the borrower defaults for more than 1 month

Answer: ( c )

(VII) The State may issue Temporary Occupation Licences (TOL) and Tenancy Agreements (TA). (b) TOLS and TAs can only be issued for min-fairs, trade expositions and carnivals

(a) Both statements (a) and (b) are true

(b) Both statements (a) and (b) are false

(c) Only statement (a) is true

(d) Only statement (b) is true

Answer: ( c )

(VIII) According to the Planning Act, written planning permission is required for carrying out:

(a) Development works

(b) Works in a conservation area

(c) Subdivision works

(d) For all of the above

Answer: ( d )

(IX) Which statement is TRUE?

(a) Differential premium and development charge will be incurred for any redevelopment works

(b) Only differential premium will be incurred for redevelopment

(c) Only development charge will be incurred for redevelopment

(d) There may be no differential premium or development charge incurred for redevelopment works in some cases

Answer: ( d )

(X) (a) There is no charge for lifting title restriction when land is bought from the State. (b) The Differential Premium is the difference in value between the use and/or intensity stated in the State title and the approved use and/or intensity in the provisional planning permission.

(a) Both statements (a) and (b) are true

(b) Both statements (a) and (b) are false

(c) Only statement (a) is true

(d) Only statement (b) is true

Answer: ( b )