At the National Day Rally 2014, the Prime Minister announced revisions to the Lease Buyback Scheme. Owners of four-room Housing Board flats can now sell part of their lease back to the Government to supplement their retirement income. Previously the scheme was restricted to three-room and smaller flats.
What is Lease Buyback Scheme (LBS)
The Enhanced Lease Buyback Scheme (LBS) is an additional monetization option to help low-income elderly households in 3-room and smaller flats to unlock part of their housing equity while continue living in their homes and receive a lifelong income stream to supplement their retirement income.
Under the Enhanced LBS, the elderly flat owners sell part of their flat lease to HDB and retain a 30-year lease. Their proceeds from selling part of the flat lease will be used to top up their CPF Retirement Accounts (RAs). Flat owners will use their full CPF RA savings to purchase a CPF LIFE plan to give them a monthly income for life.
Consider an example of an elderly couple owning a 3-room flat in Bedok, which has a remaining lease of 70 years and a market value of $323,000. Under LBS:
- HDB will buy 40 years of the lease at $138,000
- The couple will use the $138,000 to top up their RAs up to the specified limits
- The top-ups, plus the initial RA balances (i.e. full RA savings) will be used to buy a CPF LIFE plan to give the elderly couple a monthly stream of income for life
How does LBS work?
The Enhanced LBS is designed to help low-income elderly age-in-place and boost their retirement savings. Eligible elderly households will receive a $20,000 LBS bonus when they sell the tail-end lease of their 3-room or smaller flats to HDB and use their net proceeds to top up their CPF Retirement Account (RAs) to the specified top-up requirements as shown below.
|Lessee’s Age||To Top Up till RA has:|
|Less than 70||Prevailing CPF Minimum Sum (MS)^ (currently $155,000)|
|71 – 79||Prevailing MS – $10,000 (currently $145,000)|
|more than 80||Prevailing MS – $20,000 (currently $135,000)|
The household will receive the full bonus so long as the total top-up to the lessees’ RAs is $60,000 or more. Households who are unable to do so will receive a bonus pro-rated on a 1:3 basis (i.e. $1 bonus for every $3 top-up).
The excess proceeds after topping up the RAs up to the above specified top-up requirements can be withdrawn in cash, up to a maximum of $100,000. The amount in excess of $100,000 will be used to help the lessees with the lowest RA balance meet the prevailing CPF Minimum Sum.
Lessees will use their full RA savings to buy a CPF LIFE plan if they have at least $40,000 (if below age 65) or $60,000 (if aged 65 to 79) in their RA after the top-up. Those aged 80 and above are not eligible to join CPF LIFE.
Who are Eligible?
The Enhanced Lease Buyback Scheme (LBS) targets low-income elderly households. For the members of such a household to qualify for the Enhanced LBS, the following conditions must be met:
|Age||All flat owners at CPF Draw-Down Age (currently age 63) or older|
|Citizenship||At least one owner is a Singapore Citizen|
|Income||Gross monthly household income of $3,000 or less|
|Flat Type||3-room or smaller HDB flat|
|Property||No concurrent ownership of second property|
|Minimum Occupation Period||All owners have lived in the flat for at least 5 years|
What are the Restrictions?
During the 30-year lease
The Enhanced LBS is intended for those who wish to age-in-place. Hence, the 30-year lease term is non-transferable on the open market. The flat owner cannot sell the flat in the open market or sublet the whole flat.
Premature Termination of Lease
To terminate the lease prematurely, the flat owner can:
- Return the flat to HDB, and
- Receive a refund for the residual lease pro-rated on a straight-line basis
- The CPF LIFE plan will not be terminated and will continue to provide a lifelong monthly income.
What if I outlive the 30-year Lease?
There may be cases where the flat owner outlives the 30-year lease. Such cases will be dealt with on an individual basis and appropriate housing arrangements will be provided to those flat owners who are not in a position to pay for the lease extension.
No elderly flat owner will be left homeless if he/she outlives the 30-year lease of the LBS flat.
What happens if I pass away within the 30-year lease?
- Your spouse or child who is staying in the flat will be given the option of either staying in the flat for the balance of the 30-year lease, or returning the flat to HDB.
- If your lease is terminated prematurely, HDB will reimburse the residual value of the lease based on straight-line depreciation to your beneficiaries.
- The unused portion of your premium, if any, will be refunded to your CPF accounts when you pass away. The monies will then be distributed to your nominees. If you have not made a nomination, the monies will be distributed to your family members according to intestacy law. (The unused portion of the premium is the annuity premium less annuity payouts that you have received thus far. For example, if the annuity premium is $50,000 and you have received $250 monthly for a total of 10 months, the unused portion of the premium is $47,500.)
How to Apply for LBS
To apply for the Enhanced Lease Buyback Scheme (LBS), you may submit your application online from 1 Feb 2013. After logging in using your NRIC number and SingPass, go to “My Flat > Purchased Flat – Flat Details.
The following information of all flat owners and occupants is required to be given while submitting the application:
- Gross monthly income and occupation of all the flat owners and occupants
- Bank account information such as name of bank, branch and account number
The entire process for sale of the tail-end flat lease can take up to 2.5 months from the date HDB receives the application.
If you need any help in completing the application, you may approach any of the HDB Branches for assistance.
After Submission of Application
If you along with your other applicants are eligible for Enhanced LBS, HDB will invite you for the first appointment within 14 days from the date HDB receives the application. During the 1st appointment, HDB will explain the Enhanced LBS in detail to you and to other applicants, and also assist you in the computation of your estimated total payout and monthly income you may receive under the Enhanced LBS.
If you decide to proceed with your application after having a better understanding of the scheme, HDB will process your application and invite you to sign the legal documents in about 2 months time. You will receive a cheque for any excess above required CPF Retirement Account (RA) top-up (if applicable) on the day all applications formalities are completed. Your monthly income will commence from one/two months following the completion of the application.