Unit 2: Dealing with Interests in Land · •The Register of Deeds for Common Law land under the...

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Unit 2: Dealing with Interests in Land

2.5 - covenant

Explain how a restrictive covenant may be discharged at common

law and under the Land Titles Act.

2.6 Registration of titles

Associate a property type with a property title: certificate of title,

subsidiary strata certificate of title, or lease title.

Interpret dealings that are notified in the title document, e.g.

transfers, mortgages, charges, and leases exceeding 7 years.

Understand the effect of registration and the priority of registered

interests.

Understand the function of a caveat and the period of its

effectiveness.


Unit 2: Dealings with Interests in Land

2.7 Conveyance

inter vivos

This topic is pertinent to estate agents and salespersons and the scope is

extensive. It will be dealt with in detail in Paper 2, Competency Unit 4.

2.8 Mortgage Covered under Lesson 8.

2.9 Gift Explain the formalities and the effect of a gift of property.

Explain what makes a gift void or voidable under the Bankruptcy Act.

2.10 Trust Explain trust, and alienation by way of trust inter vivos or by succession.

Understand the implications of buying property held on trust.

2.11 Succession

Explain how an estate devolves by will and by intestate succession.

Appreciate the difference between the Civil law and Syariah law on

inheritance and the rights of disposal.

2.12 Future interests Explain what constitutes a future interest.

Distinguish reversionary interest from remainder interest of a life estate.


2.5.3 Covenant Unit 2 Page 14

• Promises, obligations and terms made by contracting parties and is legally binding

• Has two sides • Burden – Promissor’s duty to perform promise

• Benefit – Promissee’s right to enforce the promise

• Two concepts to understand: • Privity of contract – Both seller and buyer are bounded by the

covenants of contract.

• Privity of Estate – Burden that comes with the Title of property, to whoever that owns the property.

• Two types • To do or Positive covenant

• Not to do or Restrictive covenant (more on next slide)


Positive Covenants

• To do and maintain

• E.g.

• To pay said rent and hiring charges at the times stated..

• To pay all charges due in respect of telephone, supply of

water, etc…


Negative (restrictive) Covenants

• Prevent or restrict other party from doing something. 2 types: • Private – imposed by land seller. E.g.

• Not to void Insurance

• Not to cause nuisance

• By state – imposed by state. E.g. • Right to zone and rezone

• Right to impose height limit

• Plot ratio

• Limit lease period

• Recorded in CT as encumbrance

• Unless extended, shall cease to be enforceable against assigns of servient land at expiry of 20 years from date of entry on land register


Discharge of Restrictive Covenants

• Under common law, • By express release;

• by an action that amounts to an implied release;

• by unity of ownership, i.e. the land that is burdened and the land that is benefitted come into the same ownership (unity of seisin); or

• when the covenant is only enforceable in equity when it can be shown that due to changes in the neighbourhood there is no value left in the covenant or the restriction has become outmoded or has lost its usefulness.

• Under Land Titles Act • unless extended, a restrictive covenant shall cease to be

enforceable against assigns of the servient land at the expiry of 20 years from date of entry on the land register.


2.6.1 Unit 2 Page 32

What is Land Register?

• The land register shows who owns the land and whether

there are encumbrances, such as mortgages or charges

affecting the land

• Two land registers co-exist, namely:

• The Register of Deeds for Common Law land under the

Registration of Deeds Act (old system)

• The Land Titles Register for titles land under the Land Titles

Act


Mirror and Curtain Principle

• The principle of ‘mirror and curtain’ applies to the title

system in that the register is like a mirror – one look and

all necessary details are revealed. It is like a curtain in

that the purchaser only needs to be concerned with the

register and nothing else. There is no need to suspect

invalid ownership or trace documents to the true owner.



Property Types associated with Property Titles

• Different kinds of Property Titles: 1) Certificate of Title - associated with ownership of a land lot inclusive of

airspace

2) Subsidiary Strata Certificate of Title - suggests ownership of a strata unit

(airspace) in a strata titled development (condominiums, flats, flatted

factories, office buildings) ownership of just a portion of the land lot

3) Lease Title - a title granting a lease for a limited duration of time.

Note: Actual property type cannot be determined just by looking at the CT. For

example, the CT may indicate a land lot, but does not specify if it is a terrace, semi-

detached, or detached house. Due diligence still as to be made to find accurate

property information from INLIS.



Interpreting Dealings in Title Document

• The land register shows who owns the land and whether there are encumbrances, such as mortgages or charges affecting the land.

• Under the Land Register, the following can be registered: • Deeds

• In the past, conveyances of interests in land have to be by Deed (written in English)

• All dealings in land are registered.

• Registered so that can be used as evidence in court • Memorandum of Charge or Lien

• Usually registered in the form of a Caveat

• Registered to be effective against a subsequent purchaser for value

• State Grants or State Leases • To effect the transfer of interest in land

• Required for validity under Torrens System. Conclusive of evidence of Title



Importance of Registration

• Registration under the land register would secure priority

when there are conflicting or competing interests in the

same property, priority will be given to the deed which is

registered first.

• In addition, it can also be used as evidence. Under

Section 4 of the Registration of Deeds Act, a registrable

deed which is not registered is not admissible in any

court of law as evidence of title to the land.


2.6.5 What is a Caveat? Unit 2 Page 34

• A mechanism for the protection of interests in land which

cannot be registered for the time being because of their

transitional nature or because they are equitable

• Endorsed on the Land Register

• Title search will show claim by Caveator

• May also be just a notification of third parties’ interests or

may also be prohibitive in nature

• Important to lodge Caveat as first Caveator has priority

over other unregistered interests


Who can lodge Caveat?

• Anyone who has a claim to an interest in land

• E.g. Legal Interests, Registrable Interests, Beneficial

Interests, Agreement of Charge, Lien.

• Who cannot lodge?

• Mere creditors. E.g. Salesperson cannot lodge for his

commission.

• Moneylenders. E.g. Restricted by Ministry of National

Development


Caveatable Interest

Types of interests in land which are caveatable:

• Legal interest such as leases not more than 7 years

• Registrable interest pending registration e.g. mortgage and options to purchase

• Beneficial interests under a settlement or trust

• Liens such as an agent’s lien on the client for non-payable of commission.

* A lien is a passive right to hold on to documents and goods until the holder is paid.


Non-Caveatable Interests

People who have non-caveatable interests:

• A Licensee has no interest in land. Licensees who have

only a mere permission to occupy the property for a

specific purpose.

• Trade creditors who have a claim against the debtors in

the nature of a debt.


Termination & Renewal of Caveats

• Successfully lodged Caveats’ effect last for five years

• Can be removed or cancelled by Court or Caveator when

objective is met

• May be extended for another five years where it still

serves a purpose



Strata Title

• It is an extension of the title system. Before introduction

of strata title, high-rise developments are constructed

and sold on long leases. It does not provide titles to

individual unit owners. Strata title is introduced under the

Land Titles (Strata) Act. It provides legal recognition of

airspace with a building structure as land which is

capable of separate dealing and recognition.


Definition of Share Value

• Each Owner of a strata development has a share in the development as a tenant-in-common of the common property in the strata development. In other words, they share the common property according to their ownership share.

• Under the Land title (Strata) Act, the share value determines the following: • Voting rights of owners

• Quantum of the share in the common property

• Amount of contributions payable to the management corporations

• It would be useful to have a large share value, but, on the other hand, a large share value would mean that the owner has to contribute more to maintenance charges.


Calculation of Share Value

• The calculation of share value for purely residential

developments is based on 50sqm intervals of strata floor

areas as follows:


Management Corporation

• To enable the many owners to collectively manage their

developments

• The main function of the management corporation is to

control, manage and administer the common property

• The management corporation has the powers to levy

contributions to be paid by the owners for its

management and sinking funds


Decision Making

• Management corporations make decision by passing

resolutions at the general meetings.

• Ordinary Resolution

• Special Resolution

• 90% Resolution

• Unanimous Resolution

• Comprehensive Resolution

• Resolution by consensus


Types of Insurance to be taken

• The Management Corporation is required under BMSMA

to take up certain insurance policies. There include

damage policy and public policy of at least $1 million

insurable amount. If they have their own in house

employees, it is also required to take up a workman

compensation insurance policy.


2.7. Conveyance Inter Vivos

• A very important examination topic which

will be covered in Paper 2, Unit 4.


2.9. Gift

• A gift in estate law refers to the voluntary transfer of property from one person to another without valuable considerations (donations). Once a property is given away, it is irrevocable.

• A document is only considered as a Transfer by Way of Gift in circumstances where the distribution of property is not in accordance to a Will, Intestate Succession Act or Muslim Law of Inheritance.

• Buyers lawyer may raise questions. Is purpose of the sale to: • Avoid legal action such as bankruptcy or court action?

• Avoid creditor’s claims?

• Avoid paying estate duty?


2.9.1. Effect of a Gift of Property under Estate

Duty Act Unit 2 Page 41

• In the event the Grantor (person giving the property) dies

within 5 years form the date inserted in the Deed of Gift,

estate duty will be collected on the whole of the property

as if it is still formed part of the Grantor's estate (section

8, Estate Duty Act, Cap. 97)

• [Note: Applicable for deaths occuring prior to 15 Feb

2008. Estate Duty has been removed for deaths

occurring on and after 15 Feb 2008.]

* Estate duty is a tax on the total market value of a person's assets

(cash and non-cash) at the date of his or her death, regardless of a Will.


2.9.2. Effect of a Gift of Property under

Bankruptcy Act Unit 2 Page 41

• Up to a period of 5 years form the date of the Deed of Gift, the

Grantor's bankruptcy will make the instrument voidable at the

option of the Official Assignee only being rebuttable on

evidence being furnished of the Grantor's solvency at the date

of the gift (section 52 of the Bankruptcy Act, Cap. 20).

• A bankrupt shall be guilty of an offence if he has made any gift

of property during the period of 5 years prior to the date of the

bankruptcy order. (section 138(1) of the Bankruptcy Act).

* Official Assignee - an officer in the law court who distributes a

bankrupt's assets to the creditors.


2.9.3. Formalities of a Gift of Property

Unit 2 Page 42

Property still subject to Mortgage and/or CPF Board Charge

• If your property is encumbered by a mortgage and/or CPF Board Charge, then you should always check with the Bank or CPF Board before attempting to enter into a Deed of Gift of your share in the property.

• In many cases, the Mortgagee (eg. Bank) is unlikely to accede to your request to transfer your share by way of gift due to the implications and effects of the gift.

• Even if the Mortgagee is agreeable, if you are no longer an owner in the property after the transfer, your Transferee(s) will need to procure the discharge of the existing Mortgage and a fresh Mortgage will need to be registered, and legal costs and expense will be incurred.


2.9.3. Formalities of a Gift of Property

Property is free from Encumbrance (no Mortgage or Charge)

• Generally the following may need to be done (not exhaustive or comprehensive): • Deed of Gift to be entered between the Transferor and the Transferee

• Stamping of the Deed of Gift based on the market value of that share of the property. Parties are advised to obtain a valuation report on the market value of the property, so as not to under-declare the market value to the Commissioner of Stamp Duties (IRAS). Penalty may be payable for under-declaration of market value.

• Transfer instrument to be prepared and filed at the Singapore Land Authority with the relevant title document.

• Notice of Transfer to be lodged with the Comptroller of Property Tax, MCST (if any) and Tenant (if any).

* Legal costs and expense will be incurred for the above process.


2.10. Trust Unit 2 Page 42

• A trust is a legal arrangement by which a person or company is appointed to administer the property for the benefit of someone else known as the beneficiary. Some basic terms include:

• Trustor – Transfers property into trust

• Trustee – Holds legal title to assets of trust and manages it. Fiduciary duty. Max 4.

• Beneficiary – Benefits from the trust, included possession of property or income generate.

• As long as the person is capable of owning land, he/she can be a trustee. A trust involving property can be established in the following ways:

• By will

• By express declaration. A trust deed is created stating that the trustee as a registered owner holding the property for the benefit of the beneficiary.

• Implied by law in the form of resulting trust

• Implied by law in the form of a constructive trust


Resulting Trust

• A trust under which a transferor retains a beneficial interest or that the settlor’s interest under such a trust arises only by implication.

Constructive Trust

• A constructive trust is an equitable remedy resembling a trust imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference.

http://en.wikipedia.org/wiki/Trust_law

http://en.wikipedia.org/wiki/Court

http://en.wikipedia.org/wiki/Unjust_enrichment


3 Requirements For Valid Trust

• Presence of declaration of trust

• Presence of vesting of the land to the trustees

• Presence of 3 certainties

1. Establish intention to create a trust

2. Establish the subject matter of trust

3. Establish the beneficiaries of the trust


About Trustee

• A trustee cannot profit from the trust

• A trustee must abide by the terms of the trust

• Trustees are jointly and severally liable for any breach of

trust

• A trustee can only invest trust assets in authorized

investments.


2.10.2. Alienation by Way of Trust Inter Vivos or

by Succession Unit 2 Page 43

• Alienation simply refers to the transfer of property rights. Trust

inter vivos is also known as a Living Trust.

• You create this estate planning tool while one is alive, rather

than one that is created after death. Living trust allows transfer

of property including house, car, cash, insurance, and

investment to a separate entity. A will can be set up to ‘pour

over’ other assets into this trust at the time of death. It is an

arrangement under which the trustee holds legal title to

property for your beneficiaries. Setting a living trust saves your

beneficiaries hassle, money & time as it avoids probate and

efficiently distributes your assets for your dependents.


2.10.2. Alienation by Way of Trust Inter Vivos or

by Succession - Cont’d

• Sale of the property must bear the relevant signatories of trustees (indicated as a restriction in the land registry) and the transaction must detail conditions of such a sale. Generally the limitations of the sale are determined by the way the trust is designed and must be properly addressed by a legal representative.

• Alienation by Succession is also known as Testamentary Trust.

• You can have a testamentary trust in your Will, which comes into existence on the date of your death. If there is no Will recorded, there cannot be a trust since assets will be distributed according to the Intestate Succession Act.


2.10.3. Buying Property held on Trust/ Property

that is Settled Estate Unit 2 Page 43

• Settled Estate

• means all immovable property and all estates or interests therein, which are the subject of a settlement; and

• includes any immovable property of or to which a minor is seised or entitled in his own right other than a lease not exceeding 3 years which is executed by a minor who has attained the age of 18 years as a principal.

• Purchase of property held in trust, similar to a sale, is heavily dependent on the way the trust is designed. The Deed of Trust stipulates how decisions of trustees are to be taken.

• For example, certain trust deeds require that all decisions of trustees to be taken unanimously while other trust deeds only require a majority of trustees. If a unanimous decision is required, but only 3 out of 4 sign the agreement of purchase, the sale will be unenforceable.


2.11. Succession

Testate Succession – Person died and left behind a will

• A valid will has to be in writing and signed by the testator and evidenced by two or more witnesses not beneficial from the will.

• Interest may be given away in accordance with valid will

• Freedom of testation not applicable for Muslims

Intestate Succession – Person died and did not leave behind a will

• Interest will be given away in accordance to the Interstate Succession Act

• Generally half of assets to be given to spouse and the other half to be divided equally among sons and daughters.

• Follow the “Next-of-Kin” of the deceased

• In the absence of NOK, state will be entitled to property


Succession Order


2.11.3. Civil Law vs. Syariah Law on Inheritance Unit 2 Page 45

• Civil law of property succession does not apply for Muslim citizens.

“Section 111(1) of The Administration of Muslim Law Act (AMLA) states that no Muslim domiciled in Singapore shall dispose of his property by Will except in accordance with the provisions of and subject to the restrisctions imposed by the school of Muslim law professed by him.”

“Section 112(1) of AMLA states that in the case of any Muslim domiciled in Singapore dying intestate, the estate and effects shall be distributed according to the Muslim law as modified, where applicable, by Malay custom.”


2.12. Future Interests Unit 2 Page 46

• A legal right to property ownership that does not include

the right to present possession or enjoyment of the

property.

• Future interests are created on the formation of a

defeasible estate; that is, an estate with a condition or

event triggering transfer of possessory ownership.

• E.g. landlord-tenant relationship


2.12.2. Revisionary Interest Unit 2 Page 46

Reversionary Interest

• Right to reoccupy and use land in the future. A landlord who

lets out his property has a similar reversionary interest and at

the end of the lease the interest will revert to the landlord.

• A new owner who purchases a property subject to tenancy can

only enjoy possession of the property when the tenancy

expires. During the lease period, the new owner cannot enjoy

his bundle of rights except the right of disposition which entitles

him to sell or gift the property away.


2.12.2. Remainder Interest Unit 2 Page 46

Remainder Interest (Life Estate)

• Having interest in property for remaining period of a person’s life. After which, reverts to freeholder – Remainder.

• A person may have remainder interest in a property, but instructed to give life estate to a relative. This person may be a freeholder (or the remainder), but the relative gets to enjoy rights of possession, enjoyment, control and exclusivity. If the relative rents out the property, the owner cannot object.

• Someone with remainder interest in unlikely to sell the property, since the new owner is is only able enjoy possession of the land when the person with life estate dies.

• The life estate holder enjoys the rents even if the remainder sells the property away.


Any Questions?


Recap Unit 2: Dealing with Interests in Land

2.5 - covenant

Explain how a restrictive covenant may be discharged at common

law and under the Land Titles Act.

2.6 Registration of titles

Associate a property type with a property title: certificate of title,

subsidiary strata certificate of title, or lease title.

Interpret dealings that are notified in the title document, e.g.

transfers, mortgages, charges, and leases exceeding 7 years.

Understand the effect of registration and the priority of registered

interests.

Understand the function of a caveat and the period of its

effectiveness.


Recap Unit 2: Dealings with Interests in Land

2.7 Conveyance

inter vivos

This topic is pertinent to estate agents and salespersons and the scope is

extensive. It will be dealt with in detail in Paper 2, Competency Unit 4.

2.8 Mortgage Covered under Lesson 8.

2.9 Gift Explain the formalities and the effect of a gift of property.

Explain what makes a gift void or voidable under the Bankruptcy Act.

2.10 Trust Explain trust, and alienation by way of trust inter vivos or by succession.

Understand the implications of buying property held on trust.

2.11 Succession

Explain how an estate devolves by will and by intestate succession.

Appreciate the difference between the Civil law and Syariah law on

inheritance and the rights of disposal.

2.12 Future interests Explain what constitutes a future interest.

Distinguish reversionary interest from remainder interest of a life estate.


End of Lesson 7 Reminder that Mortgage is also covered under Unit

2/Paper 1. It is covered with Unit 4 due to it relevance

and that it aids learners’ understanding.

Unit 2: Dealing with Interests in Land · •The Register of Deeds for Common Law land under the...

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