PropNex unit sued for about S$1.2 million over agent’s alleged misrepresentation in ‘99-to-1’ deals
Source: Business Times
Article Date: 20 Feb 2025
Author: Tay Peck Gek
The practice is a tax avoidance arrangement to reduce the rightful ABSD payable on the purchase of a residential property.
A businessman has sued a unit of mainboard-listed property agency PropNex : OYY -0.89%, one of its agents, as well as a law firm – which handled two real estate transactions involving the purchases of 1 per cent interest – for about S$1.2 million.
Melvin Li has alleged that PropNex Realty agent Ian Sng and City Law had advised him that his purchase of a 1 per cent interest in each of his parents’ newly bought properties was legal, and that the transactions would be valid.
The move aimed to help fund his parents’ purchases because they were ineligible for bank mortgages, claimed the 43-year-old businessman.
Li owns a few companies and is a shareholder of renewable energy player Solar United Network, indicated records from data platform Handshakes.
The so-called “99-to-1” scheme is a tax avoidance arrangement used by some property buyers to reduce the rightful Additional Buyer’s Stamp Duty (ABSD) payable on the purchase of a residential property.
It enables those who already own a residential property to reduce or avoid paying ABSD, while still becoming a co-owner of an additional property and a co-applicant for a loan to finance the purchase.
Taking the stake in each of his parents’ properties would thus cost Li only the ABSD for that 1 per cent interest, given that he has a residential property in his name and would be liable for ABSD for additional residential property purchases.
He ended up paying ABSD rates of 17 and 25 per cent for his 1 per cent interest in each of his parents’ purchases, respectively, or a further S$1.2 million in extra stamp duties and surcharges. He claimed that he had to liquidate some assets to raise funds to pay the duties incurred.
Li is claiming against Sng, City Law and PropNex Realty – which he alleges is liable for its agent’s wrongful advice and actions – to indemnify him for the additional ABSD.
In the statement of claim filed through law firm Lee and Lee on Jan 21, Li pointed out that he has known Sng since national service. The agent handled both the sale of his parents’ landed property, and the subsequent purchase of a semi-detached house for the family.
As the semi-detached house was bought under the names of Li’s brother and sister-in-law, his parents wanted to own properties under theirs for financial security.
Sng was said to have recommended them to purchase new condominium projects, Piccadilly Grand and Pullman Residences.
Li’s parents decided against the purchases when they realised that they were not eligible for bank loans because of their old age, and the fact that they were retired.
But Sng allegedly advised them to proceed with the purchases, with Li buying 1 per cent in each of the two properties from them, enabling him to take out mortgages in his name to help fund these transactions.
Li would only pay the ABSD for the 1 per cent stakes, according to the statement of claim.
Sng was said to have told Li that he had assembled a team that included City Law and a bank for the proposed transactions, and that these parties are aware of and had acted in earlier “99-to-1” transactions.
He was said to have also told Li that such transactions were proposed by his manager and teammates from PropNex, and that they never had any issues.
Li claimed that when he expressed concern over the legality of such transactions, Sng said that he only did “legal stuff”, as he did not want to jeopardise his livelihood.
He claimed that PropNex and Maybank – said to have been recommended by Sng as the lender for the loans – are both professionally licensed and publicly listed, giving him the impression that “99-to-1” transactions would be legitimate.
In addition, City Law’s property lawyer allegedly affirmed Sng’s representation that such deals were legal and valid for Li to enter into.
After completing the transactions, Li learnt that the Inland Revenue Authority of Singapore (Iras) was probing such deals. He wrote to the taxman seeking official clarifications about the legality of these arrangements.
Iras informed Li in October 2024 that his transactions breached the Stamp Duties Act, and that he was liable for full ABSD and surcharges as below:
From Dec 16, 2021, to Apr 26. 2023, the ABSD rates applicable to Singaporeans were 17 per cent for the purchase of a second residential property, and 25 per cent for the third and subsequent property.
Li alleged that Sng made untrue representations, without caring whether those statements were true or not, or gave the advice in a negligent manner.
As for City Law, it was said to have failed to advise Li on the actual and potential implications of the “99-to-1” transactions in relation to his liability to pay full ABSD, rather than only for the 1 per cent.
Defence
Sng and PropNex, defended by Withers KhattarWong, denied the allegations. PropNex Realty disavowed liability for Sng’s acts as well.
Similarly, City Law is contesting the claims, but has yet to file its defence.
Sng claimed that he had told Li, who was also a property agent once, that he had learnt from training sessions conducted by law firms and bankers about a method commonly referred to as the “100-sell-1”.
He was tasked by Li to conduct informal checks with law firms about whether this method could help Li to fund his parents’ property purchases.
Sng proceeded to contact several law firms and relayed the information to Li, adding that Li would have to check with his conveyancing lawyer whether the method was applicable to his situation, his defence showed.
He denied that City Law and Maybank were part of the team that he assembled for Li’s transactions, and alleged that Li had full discretion on whether to engage the law firm and the lender.
He denied having told Li that “99-to-1” transactions were proposed by his manager and teammates.
Instead, he accused a City Law worker of having assured Li that the intended purchase of Pullman Residences using the “100-sell-1” method was legitimate, and that the worker did not highlight any potential risk to the claimant.
His defence also denied that the “99-to-1” transactions were held by Iras to be illegal, but did not elaborate on that point.
A case conference has been scheduled on Feb 27 for the lawsuit.
Source: The Business Times © SPH Media Limited. Permission required for reproduction.
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