WHILE I empathise with owners of apartments who do not want to sell but are forced to by the majority, any change in the law needs to take into account the following:

Before buying a unit in a private condominium, a buyer should acquaint himself with the prevailing laws on collective sales. If a buyer is not keen to be subject to a collective sale later, there is the HDB option, as well as landed property.

Many landed properties are cheaper than a condo, although the location may be farther from town.

One must abide by the principles of communal living and ownership if one decides to live in a condo. There is personal choice involved, and we need to consider the collective desires of a group of people.

As much as one could argue that one is entitled to peace of mind, it is also the right of others to buy with a ready willingness to move, or sell, if that makes financial sense for them.

The 80 per cent consent level required for developments at least 10 years old gives due consideration to the majority of owners. While one may argue for a higher percentage, others could equally argue for a lower percentage.

Owning 50 per cent of shares is the benchmark for a majority in a private company. Granted, majority voting power in a company and having a say about one’s home do not carry equal weight in the scheme of life. But that is why an 80 per cent majority is required for a collective sale after factoring in a reluctant home owner’s rights.

Kevin Kwek

Source: Straits Times, 3 Mar 2010

MR TAN Keng Ann (‘Review law on en bloc sales’; last Saturday) says he cannot treasure his home because the power to sell his home is vested in 80 per cent of his neighbours. He asks for the collective property sale laws to be changed.

Home owners of strata developments own the right to their individual units, and they share ownership of the common areas and facilities with other owners. While individual owners can decide whether and when to sell their units, they will have to go with the wishes of the vast majority of owners for a collective sale.

Shared ownership of common property means the rights of the individual owner have to be balanced against those of the vast majority of owners. The legislation, which sets a high majority consent level of 80 per cent for developments at least 10 years old and 90 per cent for developments less than 10 years old, seeks to strike such a balance.

Mr Tan’s point is that any one owner should be able to stop the majority owners’ decisions (even if it is 80 to 90 per cent majority). That is not a tenable proposition.

Chong Wan Yieng (Ms)
Head, Corporate Communications
Ministry of Law

Source: Straits Times, 3 Mar 2010

THANK you for publishing the thought-provoking concerns of Mr Tan Keng Ann last Saturday (‘Review law on en bloc sales’).

There is a growing band of condominium owners who continue to live in fear of being ousted from our precious chosen homes by property speculators or often-misguided secondary proprietors in a lemming-like pursuit of a perceived windfall profit.

With the refreshing sentiment of regarding a house as a home, I hope there will be concrete action to tighten appropriate legislation and curb collective property sales exercises.

Dennis Butler

Source: Straits Times, 2 Mar 2010

MR TAN Keng Ann’s letter last Saturday (‘Review law on en bloc sales’) revealed the unfair predicament suffered by a good number of people amid the frenzy of many collective property sale exercises. Instead of leaving them alone to retire in peace and contentment, young speculators callously go out of their way to make home owners like Mr Tan miserable, all to make a quick buck.

I am not involved in any collective sale, but from what I have heard from friends who are, the situation is dire and shameful. Meetings of condo owners to discuss such sales are invariably boisterous. Some turn ugly with owners hurling verbal abuse at one another, with those who refuse to sell on the receiving end. They are also harassed between meetings.

It is clear that those who put pressure on reluctant owners have much to gain if the sale goes through. Some speculators have bought several units earlier in anticipation of a successful sale. It is purely business and their aim (and that of the would-be developers) is to make money. The feelings of people like Mr Tan do not concern them in the least.

Yes, the law must change if we are serious about curbing speculation. It would protect the interest of owners who cherish their homes. Why take away the rights of owners who are not interested in the money and want to stay put? Besides, many of the condos involved are not by any stretch of the imagination obsolete in design, or in a state of disrepair.

Lee Seck Kay

Source: Straits Times, 2 Mar 2010

COLLECTIVE property sales require a delicate balance between residents who want to keep their home and those seeking to monetise their property.

Such a situation is perhaps unavoidable because of the strata-titled nature of the land involved.

However, the law on collective sales should favour home owners who desire not to sell because residents who want to sell their property have the alternative of doing so individually, albeit at a possibly lower price.

Residents who want to keep their home do not have an equivalent alternative.

Second, owners generally should have the right to reject an offer if one follows the accepted principle of willing buyer, willing seller.

In principle, all owners of a piece of strata-titled land should agree before a collective sale is completed.

Thus, the law should show greater protection towards residents who seek to maintain ownership.

However, this arrangement may allow a small group or even a single owner to overrule the collective discretion and well-being of other owners.

Requiring total acceptance is unjust as well.

The fine balance between the two groups could come from requiring a higher majority for a collective sale.

This helps to favour and protect owners unwilling to sell while allowing the monetisation of assets in situations where there is a large majority. The balanced approach is similar to ‘majority rule, minority rights’.

While the optimum percentage to enable a collective sale is ultimately a judgment call, the current status quo of 80 per cent is reasonable.

The authorities could re-examine this proportion, especially if significant new developments arise.

Loke Hon Yiong

Source: Straits Times, 2 Mar 2010

IF MONDAY’S advice to treasure our homes and not use them to make a quick buck is to be heeded (‘Homes are for keeps, not speculation: PM’), the Government should review the law permitting collective property sales.

Such sales exercises invite speculation in the private property market at the expense of a home owner’s security.

I have not lived in peace for the past three years because my neighbours voted to go en bloc. The main argument of the pro-collective sale lobby had nothing to do with urban renewal. It was about reaping a windfall.

The bid at my condominium, Green Lodge in Toh Tuck Road, fell through last month, but there is nothing to stop my neighbours from trying again.

I dissented because I treasure my home for the reasons implied in Monday’s report: It gives me peace, familiarity and stability in the twilight of my life; and it is my nest egg which I do not wish taken away from me by others’ temptation to make a fast buck.

But how can I take good care of my treasured asset if I have no control over it?

The power to sell my home lies not in me but in 80 per cent of my neighbours. And that is why the law must be changed.

Tan Keng Ann

Source: Straits Times, 27 Feb 2010

MINORITY owners have had a key victory in yet another court fight over the failed $500 million Horizon Towers en-bloc deal.

An assistant registrar in the High Court yesterday threw out a bid by two former members of the sales committee to halt an action against them by the owners.

The three sets of minority owners are suing the two – ex-committee chairman Arjun Samtani and ex-member Tan Kah Gee – over costs incurred when they tried to block the collective sale.

They want to be reimbursed for more than $800,000 in costs. This includes the cost of hiring lawyers to advise them and other administrative costs.

The sum is expected to be partially offset when the costs awarded to the owners by the Court of Appeal last year, after the en-bloc deal was quashed, are assessed.

The owners argue that both committee members were ‘key players in the process leading up to the commencement, facilitation, management and finalisation of the collective sale process’, according to court documents.

Lawyers for the committee members countered that the minority owners’ suit should be struck off as the action was ’scandalous, frivolous (and) vexatious’. They also pointed out that the Court of Appeal awarded costs last April in a case that dealt with all outstanding issues of reimbursement.

But the minority owners argued that the new case is different from the one settled last year.

In that case last year, costs were awarded for the minority owners’ conduct in opposing the proposed sale by the consenting majority owners.

The present action is different as it is based on what they claim is the lack of good faith in the collective sale deal struck by Mr Arjun and Mr Tan as members of the sales committee.

They allege that this ‘lack of good faith’ resulted in minority owners having to put in a great deal of effort and spend a lot of money to oppose the sale.

In effect, they claim there was a breach of fiduciary duties and they want to be compensated for the costs from the resulting damages.

Mr Kannan Ramesh, who is acting for the owners, said in his submissions: ‘The causes of action in both cases are appreciably different.’

At a closed-door hearing yesterday, assistant registrar Leong Weng Tat ruled in a reserved judgement that the suit by the minority owners should proceed.

Mr Arjun and Mr Tan, represented by Mr N. Sreenivasan and senior counsel Tan Cheng Han respectively, can appeal to the High Court against the decision, otherwise the case will advance to a full hearing. Lawyers say either way, the case may eventually go to the Court of Appeal.

The Horizon Towers collective sale spanned more than two years and involved two Strata Titles Board hearings and two High Court hearings before being thrown out by the Court of Appeal last year.

Source: Straits Times, 25 Feb 2010

High Court dismisses striking out action by 2 former sales committee members

The latest legal tussle involving Horizon Towers looks set to go into full swing, with the High Court having dismissed the action by the two defendants to strike out the lawsuits filed against them.

This means the court will hear the claims brought by three sets of minority owners against the two former sales committee members – unless the defendants succeed in appealing against yesterday’s decision.

BT understands that the first defendant – former sales committee chairman, Arjun Samtani – will appeal the High Court decision, while the second defendant, Tan Kah Gee, is still deliberating if he should appeal.

The High Court yesterday also ordered both Mr Samtani and Mr Tan to jointly bear the costs of the striking-out application and the court hearing – amounting to a total of $6,000.

The minority owners are suing the two former sales committee members to reclaim close to $1 million in legal and administrative costs which they say they incurred during the lengthy fight to keep their homes.

The en bloc sale of Horizon Towers was a saga that dragged out for more than two years, and involved several High Court and Strata Titles Board hearings. The Court of Appeal eventually decided in April last year that the deal could not go through because the development’s sales committee had failed in its duty.

The Court of Appeal had ordered the bulk of costs to be borne by the development’s potential buyer, Hotel Properties Ltd (HPL), and its majority owners.

But three sets of minority owners, represented by Kannan Ramesh of Tan Kok Quan Partnership, are now seeking compensation for the sums not covered by the Court of Appeal judgment. The three sets of owners are seeking between $117,000 and $370,000 in costs – making for a total claim of more than $800,000.

The minorities say they were made to defend their homes against an en bloc process actuated by a lack of good faith on the part of the sales committee, and had to spend much for their effort.

They said Mr Samtani and Mr Tan were ‘key players in the process leading up to the commencement, facilitation, management and finalisation of the collective sale process’.

In his defence, Mr Samtani – represented by N Sreenivasan of Straits Law Practice — said he was not alone in driving the sale process. He said ‘each and every member of the SC (sales committee) played an equally important role’ and that he ‘did not have any special powers’ that could influence the committee’s decisions.

Mr Samtani also claimed that the committee ‘followed up on all expressions of offer’ for Horizon Towers and that it received no offer better than HPL’s at the relevant time. He said the committee was advised by its lawyers to proceed with the HPL offer.

Mr Tan, represented by Senior Counsel Tan Cheng Han and Ian Lim of TSMP Law Corporation, said he was ‘not a key player’ and cited various correspondence and minutes of sales committee meetings which he said showed that he did not play a major role in the various aspects of the collective sale.

Mr Tan also said that the sales committee did not seriously consider an alternative offer made at the time by a Vineyard Holdings, as it had ‘questioned the credibility of the expression of interest from Vineyard and their level of seriousness given that Vineyard was a Hong Kong company that was not well known and its lawyers were not from a Singaporean firm, but from a small Malaysian law firm’.

He claims he suggested waiting for a higher offer, but that the majority of the sales committee did not agree. He said the sales committee genuinely felt they would not get a better offer than the one by HPL, and that they had been advised by their lawyers to accept the offer.

Mr Tan had also sought to strike out the minorities’ suits against him and Mr Samtani, saying that the entire remedy sought by the minorities was already dealt with by the Court of Appeal last April, when it decided on how it would award costs to the various parties. But the High Court chose to dismiss this application yesterday.

The defendants have 14 days to submit their appeal.

Source: Business Times, 25 Feb 2010

Development charges, which are paid to enhance or intensify the use of some sites, are headed north for residential use at the upcoming DC rate revision effective March 1, say property consultants.

They cite the increase in private home values since last year as well as aggressive land bids for residential sites at state tenders in the past six months.

On average, DC rates for landed and non-landed residential use could rise about 5 to 10 per cent. However, consultants are predicting that rates for commercial, industrial and hotel use could remain flat.

The upcoming DC rate revision will also be monitored by those trying to embark on collective sales, especially for sites whose redevelopment would involve sizeable DC payment. DC is part of total land cost to a developer. If the DC rate increases significantly and the value of the site remains constant, the developer will offer owners less for the site, explains CB Richard Ellis executive director Jeremy Lake.

‘The problem today is that there’s already a price gap between owners’ and developers’ expectations. This will be compounded if there’s a significant hike in DC rates, in the case of sites with a significant DC component. The current environment (of rising private residential price expectations) is not conducive to owners reducing asking prices,’ he adds.

‘Hence for en bloc sites with significant DC component, the exposure to DC volatility can be very unhelpful in a rising market, whereas sites with zero or low DC component are fairly immune to DC volatility and those are good sites to work on.’ Mr Lake reckons that the next DC rate revision on Sept 1 may be more keenly watched – than the March 1 update – as a higher number of en bloc sale efforts are likely to be at a more advanced stage then.

DC rates – which are revised on March 1 and Sept 1 each year – are specified by use groups (such as landed and non-landed residential, commercial and hotels) across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with Chief Valuer, who takes into account current market values.

Colliers International is projecting 8 to 10 per cent rise in average DC rates for non-landed residential use from March 1. The biggest hikes of up to 20 per cent are likely to be in places like Serangoon Avenue 3, Upper Thomson Road and Sengkang West Avenue where winning land bids at state tenders have been at substantial premiums of 48-86 per cent to land values imputed from the Sept 1, 2009 DC rates for these geographical sectors, says the firm’s director Tay Huey Ying.

Suburban locations could see a bigger rise in DC rates than upmarket locations as last year’s rebound in home sales and prices was led by the mass market segment, she argues.

Private-sector land deals too point to higher DC rates. For instance, the Parisian site at Angullia Park was sold in October at $2,058 psf per plot ratio – about 70 per cent above the DC-rate implied land value for the area.

DTZ’s SE Asia research head Chua Chor Hoon reckons that non-landed DC rates will go up 15 to 25 per cent from March 1. Jones Lang LaSalle’s associate director (research and consultancy) Desmond Sim predicts 10-15 per cent hikes in non-landed residential DC rates in mass-market suburban locations, outpacing a 5-8 per cent rise in prime districts.

As for landed residential DC rates, he forecasts a 10-15 per cent increase across all geographical sectors, with a bigger increase likely for Sentosa Cove and Good Class Bungalow Areas.

CB Richard Ellis executive director Li Hiaw Ho notes that the official price indices for detached, semi-detached and terrace houses rose 20-odd per cent from July to December 2009. In addition, 2009 saw the highest total value of GCB sales at $1.64 billion. He forecasts an average 5-10 per cent rise this round for landed rates.

Mr Li forecasts DC rates for commercial and industrial use will remain unchanged or even fall very marginally.

Colliers’s Ms Tay, who is projecting an up to 5 per cent climb in average DC rate for industrial use, says: ‘The government is unlikely to make significant upward adjustments to DC rates for industrial use group in general in the upcoming review given the nascent recovery of the manufacturing sector and the industrial property market. Also, JTC Corp industrial land rents have not been adjusted since they were revised downward in January 2009, says Ms Tay.

She reckons commercial DC rates will remain largely unchanged as office rents have remained weak.

Source: Business Times, 24 Feb 2010

As many as 50 collective sales may be launched this year, though less than half of these could translate into actual deals before year-end, say property agents polled by BT.

A study by property consultant Credo Real Estate has listed a total of 34 possible properties that could be tendered for collective sale in 2010.

Eighteen of the 34 developments are either in District 10 or 15. ‘These are among the larger high-density private residential districts that enjoy healthy demand for new homes and hence land for residential development,’ says Credo’s managing director Karamjit Singh.

Collective sales committees have been appointed for all the 34 developments in the list. Most have also appointed property consultants and lawyers. Some have begun signing a Collective Sale Agreement (CSA); however, a tender launch could well flow into next year, especially for larger estates.

Two of the 34 sites – Goodwill Mansion in Balestier and Holland Hill Lodge – have already been launched this year. Meanwhile, nearly half the developments on the list comprise fewer than 50 existing units each.

Agents say larger estates will take more time to be launch-ready as it takes longer to secure the minimum 80 per cent consent level from owners. It also requires several (usually three or four) extraordinary general meetings (EOGMs) before a site can be launched for sale under revised en bloc rules that kicked in from October 2007.

Mr Singh points out that even for an estate of say just 30 units, it could take about six months between the time owners requisition for their first EOGM and inking the sale to a developer. This used to take just three to four months before rules were amended.

Jones Lang LaSalle’s head of investment sales Stella Hoh says: ‘Small and mid-sized sites will form the bulk of new launches and actual deals up to, say, the third quarter of this year. Next year onwards, if the private residential market continues to be stable and sales volume picks up further, that will create more confidence for bigger en bloc sale sites to be launched.’

Colliers International executive director (investment sales) Ho Eng Joo reckons that projects in city fringe locations like Balestier, as well as East Coast and Changi areas, are more likely to succeed in en bloc sale efforts than those in the prime districts. ‘Prices of end units (homes) in prime districts have not recovered to their 2007 peak, so it’s harder for developers to cough up 2007 land prices that many owners expect.’ In fringe locations, the price gap compared to 2007 has been much less.

Mr Singh suggests that it may be tough selling 99-year leasehold en bloc sites this year as developers can buy comparable plots under the Government Land Sales Programme. ‘Likewise, prime sites very close to Orchard Road may also see a slow start as developers still have prime sites in their books, many of which were bought in 2006/2007.

‘Where we expect to see greater levels of success would be (sites) in mass market and mid-prime locations which are realistically priced and offering unique selling points like being near to Sentosa, MRT stations, shopping centres and good schools,’ he added.

Credo reckons about 30-50 sites could be launched this year, of which around 20 could be sold by end-2010. Knight Frank executive director Nicholas Wong forecasts 40-50 launches and 15-20 sales this year. JLL’s Ms Hoh predicts that only 15-20 sites could be launched, of which 10 may be sold.

During the peak year of 2007, a total of 87 collective sale deals were sealed at a total of $11.6 billion. This fell to eight deals for a total $346.5 million in 2008 and just one deal at $100.8 million last year.

Owners looking to match or exceed 2007 prices could stand in the way of en bloc sales.

Savills Singapore’s director of investment sales and prestige homes Steven Ming says that owners may expect higher premiums before they sign the CSA as prices could rise while they wait to collect their sales proceeds. ‘It can easily take one and a half years from the point of obtaining the first signature to the time when owners receive full sales proceeds,’ he said.

‘Sellers, when they consider signing the CSA, look at how much premium they will get for their unit in an en bloc sale than if they were to sell it on an individual basis in the current market; as well as the future replacement cost for the property. Sellers seek a higher premium for fear of being priced out later if prices rise steeply.’

However, developers in their bids would be more mindful of changes in property cycles while they wait for Strata Title Board and possibly other court approvals before they can take possession of the site. ‘The sudden market correction in late 2008 is still fresh on developers’ minds,’ Mr Ming notes.

Source: Business Times, 12 Feb 2010