20 August 2020
What are Good Class Bungalows?
Landed residential properties are coveted in land-scarce Singapore due to its limited supply and the prestige associated with owning or living in one. Among such properties, Good Class Bungalows (“GCBs”) are the most exclusive and costly, in part due to the planning constraints imposed by the Urban Redevelopment Authority (“URA”).
For a landed residential property to be classed as a GCB, it must demonstrate the following attributes:
(i) have a land area of at least 1,400 sqm;
(ii) be located in one of the 39 GCB areas gazetted by the URA;
(iii) the land must consist of a minimum plot width of 18.5 m and minimum plot depth of 30 m; and
(iv) the footprint of the bungalow and coverage of all building features must not exceed 40% of the land plot.
Due to height restrictions, GCBs are also generally built up to two storeys only.
It is estimated that there are currently about 2,800 GCBs in Singapore only. Most of them are freehold properties, making them attractive for legacy planning.
Who is eligible to buy?
Only Singapore citizens or Singapore entities are allowed to purchase a GCB. In particular, permitted entities include private limited companies with directors and shareholders who are all Singapore citizens, or a trust with trustees and beneficiaries who are all Singapore citizens.
A foreign individual or entity will not be permitted to buy a GCB. However, it is possible for a foreign individual or entity to rent one.
A foreign individual or entity may consider acquiring other types of landed residential property instead. Approval from the Land Dealings Approval Unit of the Singapore Land Authority (“SLA”) will still be required prior to the purchase.
What should I take note of when buying a GCB?
Below are two important points that potential buyers should take note of.
State and condition of the property:
If the buyer’s intention is to tear down and redevelop the existing bungalow, the buyer could agree for the property to be sold on an “as-is, where-is” condition at the date of completion i.e. in the state and condition on the date of completion.
The buyer may also decide to subdivide the plot of land into smaller plots and sell them on the resale market, subject to approvals being obtained from the relevant authorities.
However, if the buyer intends to undertake minimal construction work or requires certainty as to the condition of the property on handover of the keys and access, then the sale contract should specify that the seller is to deliver the property in the same state and condition as it was at the date of the contract, save for fair wear and tear. There should also be express warranties to ensure that no unauthorised additions or alterations have been carried out on the property.
Escape clauses
Legal requisitions are often conducted by the buyer’s lawyers in the acquisition of real estate properties.
The buyer should consult his lawyers to assess whether the property is subject to road or drainage reserves, which could result in affected portions of the land being set aside or surrendered, or approval being required from the Land Transport Authority (“LTA”) or the Public Utilities Board (“PUB”) prior to the commencement of any redevelopment work.
Any unsatisfactory legal requisition replies may affect the value of the property. It is therefore highly important that the sale contract includes provisions which entitle the buyer to withdraw from the transaction in the event of any unsatisfactory legal requisition.
How do I ensure that my privacy is protected?
Once a sale contract is formed with the seller, it is usual practice for the buyer’s lawyers to lodge a caveat against the property with the SLA.
A caveat will contain publicly available information, such as:
(i) the address of the property;
(ii) the identities of the buyer and seller; and
(iii) the purchase price and date of contract.
Even if a caveat is not lodged, the name of the buyer and the purchase price will become publicly available information after the acquisition is completed.
Privacy is a common concern, especially for buyers of GCBs. They are often public figures who would like to avoid unwanted attention.
To acquire property discreetly, we advise potential buyers to establish an effective property holding structure, which can protect the privacy of the buyer and possibly achieve stamp duty savings.
For example, if a buyer intends to purchase the property either for their child, who may still be a minor, or with a company, he may consider doing so through a trust arrangement. In such cases, the parent or the entity will retain legal ownership of the property as a trustee, while the child or appointed beneficiary becomes entitled to its beneficial interests.
All paths lead to Rome; when looking to acquire a GCB, each buyer’s needs and objectives can be met with the right solutions.
For further information, please contact:
Alex Toh, Senior Associate, Withersworldwide
amarjitkaur@witherskhattarwong.com
