There is an enormous sense of relief when the sale of your home sails through without a hitch, so it’s easy to imagine the frustration and anger of two sets of owners when the process was suddenly upended by unexpected claims.
These invariably involve someone other than the buyer lodging a legal notice known as a caveat to stake a claim on the property.
When this happens, the sale cannot proceed and the owner must file an objection to remove the notice, a step that forces the applicant to go to court to validate the caveat and show that the claim is genuine.
So, there’s no sale until the dispute is resolved.
When someone lodges a caveat on your property, you will receive a notice of it from the Singapore Land Authority. But in one of these cases, the owners did not get to read the letter, presumably because the caveat was lodged on their investment property, which was occupied by tenants.
They discovered that their former daughter-in-law had staked a claim on their $1.3 million condominium unit only when they were selling it.
The couple took legal action and the High Court eventually removed the caveat, ruling that the woman, who was divorcing their son, had no legitimate claim on the property.
In the other case, the dispute was taken to court quickly because the owner filed an objection immediately after receiving notice that a caveat had been lodged.
But this caveat was upheld by the court because the applicant was the previous owner of the $4 million property and she claimed that the present owner still owed the balance of more than $600,000 for its purchase.
There are important lessons from these two disputes on what you should know relating to property transactions.
When a family loan sparks a property dispute
Just because you believe that you have been wronged and that someone owes you money, this does not mean that you have an automatic claim over the other person’s property.
So caveats lodged in such disputes are likely to be cancelled as “frivolous and vexatious” unless the applicants can show that they have genuine stake in a property.
In this instance, a couple had given their adult son a $200,000 loan to further his studies overseas. The arrangement called on the son and his wife to repay this loan by helping the parents pay the monthly mortgage on their investment property.
All was well until the son and his wife fell out and filed for divorce. By then, the ex-wife, who ran her own online business, had made mortgage payments totalling $100,000, which prompted her to lodge a caveat on her ex-in-laws’ investment property.
No one knew about her claim until the older couple were in the process of selling the condo. They successfully applied to cancel her caveat but the ex-daughter-in-law went on to lodge another one.
In cancelling the second caveat notice, High Court Judge Goh Yihan found that the woman did not defend her action in the first round but went on to wrongfully lodge the second caveat to annoy her former in-laws.
The judge found that she did not have an interest in the property as the mortgage payments were part of the family’s arrangement to repay the study loan given to her ex-husband.
Even if such an arrangement had resulted in the woman being owed money that could be repaid with the sale proceeds of the property, she still could not lodge a caveat to secure her claim.
This is because the caveat mechanism is meant for those who have a genuine stake in a property. It is not meant to be used as a tool to provide some form of security for personal debts.
So in making an order to free the property of any claim, the judge also ruled that the woman could not lodge further caveats on it.
This case also shows that it is hard to drag parents into spousal disputes. Such squabbles are best resolved in the Family Court, which will look at all contributions from spouses, including their payments to clear debts.
Claim for property that was not fully paid
When you want to sell a property to even a relative or friend, you should let your lawyer handle the sale professionally so that the transaction is done properly and you are paid for the deal.
Never let any close relationship cloud your decisions because you will have only yourself to blame if things go wrong.
This was what happened in a $4 million property deal because the families of the buyer and seller enjoyed a “close relationship”.
The property was transferred to the buyer in 2016 even though the purchase price was not paid. Despite this, the seller allowed the transfer to take place because she trusted that the buyer would pay up in due course.
It was not disclosed how much money changed hands then, but by 2023, the seller was still owed more than $600,000.
The relationship had worsened by then and the seller suspected that the remaining sum would not be paid. The concern was heightened by the fact that the buyer’s father, who was named the legal owner of the property, had been declared a bankrupt.
So the seller lodged a caveat on the property. But this provoked an immediate response from the buyer, who argued that there was no reason for the notice because the property was already fully paid in 2016.
Justice Goh, who also heard this case, found that the buyer had produced sufficient evidence to show that the purchase price had not been fully paid and that partial payments were made in various stages in 2018, 2021 and 2022.
In particular, he noted that the buyer made a “property consideration payment” of over $1 million in August 2022. If the purchase price had been fully paid in 2016, there was no reason for the buyer to continue to make such payments after that.
Justice Goh was convinced that the seller was “an unpaid vendor” and such status would confer her a right to lodge a caveat on the property.
But allowing the caveat to remain in this case would not resolve the parties’ problems because this meant that the property could not be sold while interest would continue to be incurred on the outstanding debt.
As a result, the judge noted that it would be in the interest of all parties for the property to be sold so that the proceeds could be used to repay any amount owed.
Justice Goh also ordered that if the property were to be sold, a portion of the proceeds equivalent to the unpaid sum of around $600,000 should be set aside until the disputes were resolved.
These cases show that the right to lodge caveat is a way to stake a claim, much like what banks do because they have stakes in the properties after extending mortgage loans to the owners.
So if you lodge a caveat on other person’s property, it merely means that it cannot be sold without your knowledge. If you want to get your money back, you would still need to produce the relevant documents to show that your claim is valid.
“Source:[When your property sale is stopped by an unexpected claimant] © Singapore Press Holdings Limited. Permission required for reproduction”
