Tuesday, 14 August 2007

Myth #9: Understanding the Law and Knowing Your Rights

Nominated MP Siew Kum Hong wrote an op-ed piece to Weekend on 11 August 2007, which highlights his very thoughtful views of enbloc sales in general, and the Horizon Towers situation in particular. I will not reproduce his entire piece, but you can find it on CondoSingapore's Forum here. Note - Mr Siew has his own blog and has posted additional comments on his piece here.

I do want to comment on some of his points, specifically his argument that "just like any other commercial transaction, there are very real commercial and legal risks in collective sales":-

"With so much at stake, inexperienced sellers could and should have engaged lawyers to advise them personally. It is the sellers' own responsibility to ensure they understand all their liabilities and comply with all legal obligations.They also could and should have negotiated for terms they are comfortable with."

"If a seller is uncomfortable with the collective sale agreement (CSA) which binds the sellers collectively, he or she could always not sign it. If the concern is over the SPA with the purchaser, then a seller can seek to impose greater controls and oversight over the actions of the sale committee before signing the CSA. It is difficult to sympathise with a seller who sees only the promised dollar signs and signs without fully understanding its implications."


What Mr Siew said above is the correct interpretation of the law, and of common sense, truth be told. Everyone should read carefully the terms and conditions of anything they sign (be it credit card application, signing up an account on a website, installing a software). But the reality is very different of course (how many read the Microsoft terms and agreements before clicking on the "I agree" checkbox?). But putting aside human laziness to read such text, there's another set of very real problems that works in favour of the sale committee, the marketing agent, lawyers and developers, ie the enbloc sale:-

  1. Anyone with a non-law degree, much less a non-law PhD, will struggle with the CSA and the Sale and Purchase Agreement (SPA). In densely packed multiple subordinate and embedded clauses, these contracts can induce migraines simply by attempting to understand it. If people can barely understand it, how can owners who (a) can't understand English, (b) can't understand legal English, (c) do not have the resources to get a lawyer to read it, realise what rights they have or do not have? If the law requires that the advertisement and announcement of the sale be in 4 languages, why can't the law require that the CSA be in 4 languages as well as plain English?
  2. Most people assume that the sale committee (SC) are selfless people, who represent their interests and rights, and hence will not question in detail the intricate clauses in the CSA/SPA, which is almost always drafted by the SC and lawyers without input from the owners. Most estates have no say whatsoever in the nomination, election, voting and ratification of the SC. How much harder, then, for input into the drafting of a legal document like the CSA or SPA?
  3. The approach advocated by most agents, including the professional enbloc firms, is that a SC should not be consultative in the drafting of the CSA; they see this as only taking up more time and a waste of time. So they advocate that the CSA be prepared and at the first Owners' Meeting, have it ready for signing. "Take it or leave it" without any choice in revisions. At what point can an owner negotiate for terms? They simply can't and can only do so by not signing the CSA. But if 80% are ignorant enough to do so, then what good does your refusal do?
  4. The best method to ensure a CSA or SPA is truly representative of all owners, including minority owners, and to impose greater control and oversight on the SC is to require that owners who have reservations on the sale/CSA to be a member of the SC as well - a form of check and balance or an alternative voice that gives critical feedback to the over-riding pro-sale mentality. However, every CSA I have seen thus far has a clause requiring that each SC member must sign the CSA within a time frame (typically 7 to 30 days). This immediately excludes any form of "control" or "oversight" when owners who have reservations about the sale cannot offer his/her services to the community, except perhaps as a minority voice posting on a blog.
  5. The problem is input by owners into any drafting of the CSA, much less SPA (which is mainly handled by the SC and lawyer in conjunction with the developer), is near impossible. The law does not require it, nor does it form a legal objection in any way when STB hears of it.
Mr Siew has his heart in the right place, and has talked about the legal aspect of any contract that one must be cognizant of. Unfortunately, the reality on the ground which many enbloc estates are facing, is that people who wish to negotiate, feedback, discuss about the CSA or SPA, are not given the opportunity to do so. It is a myth that one can know and negotiate one's rights in an enbloc sale. Transparency, accountability, and due process, go against the nature of a quick sale, after all.

And even more unfortunately, only the law can change this.

5 comments:

Anonymous said...

DrMinority,

I've read quite a number of your posts, and I really respect your objectiveness in your comments and points of view. Often trying to stay at arms length yet offering constructive criticism.

Your recent post on understanding the law and knowing your rights is a particularly tricky topic. I am no P.H.D. and definitely not in a position to offer an expert opinion, but it is definitely a subject that I have given some thought to and had some experience with as a relatively educated layman.

There are no foolproof contracts, as they are all subject to a matter of interpretation. Legal documents I must say are extremely harrowing, while some terms on first read could be simple to understand, you could end up arguing in court over the simple definition of a single word in a 10,000 word long contract. On a number of occasions I’ve approached a few brilliant lawyers and judges on the interpretation of a few simple clauses. On each of these clauses, there would never be a strong consensus on exactly how to interpret it. What it goes to show, is that no matter how careful you can be in wording a clause in a contract, it will eventually be at the mercy of interpretation should it come to a point of contest. English is a mongrel language and it is because of that, we shall have to depend on the wisdom of our dear judges to weigh the cases and hopefully in all earnestness make a good decision.

Legal action is a sign of war, where many weapons legal and non-legal are employed. From what I gather, cases between various parties are not always merely being matted out in the court of law. Sometimes dirty laundry can be hung out to dry, at times as some US movies have so succinctly addressed, public perception is leveraged to precondition the judging element towards a desired outcome, any good psychology or sociology student will vouch for that. At many times it is also how aggressively the legal elements contact each other, that is why as much as having a brilliant lawyer to represent you is critical he/she needs an able and sizeable team for support as well, as with any consulting project. One has to remember that in business or even in domestic cases, by the time lawyers are brought in, it is a good indication that war is being declared, plain legalities is not the only weapon, and legal action can be wielded in many ways, sometimes to scare, to distract, to delay or to force you into a corner.

Law is not as clear cut as we think as with the judicial process. Contracts in the same way may not mean exactly what we think they mean even with the best legal advice. A daughter once commented on her father who was a judge, saying “Daddy, you are so good because you put so many bad people behind bars”. The judge replied “It is not how many people I put behind bars that matter, but how many cases I judge correctly”.

Dr Minority said...

Dear anonymous dated 14 August 2007 03:14,

An excellent comment, one that I have not seen in a long while :) You're correct of course, that legal documents are subject to interpretation, despite them being densely packed to ensure as little mis-interpretation as possible (the irony). You pointed out:
>>>we shall have to depend on the wisdom of our dear judges to weigh the cases and hopefully in all earnestness make a good decision.<<<
I want to bring your comment back to the context of probably the most crucial point when legal documents are brought to bear in an enbloc sale - in front of an STB review of the sale application. Out of 30 members of the STB, only 7 are qualified in the law (5 lawyers, 2 district judges). This does not bode well for your quote above and the thrust of your comment on the nature of contracts.

Perhaps this is why the LT(S)A defines quite clearly the (limited) conditions whereby a sale may not be approved. An unfortunate side effect, is that in most cases put forward to the STB, extraneous conditions outside of those defined in the LT(S)A are not considered valid reasons to object to the sale, and as the Waterfront case showed, it was only if the minority owners are willing to push it up to the courts, that a clearer understanding of the law becomes available (in their case, the more defined understanding of financial loss).

Over 100 public consultation papers were submitted to MinLaw over enbloc law. Another round of closed consultation was held with major enbloc players (agents, lawyers etc. I can only hope that given the serious nature of feedback provided (almost certainly both for or against the various amendments proposed), some good will come out of it. Particularly to redress the currently unbalanced nature of power between majority and minority owners.

Thanks for your comment. Would be nice to have a name/moniker attached to your comment :)

rebelrouser said...

Having had a quick browse at the proposed amendments to Minority owners in the Strata Act , I agree with Dr. Minority that the provisions do not provide for those who are against en-bloc per se and on other non-quantitative grounds.

There is no proper forum nor a legal and viable channel for the dissenters in any en bloc sale. SC are generally made up of eager potential vendors .The minority dissenters do not seem to have any legal voice unless we are prepared to go to court.

confused said...

Dr Minority,

Having read some CSA's and SPA's and views from several people, I'm still not clear whether all the members of the Sale Committee need to sign the SPA for it to be a binding contract with the buyer. Some feel that as long as there is a majority (e.g. 6 out of 7 signatures), then the contract is binding, while others feel that all members of the SC must sign the SPA because it is stated in the CSA that the SC must always comprise X number of members. What is your view?

Dr Minority said...

>>Having read some CSA's and SPA's and views from several people, I'm still not clear whether all the members of the Sale Committee need to sign the SPA for it to be a binding contract with the buyer.<<

My view is to seek the advice of the lawyer in charge of the enbloc sale :)

In 1 SPA I have, all SC members signed. In another, 6 out of 7 signed. It is an odd question, to be honest. Does it matter? Any owner who signs the CSA authorises the SC jointly and each SC member individually to act on their behalves, including approving the SPA and agreeing to the terms that a purchaser might require.

I think the only situation where it isn't a binding contract is if NONE of the SC members signed it. Otherwise, the advice of the solicitor is better than a non-legal chappie like me!