Singapore locksmith company faces S$500k land betterment charges for Yishun HQ

SINGAPORE: A local locksmith company owner recently took to social media to share the “most expensive lesson he ever learned”, which ended up costing him half a million dollars.

Mr. Ronn Teo, the director of My Digital Lock, uploaded a video on the company’s official Facebook page on Monday (30 Oct) to discuss his recent ordeal.

In the video, Mr Teo revealed that his company had received a letter from authorities declaring the operation of a showroom at their Yishun Industrial Street headquarters as illegal unless they obtained the necessary change of use permit.

Mr Teo shared that the company was burdened with substantial land betterment charges, amounting to almost S$500,000 every three years to legally run the showroom.

In Singapore, developers will need to pay the land betterment charge (LBC) for the right to enhance site use or construct larger projects.

The Land Betterment Charge Act came into effect on Aug 1, 2022, consolidating charges for land value enhancement under the Singapore Land Authority (SLA).

This new LBC regime replaced the previous development charge, temporary development levy, and differential premium regimes.

Additionally, the previously used Development Charge (DC) Table of Rates was substituted with the LBC Table of Rates, which is subject to half-yearly revisions.

Nearly S$700,000 invested in renovation and purchase of three units for the headquarters

According to Mr Teo, the company had gradually expanded its business over the past 11 years, now boasting 18 outlets spread across Singapore.

With a growing number of employees, the firm felt the necessity to establish a headquarters to centralize its operations. This space was intended not only for the staff but also to serve as a showroom catering to customers, installers, sales personnel, and accountants.

He shared the company invested close to S$700,000 in the renovation and purchase of three units at the B1 Industrial estate to construct its headquarters.

However, shortly after making these considerable investments, Mr Teo claimed that they received a letter from the Urban Redevelopment Authority (URA), declaring the operation of the headquarters to be in violation of the law.

Land betterment charges amount to S$500,000 every three years

According to the notice, My Digital Lock was required to apply for a change of property use. If the application had been successful, the company would still be liable for substantial land betterment charges.

In their particular situation, Mr Teo revealed that they were facing a recurring expense of S$500,000 every three years to operate the showroom.

“It’s not a one-time payment,” he emphasized. “Every three years you need to make the payment. ”

“I believe not every entrepreneur could afford this amount of land betterment charges,” he added.

Should the company fail to comply by the deadline of 9 Nov, would result in penalties of up to S$200,000 per unit, a potential jail term of up to one year, or both.

“If you cannot afford the land betterment charges, maybe abandon(ing) your business is the next best option,” he said.

Mr. Teo concluded the video by asserting that he had no intention of shutting down his company.

“We need to be accountable for all our customers,” he said. “Therefore, we will put in all resources to comply with the rules to continue this business.”

URA conducted an investigation on the company’s showroom

In a subsequent post, My Digital Lock addressed allegations from some netizens who claimed that the incident was fabricated for marketing purposes.

To substantiate their claims, the company shared two screenshots of an official notice issued by URA, confirming the charges imposed on them for violating property regulations.

The notice disclosed that URA conducted an investigation of the showroom located at 1 Yishun Industrial Street 1 from 29 July to 21 Sep.

It concluded that the company’s premises, along with the adjoining unit, “was determined to have been materially changed from factory to that of showroom, without the requisite planning permission.”

The notice instructed the company to halt all activities on the premises, including their designer, accounting and director offices, and the “My Digital Lock Museum” showroom.

Staggering land betterment charge

The owner also disclosed a tax invoice from the Singapore Land Authority (SLA), providing insights into the substantial land betterment charge levied on his company.

Dated 3 April of this year, the tax invoice required the company to settle an astonishing sum of over S$261,000 as a land betterment charge before 2 May 2023, and the charge was for one of the company’s three units.  However, it is not known whether the company had made the payment by the specified deadline.

“After we received this bill, for one unit. I was shock, “Mr Teo said in a Facebook post, “I stare at the invoice for many days.”

Netizens astonished with the substantial Land Betterment Charge

Commenting on My Digital Lock’s Facebook page, certain netizens expressed astonishment at the substantial Land Betterment Charge imposed on the company. They questioned how any small or medium-sized enterprise (SME) could manage to survive with such high costs.

Meanwhile, some individuals highlighted that the Urban Redevelopment Authority’s (URA) 60-40 rules were publicly accessible on the URA’s website. They suggested that the owner should have checked whether the showroom renovations adhered to the existing rules to avoid incurring such staggering charges.

In response to a comment, the company owner, Mr Teo, conveyed his disbelief that any shop could manage to afford such recurring charges every three years, in addition to covering renovation costs and shop deposits. He estimated that starting a business under such circumstances would require a minimum of $450k in investment.

Comment highlights the necessity of applying Change Of Use

A comment, possibly from another entrepreneur, recounted a similar experience encountered by their business 13 years ago. He shared that he and his partner now operate their business in a commercial unit.

The comment also cautioned that even if the business operates in a commercial unit in the future, obtaining a change of use permit remains necessary. This process could incur costs ranging from S$1,000 to S$10,000, depending on the duration of the tenancy agreement.

In response, Mr Teo expressed his viewpoint that the laws should support and facilitate small and medium-sized enterprises rather than dissuading them.

In contrast, several netizens conveyed their support to the company owner, expressing empathy for the challenges of running a business in Singapore.

One comment, in particular, shed light on the difficulties faced in closing customer deals, drawing on the 25 years of experience in the retail sector.

In response, the company owner provided an estimate, stating that his company would need to sell 2000 units of digital locks at $250 each, including installation costs, to offset the incurred expenses.

A notable comment pointed out that upon inspecting the company’s address change application, it was revealed that back in 2019, there had been a change of use to indoor farming, possibly submitted by the previous owner. The Land Betterment Charge appeared to be based on this change.

The comment suggested that Mr Teo might need to clarify with the URA officer about the current approved use and subsequently submit the Change of Use accordingly, and believed that the LBC could potentially be reduced if the space was declared correctly with the 60/40 rule in mind.