A businessman has sued a subsidiary of mainboard-listed real estate agency PropNex, one of its agents, and a law firm that handled two property transactions involving the purchase of a 1% interest, claiming approximately S$1.2 million in damages.

Melvin Li alleges that PropNex Realty agent Ian Sng and City Law advised him that purchasing a 1% interest in each of his parents' newly acquired properties was legal and valid.

The 43-year-old businessman claims that this move was intended to fund his parents' property purchases, as they were ineligible for bank mortgages.

The so-called "99-to-1" scheme is a tax avoidance arrangement used by some property buyers to reduce the Additional Buyer's Stamp Duty (ABSD) payable on residential property purchases.

It allows those who already own residential properties to reduce or avoid paying ABSD while still becoming co-owners of additional properties and co-applicants for home loans.

As a result, after acquiring a share in each of his parents' properties, Li only needed to pay ABSD on the 1% interest, as he already owned a residential property and was subject to ABSD for purchasing additional residential properties.

He ultimately paid ABSD rates of 17% and 25% for each of his parents' properties, incurring an additional S$1.2 million in stamp duties and surcharges. He claims he had to liquidate some assets to raise funds to cover the resulting taxes.

Li is suing Sng, City Law, and PropNex Realty for compensation for the additional ABSD, alleging that the latter is responsible for its agent's erroneous advice and actions.

In his statement of claim filed on January 21 through Lee and Lee law firm, Li stated that he has known Sng since his national service days. Sng was responsible for selling his parents' landed property and subsequently purchasing a semi-detached house for the family.

Since the semi-detached house was purchased under the names of Li's brother and sister-in-law, Li's parents wanted to own a property under their own names to ensure financial security.

Sng reportedly suggested they purchase new condominium projects, Piccadilly Grand and Pullman Residences.

When Li's parents realized they were too old and retired to qualify for bank loans, they decided against buying the properties.

However, Sng allegedly advised them to proceed with the purchases, with Li purchasing a 1% share in each property, enabling him to secure mortgages in his name to fund the transactions.

According to the statement of claim, Li only needed to pay ABSD on the 1% share.

Sng allegedly told Li that he had assembled a team for the proposed transactions, including City Law and a bank, and that these parties were aware of and had acted in previous "99-to-1" transactions.

He also reportedly told Li that such transactions had been proposed by his manager and PropNex teammates, who had never encountered any issues.

Li claims that when he expressed concerns about the legality of such transactions, Sng said he only did "legal things" as he did not want to jeopardize his livelihood.

He alleges that PropNex and Maybank (the recommended lender) are professionally licensed and listed, which led him to believe the "99-to-1" transactions were legal.

Additionally, a conveyancing lawyer from City Law allegedly confirmed Sng's statements that such transactions entered into by Li were legal and valid.

After completing the transactions, Li learned that the Inland Revenue Authority of Singapore (IRAS) was investigating such deals. He wrote to tax officials seeking official clarification on the legality of these arrangements.

In October 2024, IRAS informed Li that his transactions violated the Stamp Duty Act and that he was liable for the full ABSD and the following surcharges:

- S$343,521 for Pullman Residences, representing the 17% ABSD minus the amount already paid;

- S$17,176 in surcharges related to the ABSD for Pullman Residences;

- S$786,856 for Piccadilly Grand, representing the 25% ABSD minus the amount already paid;

- S$39,342 in surcharges related to the ABSD for Piccadilly Grand.

From December 16, 2021, to April 26, 2023, the ABSD rate for Singaporeans purchasing a second residential property was 17%, and 25% for the third and subsequent properties.

Li accuses Sng of making false representations without regard to their truth or providing advice negligently.

As for City Law, it allegedly failed to advise Li on the actual and potential implications of the "99-to-1" transactions concerning his liability to pay the full ABSD, not just the 1%.

Defenses

Sng and PropNex, defended by Withers KhattarWong, have denied the allegations. PropNex Realty also denies liability for Sng's actions.

Similarly, City Law has contested the claims but has yet to file its defense.

Sng claims that he told Li, who is also a real estate agent, that he had learned of a method commonly referred to as "100-sell-1" from training sessions conducted by law firms and bankers.

He was engaged by Li to conduct informal inquiries with law firms to see if this method could help Li fund his parents' property purchases.

Sng then contacted several law firms and relayed the information to Li, adding that Li had to verify with his conveyancing lawyer whether the method was suitable for his situation, his defense states.

He denies that City Law and Maybank were part of a team he assembled for Li's transactions and claims that Li had full discretion over whether to engage the law firm and lender.

He denies telling Li that "99-to-1" transactions were proposed by his agents and teammates.

Instead, he blames a City Law staff member for assuring Li that the intention to purchase Pullman Residences using the "100-sell-1" method was legal and that the staff member did not highlight any potential risks to the plaintiff.

His defense also denies that IRAS considers "99-to-1" transactions illegal but did not elaborate on this.

A case conference for the lawsuit has been scheduled for February 27.