What is hidden cost in auction?
Outstanding Quit Rent, Assessment Fees, Maintenance Fees, Sinking Fund, Insurance Premium & Late Charges
Lawyer Fees to do Memorandum of Transfer (MOT), MOT stamp duty for 1st transfer, MOT stamp duty for 2nd transfer and processing fees to developer or liquidator.
Outstanding Utilities Bills such as Electricity, Water, and Sewerage
Who pay outstanding quit rent, assessment fees, maintenance fees, sinking fund, Insurance premium, & late charges?
Bank and/or successful bidder.
How to manage this risk?
You can check in Proclamation of Sale (POS) and Condition of Sale (COS) to confirm if you can claim back all this outstanding fee. There are cases that you can claim back partially from bank such as 50% of the total outstanding maintenance fees, claim up to maximum of 6 years of outstanding maintenance fees, cannot claim or etc. However, sometimes it may not be stated in POS or COS therefore, please check with your appointed Real Estate Agent (REA), Probationary Estate Agent (PEA) or Real Estate Negotiator (REN).
Who pay lawyer fees to do MOT, MOT stamp duty for 1st transfer, MOT stamp duty for 2nd transfer and processing fees to developer or liquidator?
Successful Bidder.
How to manage this risk?
You will need to appoint a lawyer to do MOT for property auction by bank and to pay MOT stamp duty for 1st transfer (if applicable) but there are cases that you will need to pay MOT stamp duty for 2nd transfer.
It is usually for property which title has been issued but unfortunately developer doesn’t allow direct transfer of ownership to successful bidder. Therefore, title need to be transfer to current owner name (MOT – 1st Transfer) then to successful bidder (MOT – 2nd Transfer).
Prior to auction, please check with developer or liquidator (if developer has wind up) if title has been issued. If title has been issued then ask if they allow direct transfer of ownership. If developer or liquidator doesn’t allow it then calculate if it is worth to bid after adding additional one-time MOT stamp duty or otherwise to wait reserve price to drop further. Please note that the MOT – 1st transfer fee is calculated based on SPA signed between current owner with developer. In addition developer or liquidator may also charge a processing fee of 1% – 5%.
Please take note that there are 4 types of fees as follow:
Lawyer fees to do MOT
MOT stamp duty for 1st transfer
MOT stamp duty for 2nd transfer (If applicable)
Processing fee to developer or liquidator 1% – 5% (If applicable)
Please check with your REA/PEA/REN on details of fees that you will need to pay.
Who pay Outstanding Utilities Bills such as Electricity, Water, and Sewerage?
Previous Owner.
How to manage this risk?
I have a personal experience, when my client who has successfully purchase a property auction by bank from me failed to register as new user at the utility branch. The utility officer asks my client representative to pay the previous owner outstanding bill before they can register as new user.
Fortunately, my client representative did not pay as requested and I went there together with their representative the next day and successfully register as new user without the need to pay for the previous owner outstanding bill.
Why?
My client representative was told to just register as new user at the utility branch and was not aware that she needs to explain to the utility officer why they do not need to pay previous owner outstanding bill.
When I went there the next day, I showed all the original document such as Proclamation of Sale, company registration, and payment receipt and explained to the officer why my client does not need to pay previous owner outstanding bill because they have just bought this property auction by bank and they are not the user for the outstanding bill.
