HDB Extension Of Stay Guide
HDB Extension of Stay is something that is very common in the resale market, and you might have heard about this before.
So, what exactly is HDB Extension of Stay and how does it help Sellers or affect Buyers?
HDB Extension of Stay is a period of extension granted to the Sellers to continue staying in the flat after completing the HDB sale transaction.
An Extension of Stay gives Seller’s sufficient time to complete their next property purchase, or renovate their next home before moving over.
We’ve summarized the important things you need to note when entering into an Extension of Stay:
Extension of Stay Agreement
The best practice to get an Extension of Stay is for Sellers and Buyers to agree with the Extension when negotiating the offer for the sale and purchase.
This will allow all parties to factor in the required Extension together with the selling and buying price, so as to make a better decision on the offer.
Hence, sellers should make known that they require an Extension of Stay, and let the buyer know how many months are required..
And buyers should also ask and confirm with sellers whether do they require any extension, before putting up an offer to buy a HDB flat.
In almost all cases, Extension of Stay is usually on rent-free basis for the sellers, which means that buyers will not be collecting any monetary rental compensation from the sellers.
Sellers and Buyers should sign an Extension of Stay Agreement, so that all conditions of the Extension are penned down and acknowledged by both parties.
When does Extension Period Start?
An Extension of Stay period starts from the HDB Completion Date.
Which means that the Extension starts from the day the HDB Resale Transaction for the flat is completed.
Eg. If HDB Completion Date is on 1 March, a 3 months extension will mean that the buyers have to allow sellers to stay in the flat until 1 June.
You can check out our guide on HDB Resale Timeline to further understand the entire timeline for selling and buying a HDB flat.
Maximum Extension Duration
Getting an Extension of Stay doesn’t mean the sellers can stay infinitely until their next house is ready for them to move into.
Under HDB regulations, an Extension of Stay can only be a maximum of 3 months.
Thereafter no further Extension will be granted and seller must handover the flat to the buyers, as buyer’s HDB Minimum Occupation Period will start immediately after the Extension.
HDB Regulations
HDB has put in place certain regulations that Sellers and Buyers must agree in order for Extension of Stay to be granted.
Here are the regulations you should take note of:
Extension Regulations for Sellers
• Sellers must have committed to another property purchase in order to get HDB’s approval for the Extension. (The Exercised Option to Purchase contract for their purchase must be submitted to HDB)
• Sellers cannot rent out the flat during the Extension period, and the flat can only be occupied by the sellers and their rightful occupiers.
Extension Regulations for Buyers
• Buyers have to pay HDB an administrative fee of $20 for the Extension of Stay processing.
• Buyer’s 5 Years HDB Minimum Occupation Period will only start after the end of the Extension.
• Buyers will have to pay non-rebate Town Council Service & Conservancy Charges.
• Buyers will be billed Property Tax at Non-Owner Occupied Rate for 3 months. This rate will be at 10% of the property’s annual value, and hence it will be higher than the usual Owner Occupied rate.
Extension Fees & Costs
There will be fees and costs billed to the buyers, and normally these fees will be reimbursed by the sellers to the buyers in view of being fair to the buyers for allowing sellers to have an Extension of Stay.
Below are what sellers should reimburse the buyers:
HDB Extension of Stay Fee
$20
Service & Conservancy Fee
Pro-rated to the duration of the Extension of Stay
Non-Owner Occupied Property Tax
Pro-rated to the duration of the Extension of Stay
Extension of Stay Disputes
Though unlikely to happen, Sellers and Buyers need to know that HDB will not interfere with any disputes between both parties should there be any.
Therefore sellers and buyers should keep proper Extension Agreement records and HDB Extension documents, so as to protect yourself in an event of unexpected dispute.
Conclusion
An Extension of Stay is very common in the resale market.
This is especially so for Sellers who are selling and buying, upgrading and downgrading their HDB flat..
And such sellers will almost certainly require a maximum of 3 months extension for their selling, as not getting an extension will result in them having no place to stay once their selling transaction is completed.
So for sellers, if you require Extension, it is a must to include this as part of the negotiations with the buyers before accepting any offers.
As for buyers, if a flat seller requires Extension but you are unable to give an Extension, you will probably need to forgo that flat and not put up any offers to the sellers.
Throughout our years of helping clients with their HDB selling & buying, we have successful navigated countless Extension of Stay for sellers and buyers without encountering a single dispute.
If you are planning to Sell your HDB, do check out how we can give you a reliable HDB selling experience!