No sale, but agent wants commission

No sale, but agent wants commission

 

Firm files claim for $4,000 against flat owners… and loses

 

WHY should you pay for service which you never received?

 

By Tay Shi’an

 

 

30 March 2008

 

WHY should you pay for service which you never received?

 

That was what a family in Ang Mo Kio asked when they refused to pay their housing agent because the latter allegedly failed to help them sell their flat.

 

But the real estate company said it was the family that did not want to proceed with the deal after it had found a buyer.

 

The company filed a claim against them at the Small Claims Tribunal for its commission of about $4,000 in January.

 

More than 1 1/2 years after the family hired the agent to sell their three-room flat, the case was settled, on 17 Mar.

 

The tribunal ordered the family to pay the realtor just $250 – half the $500 option fee received from the potential buyer.

 

The order was met with relief by fishmonger Tan Tian Siong, 60, and his wife, Madam Hong Yin Ching, 48, who said they put their home up for sale because of severe financial difficulties.

 

The couple, who have a combined monthly income of $700, have three children.

 

Their 21-year-old son is intellectually disabled, while their 8-year-old son was born with a cleft lip and his right arm had to be amputated at the elbow when he was 3, after an illness.

 

Their 22-year-old daughter is in polytechnic and the money from the sale of the flat was meant to pay for her education.

 

Said Madam Hong in Mandarin: ‘We’re so glad it’s finally over. It was so stressful.’

 

The real estate company, ERA Realty Network, said it had claimed the commission as it had secured a ready and willing buyer for the flat.

 

But Mr Eugene Lim, ERA’s assistant vice-president, said the company accepted the tribunal’s decision.

 

The saga started in August 2006, when the Tans hired ERA agent Jeremy Ang, and put their Ang Mo Kio flat on the market.

 

They thought it should be easy to sell their flat and Mr Ang found them a buyer in December that year. But, at the last minute, the buyer backed out.

 

Then in April last year, Mr Ang found them another set of buyers, who wanted to buy the flat for $193,000.

 

The Tans said the potential buyers signed an option to purchase and paid them an option fee of $500 on 22 Apr.

 

After they received a copy of the option form from Mr Ang, they said they realised there was no start or expiry date on it.

 

They showed a copy of the dateless option form to The New Paper.

 

The Tans claimed that for one month, they kept calling Mr Ang but could not reach him.

 

They called HDB and found out that an option to purchase usually expires in two weeks.

 

Tired of waiting, they called HDB in late May to cancel the application to sell the flat.

 

They showed The New Paper a letter from the HDB dated 29 May confirming the cancellation.

 

That same week, they received a bill from ERA for $4,053 as commission.

 

The Tans ignored the bill and filed a complaint against the agent with the Consumers Association of Singapore.

 

Said Madam Hong: ‘Why do we have to pay him commission when he didn’t manage to sell my flat after one whole year? I would rather use the money to pay for my children’s needs.’

 

In July, they received a lawyer’s letter from the potential buyers.

 

The potential buyers claimed they had given Mr Ang another $500 to exercise the option on 3 May and asked why the Tans had cancelled the sale.

 

The buyers also lodged a caveat – a notice of their claim to the property – against the Ang Mo Kio flat.

 

Said Madam Hong: ‘We were so shocked. We never received the $500 exercise fee.’

 

They had to hire a lawyer, and after several rounds of letters, the potential buyers agreed to withdraw the caveat, and each side paid its own legal fees.

 

The Tans’ bill came to about $1,500. They borrowed from relatives to pay it.

 

But ERA’s Mr Lim has a different version of what happened.

 

MUTUAL UNDERSTANDING?

 

He said that there was a mutual understanding between the Tans and the potential buyers that the option form be left undated until the buyers got a loan approval letter from the bank.

 

That was why it was eventually dated 2 May. And he said the Tans were fully aware of this.

 

He said ERA tried several times to pass the $500 exercise fee to the Tans, but the couple kept rejecting the money. The buyer’s agent also tried to do so.

 

After the case was decided last Monday, Madam Hong said: ‘It’s like a weight is finally off our shoulders. Now, we can finally move on.’

 

Source: The New Paper

What to double-check when filing taxes

What to double-check when filing taxes

 

The deadline for individual income tax returns is just around the corner. Lorna Tan looks at common mistakes taxpayers make

 

THIS is the time of the year when taxpayers file their income tax returns – a mundane exercise for most. But for taxpayers who fail to report accurately, the penalty could be painful, involving fines or even a jail term.

 

As a result of the hot property market last year, two groups of taxpayers – Singaporeans who rent out their properties and real estate agents – can expect to be scrutinised closely this year.

 

Although every taxpayer is expected to file his returns responsibly, the Inland Revenue Authority of Singapore (Iras) is urging landlords and real estate agents to exercise extra care when filing this year.

 

Said Iras: ‘As the rental market had been active in 2007, Iras will put more emphasis on rental income declaration so as to ensure that taxpayers report their rental income correctly.’

 

Boosted by a buoyant economy and population growth, residential rents surged more than 40 per cent last year.

 

It is no wonder that Iras expects to step up checks on taxpayers who do not declare their full rental income or who make wrongful claims for expenses against their rental income.

 

Iras noted: ‘Our checks will include verification of gross rental and expenses and requests for supporting documents.’

 

Property agents can expect the same treatment from Iras, which will be checking and verifying the details of their income declarations.

 

This year, online tax returns must be completed by April 18; hard-copy forms must be posted to Iras by April 15.

 

According to Iras, there are several areas where individual taxpayers tend to make mistakes. These include the reporting of rental income as well as claims for parent relief or child relief.

 

For the self-employed, common mistakes include wrongful declaration of income and wrongful claims for expenses.

 

WHAT INDIVIDUALS SHOULD WATCH

 

Rental income, expense claims

 

FAILURE to report the gross rental income collected is a very common mistake. In most cases, taxpayers omit the income they get for furniture and fittings.

 

In a tenancy agreement, the gross rent is usually broken down into various components: rent for premises, rent for furniture and fittings, and service charges. When declaring rental income, taxpayers need to give the gross or total figure.

 

Other mistakes include reporting rental income based on estimates as well as incorrect expense claims. Taxpayers should note that expenses such as mortgage interest incurred on personal loans are not allowable. You can claim interest only on your mortgage loan.

 

Non-tax-deductible expenses include the cost of renovation, depreciation of furniture and fittings, and the legal costs incurred to secure the first tenant.

 

Deductible expenses are interest on your mortgage loan, property tax, fire insurance, commission paid to get a subsequent tenant, and expenses on repairs and maintenance.

 

Taxpayers should provide a working computation of how they arrived at the net rental income, with details of deductible expenses for each property.

 

In order to substantiate the income declared and expenses claimed, taxpayers should keep supporting documents such as tenancy agreements, mortgage interest statements, and invoices and receipts showing the expenses incurred.

 

·  Case study

 

Businessman Patrick Soon (not his real name) rented out a property, but did not declare the rental from the furniture and fittings. He thought he needed to declare only the rental for the premises.

 

He also claimed for personal medical and overseas travel expenses against his rental income.

 

After factoring in the rental for furniture and fittings and disallowing the private expenses, Iras found his additional taxable income came to about $100,000 a year. Additional tax and penalties were also imposed, according to Iras.

 

Parent relief

 

TAXPAYERS can claim this relief if they supported their parents, grandparents or great-grandparents in the previous year.

 

Common problems include duplicate claims and non-eligibility because of the dependant’s income level or age. Like many taxpayers, you might not be aware that this relief can be claimed only if the following conditions are met:

 

·  The dependant must have been 55 or above in the previous year;

 

·  His or her annual income (including dividends, interest and pensions) did not exceed $2,000 in the previous year;

 

·  He or she lived in Singapore in the previous year;

 

·  If he or she did not live in your household, you incurred $2,000 or more to support him or her; and

 

·  No one else is claiming this relief in respect of the dependant.

 

·  Case study

 

Ms Margaret Ang (not her real name) claimed the relief for both her parents, who had lived in her household for assessment years 2005 to 2007.

 

Iras found her father’s income had exceeded $2,000 in each of the years from 2004 to 2006. The relief in respect of her father had to be withdrawn; only that in respect of her mother was allowed.

 

Child relief for working mums

 

WORKING mothers who were married, divorced or widowed in the previous year can claim this relief. However, some do not realise they cannot do so if their children are not Singapore citizens.

 

·  Case study

 

Ms Selina Lee, a non-Singapore citizen, claimed the relief for her three children for assessment years 2005 to 2007.

 

The relief was withdrawn when Iras discovered that all three children are not Singapore citizens.

 

WHAT TO AVOID IF YOU ARE SELF-EMPLOYED

 

MISTAKES made by sole proprietors and those in partnerships include reporting of income under an incorrect category and wrongful claiming of expenses.

 

Many also keep incomplete records, for example, they don’t always hang on to receipts for public transport and entertainment expenses, which must be incurred for business purposes only.

 

·  Case study

 

Mr Robert Chan (not his real name) is a real estate agent who earns commission income. In his tax returns for assessment years 2005 and 2006, he claimed substantial deductions for transport expenses.

 

Subsequent checks by Iras revealed some of these expenses were incurred in respect of his private car, so the deductions were not allowed. However, the remaining claims were allowed after he was able to produce receipts to show that they were public transport expenses incurred in the course of his business.

 

Mr Chan had also claimed entertainment and gift expenses based on estimates. Without enough documents to substantiate the claims, those expenses that could not be fully substantiated were disallowed as deductions.

 

The additional taxable income totalled $126,000 for the two assessment years.

 

Source: Straits Times

HDB resale market healthy but prices rising at slower pace

HDB resale market healthy but prices rising at slower pace

 

Total sale prices likely to be steady or higher while upfront cash demands may continue to slide

 

By Joyce Teo

 

WHILE quiet may prevail in the private homes market, the resale market for HDB flats offers another picture – one filled with steady activities.

 

Still, a number of potential HDB resale flat buyers are kept out of the market by the high upfront cash sums that some sellers demand.

 

These cash sums are on top of the valuation price of a flat and can be paid only in cash.

 

Last year, when HDB resale prices rose 17.5 per cent in line with the private property boom, many sellers rode on the buying wave and started asking for cash- over-valuation sums ranging from $50,000 to more than $100,000.

 

For those who are holding off their HDB purchases for a lower price, property agents say cash- over-valuation amounts could continue to slide. But HDB resale flat prices are unlikely to tumble in the foreseeable future, they say.

 

‘The HDB market is still very healthy,’ said Mr Chris Koh, director of Dennis Wee Properties.

 

Resale prices are still rising – albeit at a slower rate than last year – as valuations have generally risen, property agents say.

 

Even if the cash-over-valuations are slightly lower than late last year, the total resale price will still be steady or higher.

 

ERA Realty Network’s assistant vice-president, Mr Eugene Lim, said his firm expects the first-quarter HDB resale price index to show a marginal rise of 3 per cent or less.

 

The resale price index increased by 5.7 per cent in the fourth quarter of last year.

 

Cash-rich en-bloc sellers

 

‘WE ARE still seeing en-bloc sellers downgrading to the bigger HDB flats such as the executive flats,’ said Mr Koh.

 

With their $2 million or so sales proceeds, some en-bloc sellers, especially the retired ones, prefer to buy an HDB flat to live in and a small private property for investment, he said.

 

Meanwhile, some of the HDB resale flat buyers are downgrading to smaller flats.

 

As a result, there is more sales activity among three- or five-room flats and executive flats, said Mr Koh.

 

He said some collective sale sellers are of the view that the private property market will fall some time down the road.

 

This group would buy an HDB resale flat to live in while they wait for a good time to enter the private property market, he said.

 

They need to live in their resale flats for only one year before they can sell them, if they are taking a bank loan for the purchase.

 

Those who take an HDB loan for a resale flat purchase have to live in it for 21/2 years before they can sell it.

 

While this group may not be big, they do help to prop up the HDB market to a certain extent.

 

Lower upfront demands

 

THE Government has increased the supply of HDB flats as its stock depletes, and has assured the public that it will boost supply when needed.

 

As buyers now have more choices, some agents are taking double the time to sell resale flats, compared with around one month on average late last year, said Mr Eric Cheng, executive director of HSR Property Group.

 

Because of the weak sentiment in the private homes market this year, HDB flat sellers have also become more realistic in asking for lower sums of cash, property agents say.

 

Today, sellers in prime areas like Holland and Tiong Bahru may ask for $35,000 to $60,000 cash, compared with maybe $80,000 to $100,000 last year, said Mr Cheng.

 

Mr Koh said cash-poor buyers need not consider only far-out areas like Marsiling. They can also look at towns such as Yishun, Tampines, or Pasir Ris, where sellers are now asking for less cash.

 

The HDB recently said its records for last month showed that about a quarter of the resale flats were transacted at prices not exceeding $10,000 above market valuation. These included those in more established towns such as Ang Mo Kio, Bedok, Tampines and Yishun.

 

Such cash-over-valuation levels of below $10,000 for flats in established towns are attractive in today’s market, said Mr Cheng.

 

Those who do not have an urgent need for a place to live in can wait a little longer to see if they can buy a resale flat with a smaller cash sum, say some property agents. But do not expect the valuation price to fall just yet.

 

 

Source: Straits Times

Will retiree be better off with annuity or rental income?

Will retiree be better off with annuity or rental income?

 

Q I AM wondering if I should continue to rent out my property or dispose of it and use the proceeds to buy an annuity that will provide a retirement income.

 

Rentals will rise with inflation while an annuity is more or less fixed and will not keep up with inflation.

 

Being a landlord, however, also has its minuses. As the property gets older, repairs and maintenance will get more costly. Also, in a recession or if supply exceeds demand, rentals will fall.

 

What would you advise?

 

A IN RECENT months, property investments and annuities have generated much debate among Singaporeans.

 

Improper management of these financial vehicles could have an adverse impact on your retirement plans, so let us look at the key characteristics of these two asset classes.

 

Property investments are popular because of their potential capital gains. In a boom cycle, they offer attractive capital appreciation. In contrast, annuity products have no potential for capital gains.

 

On the income side, rentals fluctuate as demand and supply conditions change. Thus, property investments may not be able to provide the constant and predictable cash flow that annuities can.

 

This uncertainty could be painful for retirees who rely solely on rentals for their retirement income. Furthermore, repairs and maintenance are unavoidable and potentially troublesome.

 

The most attractive benefit of an annuity is that you have a guaranteed stream of regular income throughout your lifetime. You need not worry about outliving your savings. This makes annuities an apt choice for many retirees.

 

Also, the introduction of the National Lifelong Income Scheme, or CPF Life, which is essentially an annuity scheme, allows you to explore more ways of generating a retirement income, as you can pledge your property towards the Minimum Sum.

 

If you sell a property that has been pledged, the money from the sale of the property would be returned to your Minimum Sum. This could then be used for an additional stream of income for life.

 

In your case, this certainly sounds like good news. You can keep your pledged property for rental income and enjoy any market upside, while the monthly payout from the Lifelong Income scheme covers your basic living needs.

 

When planning for retirement, you must first ensure that your minimum cost of living over your lifetime is provided for – in this case, with an annuity product. Indeed, the CPF Board has effectively addressed the basic retirement needs of many Singaporeans with the Lifelong Income scheme.

 

You can supplement your income by investing in other asset classes, such as pension endowments, real estate investment trusts or dividend-paying stocks. You can even take up an additional private annuity.

 

A well-diversified retirement portfolio will provide a staggered stream of income from various sources as you get older. As it is becoming increasingly common for people to have more than one source of retirement income, it is important to manage all these financial instruments properly.

 

I would advise you to engage a professional financial planner to work out your retirement expense cash flow and assess how your annuity or rental income can complement your current retirement portfolio as a whole. Do this before you decide to sell your property, buy a private annuity or choose a CPF Life option.

 

Xanne Leo Sen Yun

Associate Manager

New Independent

 

Source: Straits Times

How to deny my father a share of my assets after I die?

How to deny my father a share of my assets after I die?

 

Q I AM a 29-year-old executive with no assets except for some small savings, several insurance plans that will pay out on my death and an HDB flat that I will eventually co-own with my older sister.

 

I am estranged from my father, who divorced my mother more than 10 years ago and has not supported us since. I do not wish to leave a cent to him, my step-siblings or my step-mother.

 

I have nominated beneficiaries for the payouts from my insurance plans, and I have excluded my father.

 

If I do not make a will, is this enough to ensure that my father cannot get a share of my money when I die?

 

 

A IF YOU die intestate, that is, without a will, your estate will be distributed to your parents in equal shares if you are single at that point. If you are married without children, half will go to your parents and the other half to your spouse.

 

Thus, you should make a will if you do not wish to leave anything to your father.

 

The death proceeds from your life insurance policies will go to the beneficiaries you have named. In the unlikely event that your named beneficiaries do not file a claim with the insurance companies, your executor (if you die with a will) or administrator (if you die without one), or any legitimate claimant under insurance laws (such as your father), can seek to have the proceeds paid to them.

 

The recipient would then be legally obligated to distribute the proceeds in accordance with the law, that is, as specified under your will, in accordance with intestacy laws or to your named beneficiaries, as the case might be.

 

If your co-owned HDB flat is held under a joint tenancy, your share would go to the surviving joint tenants. If it is held under a tenancy in common, your share would be distributed in accordance with your will, or intestacy laws if you die without a will.

 

Leong Sze Hian

President

Society of Financial Service Professionals

 

Source: Straits Times