Case Study: Lim Yuan Zhang v. ERA Realty Network Pte Ltd & Others

Background

In November 2021, Lim Yuan Zhang purchased a condominium unit at Normanton Park in Singapore for $985,000. Acting on advice from property agent Jeremy Chan of ERA Realty, Lim structured the purchase as a 99-1 arrangement where his father purchased 1% of the property and co-signed the loan, ostensibly to reduce Additional Buyer’s Stamp Duty (ABSD) liability on what was effectively Lim’s second property purchase.

Timeline of Events

• November 18, 2021: Lim paid $49,250 option fee for the unit
• January 26, 2022: Lim’s father purchased 1% interest, completing the 99-1 structure
• December 2024: IRAS ordered payment of $246,744 in ABSD and surcharges
• May 2025: Lim filed lawsuit seeking $180,945 in damages
• August 2025: Anthony Law Corporation penalized by MinLaw for AML breaches
• November 2025: Lawsuit withdrawn, each party bearing own costs

Key Legal Issues

Misrepresentation Claims

Lim alleged the property agent represented the 99-1 structure as a “commonly used and foolproof method” with supposed legal clearance. The agent countered that he provided information from law firm training materials and was not qualified to give legal advice.

Professional Negligence

Lim claimed Anthony Law Corporation failed to advise him on legal risks despite red flags. ALC defended that it only provided conveyancing services and had warned Lim during their meeting about IRAS’s broad enforcement powers under the Stamp Duties Act.

Vicarious Liability

ERA Realty faced claims of inadequate training and supervision. The agency argued Chan was an independent contractor, not an employee, and that proper systems were in place requiring compliance with professional codes.

Legal Implications

For Property Buyers

Tax Avoidance vs. Tax Evasion

Singapore courts have made clear that structures created solely to avoid taxes without genuine commercial purpose will be disregarded. The High Court has explicitly ruled that property “decoupling” arrangements are illegal when done purely for tax avoidance.

Personal Liability

Buyers cannot escape liability by claiming reliance on professional advice when the arrangement’s purpose is clearly to circumvent tax obligations. IRAS has authority to:

• Disregard artificial transactions
• Impose full ABSD amounts
• Add substantial surcharges (originally 50% in this case, reduced to 10% on appeal)
• Pursue both parties in joint ownership arrangements

Due Diligence Obligations

Buyers have a personal responsibility to understand tax implications of property structures, even when professionals are involved. Ignorance or claimed reliance on agent advice provides no defense against IRAS enforcement.

For Property Agents

Scope of Professional Responsibility

This case highlights the tension between agents’ sales role and their advisory limitations. Key takeaways:

• Agents must not provide legal or tax advice beyond their qualifications
• Marketing materials or training content do not constitute legal endorsement
• “Common practice” does not equal legal compliance
• Agents should explicitly direct clients to seek independent legal and tax advice

Agency Liability and Training

Real estate agencies face potential vicarious liability for agent conduct, requiring:

• Robust compliance training programs
• Clear policies prohibiting participation in tax avoidance schemes
• Documented warnings and disclaimers
• Supervision systems to detect problematic transactions

For Law Firms

Conveyancing vs. Advisory Services

Anthony Law Corporation’s defense centered on distinguishing between:

• Conveyancing services: Executing the legal mechanics of property transfer
• Legal advice: Opining on the legality or tax implications of structures

However, this distinction has limits. Law firms have professional obligations to:

• Identify and flag obvious legal risks
• Warn clients about regulatory enforcement trends
• Refuse to facilitate clearly illegal arrangements
• Exercise professional judgment beyond mere “paperwork processing”

Red Flags and Professional Duties

The case raises questions about when law firms must refuse to proceed:

• When transaction structure has no purpose except tax avoidance
• When similar arrangements are being actively prosecuted
• When clients cannot provide legitimate commercial rationale
• When third-party funding sources are unexplained

ALC’s separate penalties for AML breaches in the $3 billion money laundering case demonstrate the serious consequences of ignoring red flags in property transactions.

Regulatory Enforcement Trends

IRAS Crackdown

Singapore tax authorities are aggressively pursuing 99-1 and similar arrangements:

• Systematic review of property transactions with unusual ownership splits
• Substantial penalties and surcharges
• No grandfather clauses for past transactions
• Willingness to litigate to establish precedents

Professional Regulation

The Ministry of Law and Law Society are scrutinizing law firms involved in questionable property transactions, as evidenced by:

• Public penalties and naming of firms
• Referrals of individual lawyers for disciplinary action
• Enhanced AML and compliance requirements
• Reputational consequences beyond financial penalties

Market Outlook

Short-Term (2026-2027)

Litigation Wave Subsiding

The withdrawal of multiple lawsuits suggests parties are recognizing:

• Weak legal grounds for claims against agents and lawyers
• High costs of litigation with uncertain outcomes
• Difficulty proving reliance when tax avoidance intent is obvious
• Risk of additional scrutiny from prolonged legal proceedings

Increased Caution

The property market will see:

• Greater reluctance by agents to discuss tax minimization strategies
• More explicit disclaimers and referrals to tax advisors
• Lawyers refusing to handle transactions with obvious tax avoidance purposes
• Buyers seeking independent tax opinions before proceeding

Medium-Term (2028-2030)

Market Adaptation

Property professionals will develop clearer protocols:

• Standardized disclosure documents about ABSD obligations
• Mandatory tax advisory requirements for complex structures
• Industry-wide training on prohibited arrangements
• Technology solutions to flag high-risk transaction structures

Regulatory Clarity

Expect enhanced guidance from authorities:

• Published guidelines on acceptable vs. unacceptable property structures
• Clear safe harbors for legitimate co-ownership arrangements
• Streamlined ruling procedures for buyers seeking advance clearance
• Coordinated enforcement between IRAS, MinLaw, and professional bodies

Long-Term Implications

Professional Standards Evolution

The real estate and legal industries will likely see:

• Higher professional insurance requirements
• Mandatory continuing education on tax compliance
• Enhanced record-keeping and documentation standards
• Greater integration of tax expertise into property transactions

Market Efficiency

Paradoxically, the crackdown may improve market function:

• Reduction in artificial demand from tax-motivated structures
• More transparent pricing without tax arbitrage distortions
• Level playing field between first-time and subsequent buyers
• Greater stability in property ownership patterns

Solutions and Recommendations

For Property Buyers

Before Purchase

1. Seek Independent Advice: Engage a tax lawyer or accountant separate from the transaction to review any proposed ownership structures
2. Document Legitimate Purposes: If considering co-ownership, establish genuine commercial or family reasons beyond tax savings
3. Request Written Opinions: Obtain formal legal opinions on tax implications, not verbal assurances
4. Consider IRAS Rulings: For complex situations, request advance ruling from IRAS before proceeding
5. Calculate True Costs: Factor in full ABSD and potential penalties when evaluating affordability

Red Flags to Avoid

• Any structure described as “foolproof” for reducing taxes
• Ownership percentages that don’t reflect actual contribution or use
• Agents or lawyers who minimize regulatory risks
• Arrangements where parties have no genuine joint interest in the property
• Pressure to act quickly without proper legal review

For Property Agents

Compliance Framework

1. Clear Scope Definition: Provide written disclosure that agents do not offer legal or tax advice
2. Referral Networks: Develop relationships with reputable tax advisors for client referrals
3. Documentation Standards: Keep records of all advice given and disclaimers provided
4. Prohibited Practices: Establish agency-level bans on promoting tax avoidance structures
5. Ongoing Training: Regular updates on regulatory developments and enforcement actions

Communication Best Practices

• Focus on property features and market conditions, not tax strategies
• When tax questions arise, immediately refer to qualified professionals
• Document all interactions regarding ownership structures
• Avoid providing examples or success stories of tax minimization schemes
• Clarify that agent represents the seller/developer, not the buyer’s interests

For Law Firms

Risk Management

1. Enhanced Client Intake: Screen for transactions with obvious tax avoidance purposes
2. Engagement Letters: Clearly define scope as conveyancing only, excluding tax advisory
3. Mandatory Warnings: Standard disclosure of IRAS enforcement powers and recent penalties
4. Second Opinions: Require clients to obtain independent tax advice before proceeding
5. Right to Refuse: Exercise professional judgment to decline problematic transactions

Professional Standards

• Develop firm-wide policies on acceptable property structures
• Implement review procedures for unusual ownership arrangements
• Train conveyancing staff to identify and escalate red flags
• Maintain insurance coverage adequate for regulatory risks
• Consider reputation impact beyond immediate fee revenue

For Policymakers

Regulatory Clarity

1. Published Guidelines: Issue comprehensive guidance on legitimate vs. problematic property structures
2. Safe Harbors: Define clear criteria for acceptable co-ownership arrangements (e.g., spouses, genuine investment partners)
3. Advance Ruling System: Create accessible process for buyers to obtain IRAS clearance before purchase
4. Grace Periods: Consider limited amnesty for voluntary disclosure and unwinding of existing structures
5. Proportionate Penalties: Distinguish between sophisticated tax evasion and misguided reliance on bad advice

Market Education

• Public awareness campaigns about ABSD obligations and prohibited structures
• Resources for first-time buyers on legitimate property ownership options
• Regular updates on enforcement actions to deter similar schemes
• Collaboration with industry associations on professional standards
• Enhanced disclosure requirements at point of sale

Conclusion

The withdrawal of Lim’s lawsuit reflects a broader reality: buyers who engage in obvious tax avoidance schemes have limited legal recourse when caught. While the temptation to reduce significant ABSD payments is understandable given Singapore’s high property prices, the risks far outweigh potential savings.

The case serves as a watershed moment for Singapore’s property market, establishing clear boundaries for professional conduct and buyer responsibility. Moving forward, all parties in property transactions must prioritize compliance over creativity in tax planning.

Key Lesson: In property transactions, there are no shortcuts around tax obligations. Legitimate tax planning requires genuine commercial substance, not artificial structures. When something is marketed as “foolproof” for avoiding taxes, the only foolproof outcome is eventual enforcement by IRAS.