HDB Enhanced Contra Facility: Complete Sale and Purchase of Two HDB Resale Flat At The Same Time

We have received many questions from our clients or clients-to-be over the years about how is best to go about selling their present house and buying another house without the hassle of moving into a temporary accommodation.

HDB understand the need for resale flat sellers to sell their resale flat and buy another resale flat at the same time without having to move into a temporary accommodation. Thus, they create a facility for this called Enhanced Contra Facility. With the Enhanced Contra Facility (ECF), HDB resale flat sellers can sell their existing HDB flat and at the same time buy another resale flat using the sale proceeds and refunded CPF monies. However, the refunded CPF monies cannot be used for the payment of stamp duty and conveyancing. With the ECF, sellers can reduce the cash outlay needed for their resale flat, and the mortgage loan amount needed and the subsequent monthly repayments. ECF can only be done amongst 3 parties, resale flat seller and buyer of another flat, the seller you bought the flat from, and the buyer who purchased the flat from you. The latter 2 parties must have not have applied for similar contra facilities for their flats. ECF can also only be done if any of the party has an outstanding loan with a bank. How to go about doing this? After accepting an Option fee from a buyer and issuing an HDB-prescribed Options to Purchase (OTP) to the buyer in exchange, resale flat sellers must also secure another HDB flat within the span time of approximately 4 weeks. Together for their sale and the purchase, they can apply to HDB for a facility called Enhanced Contra Facility in the HDB Resale Submission.

Even with ECF, usually sellers will have their sale of their present resale flat, and purchase of their another resale flat completed on the same day and at the same time, leaving them with technically no time to even do house moving so the existing resale flat sellers may apply for above-mentioned temporary extension of stay. If the resale flat sellers intend to do renovation in their newly bought resale flat, they can arrange with the buyers to extend their stay temporarily in the flat for a period up to 3 months after the legal completion of the sale. Resale flat sellers and buyers shall privately work out their own terms for the temporary extension of stay. Terms to be discussed usually include whether there is rental amount involved, and if there is how much would the rental rate be, and whom between the buyer or the seller will pay for the property tax, Town Council Service & Conservancy Charge (SCC), and utility fees during the temporary extension of stay. Both the seller and the buyer do not have to show their agreement to HDB however they must indicate in the HDB Resale Submission that there will be a temporary extension of stay.

As the information on temporary extension of stay is passed on to the Property Tax department in the Inland Revenue Authority of Singapore (IRAS), new flat owners will automatically be charged a non-owner occupied tax rate. The property tax charges is usually about few hundred dollars unlike the usual owner-occupied charge that is less than S$100. We have seen a number of cases where inexperienced real estate agents had not advised their respective clients on the terms for temporary extension of stay and unnecessary disputes do arise occasionally when money is involved..

Besides extension of stay, sellers can also arrange with the seller they are buying the house from for early move-in. If the sellers intend to do renovation prior to legal completion of sale, this can be discussed upfront and usually indemnity letter will be drafted to indemnify the seller of any mishap in the renovation, and also includes terms such as reinstating the property to the original condition in the event of abortion of sale. This early move-in arrangement is more commonly available in the purchase of private residential property than in HDB resale flat.

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