SINGAPORE Law and Practice Contributed by: Benjamin Tay, Chou Ching, Norman Ho, Vikna Rajah, Chun Kiat and Marcus Tay, Rajah & Tann Asia
3.5 Legal Requirements Before an Entity Can Give Valid Security Before granting security, a Singapore entity must have the requisite corporate power under its constitution and must derive corporate benefit from the transac - tion. Directors are required to act in the best interests of the company and to consider solvency implications at the time the security is granted. While financial assistance restrictions have been relaxed for private companies, they continue to apply in certain contexts involving public or listed entities. As a result, board approvals, solvency considera - tions and legal opinions confirming due authorisation remain standard in real estate financing transactions. 3.6 Formalities When a Borrower Is in Default Where a borrower defaults, a mortgagee under a registered mortgage is generally entitled to exercise its statutory power of sale without obtaining a court order, provided the power of sale has arisen and become exercisable under the mortgage terms. The mortgagee must act in good faith and take reasonable steps to obtain the best price reasonably obtainable. Court proceedings may be required in certain cir - cumstances, such as disputes over debt recovery or where judicial management or liquidation proceed - ings are involved. In practice, many distressed real estate situations in Singapore are resolved through negotiated restructurings, extensions or consensual sales rather than formal enforcement. There are no continuing pandemic-related restrictions on enforce - ment activity. 3.7 Subordinating Existing Debt to Newly Created Debt Priority between secured creditors may be altered by agreement through intercreditor arrangements or deeds of priority. Although registered mortgages rank in order of registration by default, this priority can be contractually reordered where all affected parties agree. Structural subordination is also commonly used, par - ticularly in transactions involving mezzanine financing, where junior lenders take security over shares rather than the underlying real estate. Intercreditor arrange -
In addition to the property mortgage, lenders typi - cally take a debenture or charge over the borrower’s assets, assignments of rental income and material contracts, security over bank accounts and charges over shares in the borrowing entity or its holding com - panies. Cross-collateralisation and cross-guarantees are common in group or portfolio financings. The security package is structured to align with the transaction structure and asset profile, with particular attention to lease restrictions, control change provi - sions and insolvency priority considerations. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Outside of practical concerns, there are generally no Singapore law restrictions on granting mortgages or other security over Singapore real estate in favour of foreign lenders. A foreign lender may take a registered mortgage under the Land Titles Act in the same man - ner as a domestic lender, and enforcement rights are not restricted solely because the mortgagee is foreign. Repayments to foreign lenders are generally permitted, although parties typically take tax (including potential withholding tax on interest, subject to treaty relief) and any sector-specific approvals that may apply to the underlying asset (eg, consent requirements under cer - tain state lease regimes) into consideration. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Mortgages over Singapore real estate are subject to stamp duty at 0.4% of the loan amount secured, capped at SGD500 per mortgage instrument. This is payable on execution of the mortgage and must be paid before the mortgage can be lodged for registra - tion. Registration fees payable to the Singapore Land Authority are comparatively modest. On enforcement, there are no additional documentary taxes triggered by the exercise of a power of sale or the appointment of a receiver. Legal costs of enforce - ment are typically recoverable from the borrower under the terms of the mortgage and loan documentation.
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