Sunday, 3 June 2007

Myth #8 - Transparency - Advantage to Who?

I've been asked this in an email and thought it's important that this be discussed here - the issue of transparency.

Let me begin with a quote from a recent ST article on minority owners and a side-conversation I overheard: "A consultant's role in a collective sale is to help owners make informed decisions, but 'there will always be owners who, for different reasons, will not want to sell, no matter the price, and we respect that" - Ms Tang Wei Ling, DTZ Debenham Tie Leung.

Now the side-conversation, overheard at The Coffee Connoisseur while sipping coffee. A property agent was seated next to me, trying to persuade his client, over the phone, to part with $4.7 million for presumably a flat or house. He kept on saying to the client, that he is very certain the property's value will increase next week, and wants the client to commit to the sale today. Off the phone, he told his friend (colleague/partner/wife/girlfriend) the client was indecisive and he just had to say something to make the client sign (and hence gain his commission). This includes of course saying things to persuade the client. Now obviously the property value MIGHT increase; we don't know except in hindsight. And if the client commits, he can never know if it'll go up or down. So in a way, he's not telling a lie - just half-truths.

An email was sent to me from someone undergoing an enbloc in her estate. She was frustrated with the lack of information from both the SC and the marketing agent. She said she has to initiate information from the agent and often they are not forthcoming. Often, the SC was not forthcoming and refused to reply to her. How many of you have encountered this situation?

She asks if there's any regulation regarding the issue of transparency. After all, given the DTZ quote above, an agent's job is to help inform owners (ALL of them) to help them facilitate the enbloc sale.

The proposed en-bloc law changes are supposed to tackle the issue of transparency (as stated in the position paper) but whether that will happen remains to be seen. What is the case now is this:-

  • Transparency is not an issue that STB will consider as a matter that can block an en bloc sale.
  • Information is a double-edged sword. The more information you have, the more informed your decision can be. But it also means the more likely you are to ask questions or critique certain things, or be dissatisfied with certain aspects of the en-bloc process.
  • Hence, agents often encourage that transparency be kept to the barest minimum, to minimise potential slow down to the enbloc process from too many queries raised, too many complaints etc. By the barest minimum, it means being around for Q&A during the CSA signing, so that they can persuade you to sign; writing letters to all owners informing them of the stages of the process etc; how much you'll be getting etc. The 'positive' aspects that will push the sale forward. That is their job after all.
  • What don't they tell you? The minutae of the CSA clauses - that's the job of lawyers. And unless you are trained to read legal documents, CSAs are as foreign as doctors' scribbles. Agents and SCs are not likely to tell you, for example, that once you have signed the CSA, you give the SC near-total rights to anything and you can't sue them. They don't tell you that while the RP can be revised upwards (if stated in the CSA) given market conditions, that the SC is under no obligation to do so (to guarantee a quicker sale, rather than a maximum profit). They don't point out what are the other representations that the SC might have heard, what alternative methods of distributions they turned down and exactly why. They don't tell you why they chose a particular method of distribution and be made to defend that choice. All these information may work against you signing the CSA, and selling your unit collectively.
So is there 'transparency'? Only very narrowly defined (and which can be legally upheld in court) in the form of the agents/lawyers being present for Q&A, letters sent out etc. BUT the information given may not be complete so as to allow owners to make "informed decisions", but rather half-truths or worse, withholding information, so that the sale can proceed expeditiously.

That's why you need to read up on en-blocs yourself. Use the information on blogs such as mine and Pariah's, forums, etc to check on information not forthcoming. They might keep such things from you, but that doesn't exclude you from learning on your own.


Anonymous said...

** My replies follow: '~>' **
Edited version, 'full' version at:

Parliament No: 11, Session No: 1, Volume No: 83, Sitting No: 6, Sitting Date: 2007-05-22
Title: EN BLOC PROPERTY SALE COMMITTEES (Measures to ensure transparency)
MPs Speaking: Mr Chiam See Tong (Potong Pasir);The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee)

EN BLOC PROPERTY SALE COMMITTEES- (Measures to ensure transparency)

"2. Mr Chiam See Tong asked the Deputy Prime Minister and Minister for Law what measures will the Government take to ensure that en bloc property sale committees exercise transparency, act fairly and do not abuse its powers.
- The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee) (for the Deputy Prime Minister and Minister for Law): Sir, all en bloc sales without 100% owners' consent must be approved by the Strata Titles Board. Advance notice of an application for en bloc sale must be sent to all owners. An owner who does not agree to the en bloc sale can file an objection with the Board. ... ... Sir, we are always reviewing the procedures to see how they can be improved. ... in 2004, as a result of feedback received, we improved the process by requiring regular updates on the number of owners who had executed the Collective Sales Agreement to be put up in the development in the four languages and also requiring that the CSA be signed by the required majority within 12 months, so that all owners, whether or not they have signed the CSA, will not be kept in suspense for an indefinite period."

~> 12 months is a long time, MinLaw's measure is archaic in that the true 'suspense' really only begin after 80% consent is achieved: due to market fluctuations, pending the purchase by buyer. The true problem with most CSAs is that greedy sales committees (SC) and property companies create anti-competitive binding agreements that are effective in psychologically pressuring residents to agree to a collective sale. E.g.: binding agreements stating govt's '1 yr policy', prohibiting a resident from selling property unless unit buyer agrees to CSA contract too... these 'anti-competitive' agreements are what increases the 'suspense' of CSAs. I believe that it is mainly due to pressure of 'suspense' under such 'anti-competitive' agreements that many CSAs are quickly reached with underhand tactics perpetuated by the "too bad... you cannot back out" mafia rules. STB should establish rules against such 'anti-competitive' practices by dismissing applications where agreements were made by entrapment if protesting residents could prove that agents disallowed consent withdrawal. The 1 yr rule should thus be scrapped and replaced by a 1 month rule (to sale completion) that applies the moment 80% has been reached. (Other checks continue to apply).

" Nevertheless, MinLaw believes that there is room for some tightening of the en bloc sale procedures. ... One of the proposed changes is that the setting up of an en bloc sale committee must be done at a general meeting convened by the management corporation. Not only will this make for better accountability, it will also serve as notice to all owners of a possible en bloc sale initiative being started."
~> gd idea but less impt then my 1st pt.

"The public consultation closed recently on 12th May. We received quite a lot of feedback."
~> not surprising...

"Mr Chiam See Tong (Potong Pasir): Sir, the sale committee is perhaps the most important component in the en bloc sale process. It appoints the agent to sell the whole development and it also appoints the solicitors, and I think it has got a duty to appoint the valuers. Therefore, it must be properly appointed. Usually, an en bloc sale involves millions of dollars, and I think their responsibility is very great. So, I hope the Minister will incorporate some statutory measures to make sure that the sale committee is properly appointed.
Assoc. Prof. Ho Peng Kee: ... , another suggestion that we are looking at is that the minutes of the sale committee should be posted on the notice board so that all owners, whether majority or minority, will be kept au fait with the discussions."
~> Greater transparency can be achieved if the list of consenting units is available for inspection by all residents (not just the SC mafia)- after anti-competitive practices have been banned, this will allow transparency and greater wisdom propel CSAs instead of crass mafia tactics of the inept/ uninformed.

"Mr Chiam See Tong: Sir, I wonder if the Minister can make it possible for some of the flat owners to exchange one for one; in other words, their old property to exchange for a new one, when the new ones are developed, in the same place. Usually, for the older citizens who stay in a place for a long time, they would like to remain there. But, of course, that is not possible unless they exchange one for one. I think they also do not like the hassle of finding alternative accommodation. I wonder if the Minister can incorporate this provision into the law.
Assoc. Prof. Ho Peng Kee: Sir, this is one area where we should leave it to the owners to decide, because not all owners may want a replacement flat. Different people have different considerations. But I know on the ground that owners who want a replacement, in fact, negotiate with the developers who are buying the property. This has happened in some of the developments. So, let the owners negotiate with the developers and get a deal that suits them."
~> there fore the need to ban anti-competitive practices, so free market forces can deliver residents the best deal; or is the lack of transparency a widespread issue in a Singapore run by a mafia?,PENG,KEE&hlWords=%20%20&hlTitle=&queryOption=1&ref=

Also posted to

Anonymous said...

TRANSPARENCY- Self help style is the only way to protect minority anti-bloccers.

We need to form a group that sits as opposition party against the pro-tem SC in all enbloc projects.
I feel that even if there is no legislation to that end, we the owners will just have to be pro-active and insist on forming a representation for the anti-bloccers.
The Strata Land Act allows anti-bloccers to file their objection, but how many anti-bloccers have actually been told they could do that? And how many fence-sitters are willing to stick their neck out to do that and suffer the ostracisation in their condo ?

Actually it is easier to say 'NO' first , file the objection against the collective sale and let the SC and the marketing consultants work their butt out to convince the dissenters why they should sell, after all they are going to be the ones who make a bundle , so feel no guilt that they should slave for us. So all those who want a fair and transparent deal, whether you want to sell or not, should all file against the collective sale then sit back and watch the furore.

Perhaps the HT case is a good deterrent for all those who are greedy , from the developers, the enbloc speculators to even the professionals in the game. Perhaps this is the best case that has happened to show us that we live the consequence of being a people who know the price of everything and the value of nothing.

Mahatma Gandhi once said:'This world has enough for everyone's needs but not everyone's greed.'

PS . could anyone tell me how much does it cost to file the objection with Strata Title Registry?