An extension of stay can help sellers transition to their new homes more smoothly, but many opt for a private agreement without going through HDB.

This leaves both buyers and sellers in a precarious situation – and it can get ugly.

We’ll lay out the 5 scenarios we commonly encounter, what traps to avoid, and what your options are moving forward:

1. You’re buying an HDB flat and the seller requests an extension of stay up front.
2. You’re buying a flat and the seller asks for an extension after the OTP has been issued.
3. You’re the seller requesting an extension of stay, which you’ve communicated to the buyer at the start.
4. You’re requesting an extension of stay but the buyer does not want to grant one.
5. You requested an extension that the buyer agreed to initially. He/she later changes his mind and wants to cancel it.

Scenario 1: You’re buying an HDB flat and the seller requests an extension of stay upfront.

This is the most straightforward scenario. Ideally, the seller communicates his request during the negotiations so you know what you’re getting into in advance.

The Temporary Extension of Stay can be a max of 3 months after the date of completion. To quote HDB, “there shall be no further extension beyond the 3-month period.”

You can then agree on a purchase price with the extension in mind. You’ll have to account for factors like:

• Rental for a place to stay in the interim
• Town council fees
• Utilities
• Any potential damage to the property during the extension period (since you are now the owner)
• Delays in renovations (if needed)
• Higher non-owner-occupier property tax rates for the duration of the extension

The seller should compensate you for these added costs in a private agreement separate from the flat’s resale price. Just bear in mind that even though it’s a “private agreement,” you’ll still need HDB approval to proceed with the extension!

The Sellers and Buyers of the Flat may sign a private agreement between themselves on the terms of the Temporary Extension of Stay, including but not limited to terms dealing with monetary compensation and any other mutually agreed considerations. In this regard, both Sellers and Buyers understand that the resale price of the Flat cannot incorporate any intended or prospective monetary compensation for the Temporary Extension of Stay. (HDB Terms and Conditions)

If you’re all right with the timeline and the level of compensation, it’s time to ask for an OTP. (More info on the timeline in the Step-by-Step Guide to Buying a Resale Flat.)

When you fill out the Resale Application later, both you and the seller will have to note the request for the extension in your respective copies.

As the buyer, you’ll have to pay a S$20 admin fee to process the extension. The seller will also need to show proof of purchase for the new property before HDB will grant the Temporary Extension of Stay. You can check on the approval by emailing the officer in charge of your case (you’ll find his or her name when you log in to the resale portal).

The Temporary Extension of Stay, once approved, starts from the date of resale completion and automatically terminates 3 months after. 

If there are any disputes over the extension, you’ll need to resolve these privately with the seller. HDB will only provide relevant documentation.

 

Scenario 2: You’re buying an HDB flat and the seller requests an extension of stay after the OTP is issued.

As the buyer, it’s in your best interest to avoid granting an extension after the OTP has been issued. This should’ve been negotiated upfront as agreeing to the extension of stay means extra costs to you.

In the event that you encounter a seller who wants an extension of stay but doesn’t want to apply via HDB, be very careful. This is a huge risk: if HDB finds out, they could take legal action against both you and the seller as you’re in breach of the Minimum Occupancy Period.

There’s also an issue with taxes: filing an extension of stay means the unit is non-owner-occupied and therefore subject to the higher property tax rates. Without HDB’s approval of the extension, they assume that the flat is owner-occupied. If it turns out it isn’t, it could be considered tax evasion.

In many cases, this scenario occurs because the seller has not yet acquired their next place of residence. HDB requires sellers to provide proof of purchase for their next home before granting the extension of stay. Otherwise, resale completion processes could drag on for months and leave buyers in a very difficult position.

You have two main courses of action:

1. If your situation allows you to grant an extension, ask the sellers to approach HDB via the proper channels. If HDB gives the go-ahead, you can then negotiate the terms of the private agreement with the seller.
2. If you’re unable to grant an extension, you’re well within your legal rights to refuse. This is especially so if you and the seller have already submitted the Resale Application.

More often than not the seller is able to arrange alternate accommodation, so don’t feel obligated to grant the extension of stay.

There have been cases in which the seller offers to lease the property back from the buyer. However, you’re not allowed to rent out the entire flat within the Minimum Occupancy Period, not to mention that short-term HDB rentals have a minimum duration of 6 months. 

What if the seller threatens to back out of the sale?

It’s not a valid threat. After the seller has issued the OTP, they’re in a legally binding agreement to sell the property to you during the 21-day option period. If they back out, you’re entitled to pursue damages on the grounds of contractual non-performance.

Your conveyancing lawyer can also place a lien on the property so that the seller can’t sell the property to another buyer until the matter is resolved.

 

Scenario 3: You’re the seller requesting an extension of stay, which you’ve communicated to the buyer at the start.

This is the best scenario as it puts you and the buyers on an even footing for the negotiations. It helps to provide the buyer with proof that you’ve already acquired your next place of residence – you’ll need to send the documentation to HDB when you file for the Temporary Extension of Stay anyway. This can be:

• an exercised Option to Purchase,
• a duly executed Sales & Purchase Agreement, or
• other evidence of purchase (e.g. confirmation of taking possession or date of taking possession of Property (in purchase documents or letter by solicitors)

If the buyer accepts your request, make sure you put the terms of the agreement in black and white. This includes (but is not limited to) monetary compensation, duration, and any other mutually agreed-upon considerations.

Either party may cancel the Temporary Extension of Stay at any time before the date of resale completion, so your private agreement should also state what happens if they do – including whether there needs to be compensation.

You should also put in a termination clause allowing either party to cancel the agreement upon the other party’s receipt of a written notice of termination.

 

Scenario 4: You’re requesting an extension of stay, but the buyer does not or cannot grant one.

Assuming you’ve asked for the extension at the beginning of the negotiations, it just might not be the right match. The buyer’s circumstances may not allow them to grant an extension.

This is also why you should make the request before issuing the OTP: that way, you aren’t legally bound to sell the property to that buyer.

It might also help to extend a discount on the property price along with the appropriate compensation. Buyers would negotiate with their financial and living situation in mind.

 

Scenario 5: You requested an extension of stay that the buyer agreed to initially. He later changes his mind and wants to cancel it.

While unsettling, this is allowable under HDB’s terms and conditions:

3.8 Either the Sellers or the Buyers may cancel the private arrangement for the Temporary Extension of Stay at any time before the completion date of the resale of Flat. Sellers and Buyers are advised to provide in their private agreement what will happen in this instance, including issues of compensation etc.

And if HDB approved the Temporary Extension of Stay, then the terms of the ‘private arrangement’ are in effect. HDB will not arbitrate or enforce the agreement on your behalf.

This is where it helps to have a good agent doing up the terms of the agreement beforehand, but you should also check that compensation for early termination is explicit in the arrangement.