Sunday, 20 May 2007

Bound to Happen - Multiple Sales Committees

The Electronic New Paper on Saturday reported that the Watten Estate Condo in Bukit Timah has:

  1. 2 Sales Committees
  2. 2 Marketing Agents (DTZ Debenham Tie Leung and Dennis Wee)
  3. 2 Law firms (unknown with DTZ, Phang & Co with DW)
  4. 2 Collective Sale Agreements
  5. 2 Methods of Distribution (DTZ = Straight Cash Offer, DW = Hybrid Deal)
You can read the actual article here (with pictures of the ads).

This was bound to happen. With absolutely no regulation to stipulate how many SCs can be formed, how often they can be formed, who they should comprise etc, there is no limitation to how many SCs can be created in any estate, subject to these SCs obtaining an agent and a law firm to represent them. Another big reason why the collective sale legislation needs to be seriously reviewed. I've been asked before - can an estate have more than one SC/CSA - and I said legally there's nothing stopping an estate from having 100 SCs/CSAs. Now it's happened.

Some questions that must be raised:-

  1. If an owner signs on BOTH CSAs, which one applies? Both? The earlier dated one? Since both CSAs are legally binding, what happens to the owner? Previous reports by en bloc law firms have stated, quite categorically, that a CSA is a contract and one cannot renege it. If this is the case, once an owner has signed on both CSA what will happen?
  2. However on earth, if both SCs, agents, law firms are not going to coordinate their efforts (since I'm assuming both will be highly competitive to obtain the prerequisite 80%), are both law firms going to monitor whether a particular owner has NOT signed on the other parties' CSA? There has to be a checking mechanism, presumably, to ensure that said owner has signed on only one CSA. Of course, given the legal language that is embedded in many such documents, some owners may get royally confused on what is required of them (ie not to sign the other CSA).
  3. Given that the two CSAs are equally valid documents in the single collective sale (depends on which CSA you sign), what happens to owners who signed the first CSA, and then realised that the 2nd CSA (formed later) is more appealing/equitable/profitable? Can they renege the first in favour of the 2nd, given the special circumstances? Or are they stuck, which would seem unfair since most who signed the first CSA obviously would've thought that that particular CSA was the only option they had.
  4. Is there not some sort of professional courtesy angle that should apply to law firms and agents (SCs are excused), that compels them not to step onto each others' turf? I mean, once law firm/agent X finds out that the estate is already handled by law firm/agent Y, should they not abstain from representing the estate, to prevent potential conflicts and confusion from arising? Or is it really a free-for-all no-holds-barred winner-takes-all goldmine grab? How does this reflect on the professionalism of such law firms and agencies?
  5. What is to stop multiple SCs from sprouting up now, with the latest SC offering a higher RP, better method of apportionment, a free lucky draw for a unit in the redevelopment thrown in?
  6. I noticed in one of the ads reprinted in the NP article, that the term "hybrid en bloc" has been trademarked. I'm assuming this was trademarked by a particular law firm that specialises in such mechanisms. Is this allowed, and if so, what implications does that have if the government wishes to pursue a process similar to the New South Wales' Renewal Plan (fairly similar to a legislated collective exchange mechanism)? Does that mean any hope of a hybrid deal is impossible without the permission of the firm, or without paying royalties to them?
I can imagine the consequences: (a) don't like your current SC, think they're not aggressive enough or too kiasu, start your own SC, ask your neighbour to start their own SC, see who gets to the finishing line first; (b) hybrid deals will become increasingly rare or even impossible unless someone comes up with an alternative mechanism (and then trademarks that, ad nauseam, think "mutant deal" "rojak deal" "fusion deal" "mixture offer" etc).

That, folks, is what happens when we leave things to "market forces" :)

1 comment:

Anonymous said...

There's an article in the sunday times on Neptune Court Enbloc. Really glad that such stories are slowing surfacing in the mainstream papers about the unhappiness that enbloc is causing.

An article also appeared in today's zbSunday (Chinese papers) about enbloc: there will be a second round of enbloc craze in 2008. Dr., get a friend to translate that article for you, if you can. It would be of interest to you.