Tuesday, 30 January 2007

Apportionment of En-bloc Sale Proceeds - From ST Online Forum

I can anticipate the reply from the Strata Title Board - (a) apportionment decided by Sales Comm not them (b) fairest method of apportionment overall (c) will continue to monitor situation (d) too bad cos you can't bring this up during the STB hearings as it's not a legislated point of contention for en-bloc sales (because it is one of the approved methods of apportionment). Here's the forum letter for you to think about...

Jan 29, 2007
Apportionment of en-bloc sale proceeds: Clarification needed

The increasing popularity of en-bloc sales of existing condominiums is good for rejuvenation in providing newer and better housing. However, the recent legal case of the aggrieved Eng Lok mansion owner highlights the need for the authorities to provide a clear guideline for the 'Apportionment of En-bloc Sale Proceeds".

I am the owner of an apartment unit, where the Management Committee through the Sales Committee has appointed a sales agent to handle the proposed en-bloc sale of the condominium. The condominium consists of two tower blocks and one low-rise walk-up apartments of various sizes. However, according to the Strata Title Act, each unit owner is entitled to one unit share irrespective of the apartment floor area.

For whatever reasons, each apartment owner has been charged the same monthly maintenance fee and, during an upgrading exercise, charged an equal amount irrespective of the apartment unit size.

Under the proposed en-bloc sale, the small apartment unit owners felt they had the right to assume that the proceeds would be distributed equally, based on the fact that they have a one unit share and had paid equally for the monthly maintenance fee and upgrading charges.

The sales agent has proposed in the collective sale agreement (CSA) to apportion the sale proceeds by the 50:50 arbitrary ratio, that is, 50 per cent of the amount to be distributed equally and the rest to be apportioned according to the floor area ratio.

While on the surface this may appear fair, it remains arbitrary and, in this case, means that the unit rate of the small apartments is almost 25 per cent higher than the larger apartments. Yet we all know that the market value of an apartment is normally based on the built-in floor area of each apartment unit multiplied by the price-per-square-foot, although the latter may vary depending on location, condition, et cetera.

Even then, it does not make sense that there should be such a big disparity of the per-square-foot price for the various apartment sizes. While the small apartments may command a higher market price per square foot because of the 'affordability" factor, the recent trend in the choice district area favours larger apartment units. Neither does the sales record of this particular condo justify any premium rate for the small apartment units.

Could the Strata Title Board explain the purpose or intention of allocating one unit share to each apartment unit irrespective of size?

I believe the confusion in the Apportionment of En-bloc Sale Proceeds created by the 'One Unit Share" entitlement requires proper clarification from the relevant authorities.

Robert Oei Tjhing Bo


1 comment:

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