Property Legal Brief: Tougher for Foreigners to Buy Commercial & Residential Properties. How to Safeguard Your Legacy?

By Lee Heng Eam

Most people are familiar with restrictions on foreign ownership of residential properties in Singapore, with measures such as hefty additional buyer’s stamp duty payable by foreign buyers, and the need to seek government approval for the purchase of landed homes.

These measures have at times nudged investors to look into buying other types of properties. Going forward, however, foreigners wishing to purchase Commercial and Residential land or property will need to take an extra step.

New Requirements for Foreign Purchasers
Effective 20 July 2023, foreign persons (individuals and entities) must obtain approval from the Land Dealings Approval Unit (“LDAU”) to purchase land zoned as “commercial and residential (the “C&R Properties”). Existing foreign owners of C&R Properties need not seek approval if they intend to retain the property as-is. However, if they wish redevelop the C&R Properties, approval must be obtained.

These new requirements are brought about by the changes to the Residential Property Act (“RPA”). According to the Ministry of Law and Singapore Land Authority (SLA), the requirements are aimed to “safeguard residential land for Singaporeans”.

Foreign persons who were granted Option to Purchase (OTP) by sellers before 20 July 2023 AND have exercised or will exercise the OTP on or before 9 August 2023 AND the OTP has not been varied on or after 20 July 2023, will be exempted from the approval requirement.

Whilst it is clear that foreign persons who intend to purchase C&R Properties (on or after 20 July 2023) will require LDAU approval, how about foreign beneficiaries? This was addressed in a document issued by the SLA (hereinafter referred to as “RPA Q&A”).

Foreign beneficiaries must obtain approval
Under FAQ 7 of RPA Q&A, if the owner of a C&R Property passes away before 20 July 2023, a foreign person who is a beneficiary to the estate need not apply for LDAU approval to inherit the C&R Property. If death occurs on or after 20 July 2023, such foreign beneficiary will need to apply for LDAU approval. This requirement applies to both testate (when the deceased left a will) and intestate succession (when the deceased did not leave a will and their estate is distributed according to the laws). If LDAU approval is not obtained, the C&R Property must be disposed of within 5 years from the date of death of the deceased.

Potential Issues
A beneficiary can become a foreign person, and at times, such changes will not be made known or informed to the deceased during his or her life time.

If a beneficiary becomes a foreign beneficiary, the C&R Property will be “removed” from the deceased’s estate if the foreign beneficiaries could not obtain LDAU approval to inherit the same. In other words, the C&R Property will have to be sold and will not be able to form part of the deceased’s legacy and property portfolio.

With knowledge of this requirement, or when you have knowledge that your beneficiary is a foreign person, what steps must you take to preserve your property portfolio for generations to come?

The answer lies in the definition of “foreign person” under the RPA.

Definition of Foreign Person
Under the RPA, a foreign person means any person who is not any of the following:
(a) Singapore citizen;
(b) Singapore company;
(c) Singapore limited liability partnership; or
(d) Singapore society.

Therefore, as part of estate and legacy planning, having the appropriate vehicle to hold the C&R Properties (for example, Singapore company holding C&R Property with beneficiaries as shareholders) can be a viable tool to ensure that C&R Properties can be preserved, retained and enjoyed for generations to come.

As with other similar writings, the author reminds all readers to seek professional advice from lawyers or real estate sale consultants who are experienced on such matters before taking any action. It is always important to get the right guidance from the right people, in order to take the right decision in the right direction.

About the writer
Heng Eam serves as Assistant Vice President (AVP) to PropNex Limited since March 2021. A lawyer by training, he was called to the Malaysian Bar in 2005. From 2007, he practiced law in Singapore for several years before being called to the Singapore Bar in 2014. He then served as legal counsel for in another major real estate agency, from 2015 up till 2021. Besides his specialisation in litigation, he also provides legal counsel for corporate regulatory issues such as the Personal Data Protection Act (PDPA), as well as advises clients on employment, property, and landlord and tenant disputes.

Residential Property (Amendment) Notification – 20 July 2023 Q&As