Wednesday, 31 January 2007

"Date of Completion" & "Date of Vacant Possession" - Myth #6 on Obligations

This post was from an expat tenant staying in a condo that has been sold off in a collective sale:-

We live in a condo that has been sold enbloc, all the tenants have been given notice to vacate by end May 2006 - a large portion have moved already but the place is still about 40% full. The previous Management company have handed over the property to the redevelopers already. In the last week they have been doing soil-investigation work for the redevelopment of the property, which involved a lot of drilling and digging and generally very noisy and inconvenient for the current tenants. I am curious about what the law says. Is it legal for them to start the redevelopment process whilst there are tenants still in the building. - Patch, 30/1/07, ExpatSingapore Message Board.

Another tenant has expressed the same situation, whereby developers have entered the premises to begin drilling and working the grounds, and the condo maintenance crew are left to a skeleton crew (probably comprising one poor elderly person in charge of clearing the bins, cleaning the corridors, and being security guard at the same time). What's the law on this?

For tenants and owners who choose to stay after the Completion Date, there's nothing in the Statutes that protects you from poor grounds management and developers coming in; everything is defined in the Collective Sale Agreement (CSA) that is a binding contract between the owners and the developer. Let me spell out the typical schedule in the CSA first :-

The COMPLETION DATE (CD) – this is the date typically 3-4 mths after the Strata Title Board application approval. This is the legal completion date, when all owners can get their millions, if they choose to vacate by this date. If they do not, they have…

The DATE OF VACANT POSSESSION (DVP) – this is about 3-6 mths and varies between CSAs. Some may be longer, some shorter. But typically, if an owner does not vacate by the CD, a small % of their proceedings will be retained (eg 15%) and returned when they vacate the premises, before or on the DVP.

What about tenants? Well, again the CSA will define the conditions, but typically the landlord has the right to allow tenants to stay in the premises up to the DVP, and collect rent until then. Which means the landlord would have given you notice to vacate by a set date, cut short your contract etc, do whatever to evict you from the condo, or he will pay a severe penalty for delaying the DVP. Squatters not allowed. Owners are allowed to stay in the premises between the CD and the DVP, 'maintenance-fee free'. Why will be explained below.

There’s also a clause in the CSA that allows developers to come into the property to obtain planning permission for redevelopment (hence the drilling and ground work). This can be done at anytime after the CD.

The implication of the CSA clauses?

  • For owners, they don’t give a hoot after the CD because once they vacate the premises, they’ll get their millions.
  • For landlords, they too get their millions (minus a deposit) AND they continue to get rent UP TO the DVP.
  • Developers will come marching in, after the CD to begin processing the grounds.
  • Management committees (MC) will not care about the premises when they’ve already gotten their money (after or on the CD). After the CD, the MC will not be collecting any monthly maintenance fees from owners; the months between the CD and DVP is 'free' to all owners/landlords who choose to continue staying there. Which means they may leave a skeletal crew but are under no obligation to do so, since the legal date of ‘transfer’ is the CD and not the DVP. The MC is effectively dissolved after the CD.

  • SO to all involved in the en-bloc, when the lawyers and agents say that you have up to the Date of Vacant Possession to move out, think again. The months after completion will not be managed well, there will be almost no repairs, developers have the right to enter the premises to begin work. The quality of living will deteriorate so badly in the months that you will want to vacate as soon as you can.
  • My advice to TENANTS – take the landlord to task, and argue for a break in the contract so you can move out. The quality of living in your existing place will rapidly deteriorate. The landlord is reaping monthly rental on top of their sale proceedings, just by allowing you to stay in a rapidly abandoned building.
    • Hopefully any tenant who is aware of enbloc completion at their place will not sign for a stay beyond the CD, because the owners will have no responsibility to you (beyond the four walls of your unit) after that point.
  • My advice to OWNERS - think carefully about the schedule that your agents/solicitors have given to you, and defined in the CSA. Read your CSA carefully.
    • Let's say you have achieved 100% or are persuaded that it's in the best interest to sign the CSA to get 100% signatures, after all you have 3-4 mths to the CD after successful tender/STB approval and then 3-6 mths to DVP to vacate, that's still enough time for you to look for a new home etc. But after the CD, the management council and sales committee have no further obligation to you; only the solicitors who hold on to whatever deposits or act to penalise people who stay beyond the DVP. So, if there is no STB application, you have effectively 3-4 mths to find a new home and begin moving out.
    • If you achieved only 80% and need to go through STB approval, that's a wee bit better. You can use the time during the STB approval to begin looking for a new home (STB approval timeline about 6 mths). That gives you, from point of tender approval, 6 mths + 3-4 mths to completion.
    • You do NOT want to be staying in what is probably legally an abandoned condo after completion.

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