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?
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.
Halo .. thanks for the informative article.
If per POS, outstanding maintenance fee, sinking fund , insurance will be borned by bank (assignee). While outstanding utilities and telephone bills will be borned by purchaser. (Bidder).
Does the above expenses and costs eventually can be or legally be reimbursed by the original beneficiary owner (assignor) ?
Mak Kar Kuen
Hi John. Thank you very much for your interest.
Outstanding maintenance fee, sinking fund, insurance may not claim back from bank. Outstanding utilities does not need to pay at all.
You can check in the POS or your agent the total hidden cost. It may not be the same term and condition for every auction.