Lessons from a couple’s dispute over their 16 properties

Real estate was the true love for a couple who bought and sold around 20 properties during their 15-year marriage but it was also the source of a bitter dispute when the union broke up.

It was all brick-and-mortar bliss in the early years as the couple amassed a portfolio of 16 properties, by using their business profits and reinvesting the sales proceeds of earlier purchases.

There were five homes in Singapore with a total value of about $6 million, seven houses, flats and land plots in Malaysia worth $1.35 million or so and four houses in the United States valued at around $100,000.

They had also invested an undisclosed sum in a British project but that was a total loss as it turned out to be a scam.

When they divorced in 2020, the real estate became the primary source of dispute as they bickered over who had paid for what and who should get which property.

As their investing started even before they tied the knot, there were disagreements on who funded the early transactions and how sales proceeds were used to buy more properties.

The couple were also joint owners of several small companies, including a software firm and one that dabbled in the hostel and dormitory sector.

They did not need to draw salaries because the income from their family business was enough to pay for their own expenses as well as to fund some of their property purchases.

They also used sale proceeds from the properties, rental income and funds from relatives, such as contributions from the wife’s mother, to add more assets to their property stash.

Their strong bias towards real estate, which led them to buy at least one residence for every year they were married, provides three insights for all property investors.

Investing beyond your means

No matter how lucrative you think real estate can be, it is never wise to stretch your resources so thin that you have to depend on loans to meet your living expenses.

After all, unlike more liquid assets such as stocks, which can be easily sold, it is harder to offload a property if you need cash urgently unless you are willing to accept substantially lower prices, especially in a downturn.

In this case, the husband had only $2,000 in his savings account and he borrowed to pay for his needs, which landed him with a whopping $130,000 in credit card debt.

Even if he stopped spending on his cards and paid back $3,000 every month, it would take more than eight years to clear this debt, which would have incurred more than $160,000 in interest.

With such high borrowing costs, you would consider yourself lucky if you could pay off the debt by selling assets but that would defeat the reason for your investments in the first place – to provide for your retirement.

Joint contributions from couples

It is hard to tell who has paid for what if couples co-mingle their funds when paying for expenses while not keeping proper records.

It is also difficult to look at all the transactions, especially when the spouses have been selling various properties and then using the proceeds to fund more purchases.

In such cases, the courts are likely to find that both spouses made equal contributions, especially if these transactions took place during a long marriage.

In this case, the wife refuted her ex-husband’s attempt to downplay her contributions to their family business because company funds were used to pay for some of their properties.

She claimed that her ex-husband handled the finances and was the person with the business “ideas” while she ran the operations, marketing and sales aspects of the companies.

While she was unable to provide many documents to prove her contributions, a warning letter from the Urban Redevelopment Authority about the running of their hostel business ended up becoming important evidence as it was addressed to her as the person in charge of the business.

Another piece of evidence also in her favour was the way the couple ran the business because neither of them drew salaries.

They received only CPF contributions because profits from these businesses were used for household expenses and to pay for property investments.

High Court Judge Kwek Mean Luck noted that the absence of salary payments showed this was not a situation whereby the husband was the sole owner and employer while the wife was a mere employee.  

“Parties were willing to work without any salary as they both viewed the profits from the businesses as belonging to them jointly,” he added, noting that the husband could not clearly explain some of the business invoices and letters, meaning that the bulk of such work was done by the wife.

As a result, he ruled that the wife had worked together with the husband and that both had jointly managed their business.

Justice Kwek then took “a broad brush approach” to arrive at the conclusion that the couple’s financial contributions to their properties were broadly equal and so awarded the husband a share of 51 per cent as he had started working earlier, while the wife was given 49 per cent.

He also found that their indirect contributions towards taking care of their three children and their household were equal, so the final outcome of their $8.9 million matrimonial assets’ split was 50.5 per cent to the husband and 49.5 per cent to the wife.

That gave the husband about $4.5 million worth of assets while his ex-wife took the balance of $4.4 million.

Transfer of properties

Once the final split is decided, the transfer of assets between the parties is normally a straightforward affair as it usually involves the sale of properties or payment of cash.

But as the couple still had 16 properties in their names, the transfer process itself was the subject of another dispute.

The wife had about $1.2 million assets under her name and this meant the husband had to give her another $3.2 million worth of assets.

To make up for this sum, one of the two properties here that were jointly owned was sold while the wife became the sole owner of the other apartment.

The husband, who is Malaysian, wanted to make up the remaining sum by transferring a $600,000 plot of land in Johor to the wife.

But she objected, fearing that she might have problems dealing with it due to the restriction on foreigners owning land there.

In the end, the dispute was settled with the wife getting the ownership of their four houses in the United States and a bigger share of the sales of proceeds of the Singapore property.

Finally, this case presents a compelling lesson on why you should not over-leverage on fixed assets like property, because you could face cash flow problems in an emergency.

If you are dealing with Singapore properties, there may be higher costs in the form of additional buyer’s stamp duty – ABSD – if the recipient of any transfer already owns real estate.

So it pays to do your homework and work out possible exit strategies before you make any major investment decisions.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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