Wednesday, 26 March 2008

David vs Goliath: Airview Towers Sale Dismissed by High Court

One man versus an estate worth $202 million, including top lawyers Harry Elias Partnership, well known enbloc agent DTZ Debenham Tie Leung, and Bukit Sembawang Estates. And Mr Ken Lee, representing himself, won against Goliath and got the sale kicked out. You can read the articles here.

What happened? Where did it go wrong? The case hinges on a clause in the CSA and the deadline of 12 mths to get the 80% majority consent. The CSA clause regulates the rights of a signatory (someone who signs the CSA) to sell their unit, after they have signed the CSA. In the case of Airview, according to the news report, 2 owners had signed the CSA and then decided to sell their units. The buyers however, only signed the CSA after the 12 mth deadline, even though they had "agreed all along to the sale". The SC and their lawyers argued that their late signing should not penalise the entire sale, because "their failure to sign was due to 'mistake or inadvertence' and so was a technicality". Justice Lee Seiu Kin however ruled that the 12 mth deadline must be adhered to, and if any one misses the deadline, they cannot be counted towards the 80%.

Why would anyone sell their flat, some might ask? Why get out of such a windfall?

For various reasons - urgent need to sell (eg emigration, business despatching family overseas), or owners wishing to capitalise on the enbloc fever. Say a person bought their flat for $1m, and it's now going enbloc and he stands to gain $1.8m. He puts it on the market for $1.4m; any buyer stands to gain $0.4m and that owner transfers the risk of enbloc sale collapsing to the buyer; owner gets a guaranteed 'windfall' of $0.4m while buyer accepts possibility of getting $0.4m.

What clause is this in the CSA, that forces this buyer to join the enbloc majority?

This one, which you should find in most CSAs (with some variation):-

Each of the Selling Owners (people who signed the CSA) hereby represents, warrants and covenants as follows:-
... not to do any of the following from the date of signing this agreement by each of the Selling Owner in respect of his strata unit:
(a) grant an option to purchase
(b) sell
(c) agree or contract to sell
(d) assign or transfer by whatever means;
unless third party/parties having such benefit thereof shall also join in as a party to this Agreement by signing the same forthwith or any Supplemental agreement if required by the SC; provided that the particular Selling Owner shall indemnify the other Selling Owners from any claims, losses, damages and/or otherwise arising therefrom.

A variation I've seen includes a condition, that this sale must be subject to the approval of the SC (yes, they rule your life). What this clause means is that if you signed the CSA, you can only sell your unit to someone who MUST agree to sign the CSA AND any other documents required by the SC. It also means that the seller is responsible for any claims or damages if anything botches up. But is this fair? Why should you as a seller, if you have legit reasons to sell, be held responsible if the managing agent and/or lawyers do not follow up on the sale and chase the new owners to sign the CSA? Why should you also be penalised for signing the CSA, by having such a clause that effectively limits the potential number of buyers (or worse, they must be approved by the SC)? Shouldn't the onus be on the marketing agent and SC to convince the new buyers to sign the CSA, rather than it be your job?

It remains to be seen what's the aftermath of the Airview Towers dismissal - will the 2 unit sellers get into trouble? Will Bukit Sembawang sue the majority owners, like in Horizon Towers? Will the 2 unit buyers get into trouble for not signing the CSA in time? Will Bukit Sembawang let the sale slide, as the news report suggests?

What cannot be denied though - that it is rather sneaky of the managing agent and/or lawyer for the SC to brush off the late signing of the CSA by the 2 unit sellers, as a mere 'technicality'. They really should have known better.

Moral of story - Be careful of what you sign. If the 2 unit owners never signed the CSA, they would not have gotten into any trouble that they might be in now.

Stayers' Poll & Links to Parliament Debates

Back in June 2007, the Straits Times published an article that described what they considered 7 archetypical characters in an enbloc sale - the Stayers, the Sharks (condo raiders), the Bochap Investors, the Activists, the Fencesitters, the Troublemakers (want more money), and the Happy Sellers. For the Stayers category, this is what they said:

"They've lived for decades in the same home. It's where they've brought up their families or shared memories with deceased spouses. Money is not an issue - they simply refuse to move out. One widow was afraid her husband's spirit would not be able to find her if she moved; others say they had no idea their home was being sold. One thing they have in common: really annoyed neighbours who want a quick sale."

I'd argue that nowadays, most stayers have also learned to become activists - people who would fight to protect their homes. So in the spirit of Stayers (and Activists), I've created a poll which asks what reasons might they have, for wanting to protect and keep their home. Note you can select as many responses that you feel fits your situation, but if possible, try to limit to no more than 3 of the most important reasons.

  1. My right to my home is sacrosanct - If you believe you have an absolute right to acquire, hold and dispose of your home with noone interfering with this right, tick this.
  2. My home is part of my identity - You have your memories here, your family was brought up here, your home and the network of people you've befriended are important to you and your identity, especially your identity as a Singaporean. Lose your home, and why should you be bothered to stay in this country?
  3. My home is more than just about money - You can't put a value to my home.
  4. I'm not offered enough money - I'll sell my home for the right price. My price.
  5. I love my neighbourhood - It's not just my home, but it's my neighbourhood that I love and cherish.
  6. I'm too old to move - I've reached an age where this is my retirement place. Don't take it away from me!
  7. Pragmatic reasons - I bought this place and moved here because of pragmatic reasons, be it the catchment area for a good school, or the church that I'd like to go to, or proximity to Orchard Road etc.
This by no means is a well designed survey since some of the choices do overlap, but it's just to get a sense of what makes people want to stay, and more importantly, fight to keep their homes.

Previous Poll Results :
Question asked: What is your opinion of STB?
  1. It's a rubber stamping machine - 25 (55%)
  2. It should be run by judiciary members - 12 (26%)
  3. It helps ensure a fair and equitable sale - 5 (11%)
  4. It only slows down the process - 3 (6%)
Total of 45 voted. Interesting results, considering the idea of having judiciary members or the courts perform the current role of the STB in enbloc sales was mooted 10 years ago in the Parliamentary Debates on the 1999 Amendments.

You can download or read the Parliamentary Debates on scribd - 2nd Reading here and 3rd Reading here.

Now go poll, you Stayers!

Tuesday, 25 March 2008

Pandering to "the Greed of Developers": 10 Year Predictions - Parliamentary Debate on 1999 Amendment to LTSA

In the middle of 1998, the Parliament debated on an amendment to the LT(S)A, to facilitate enbloc sales. Primary change in this 1999 amendment was the 90%/80% to 10 year old estates which we're all aware of.

A kind reader dug up the Parliamentary debates from 1998 and sent them to me. I read through them with horror.

Some of the criticisms raised in Parliament about the potential negative consequences of this 1999 amendment, they are the very reality we live in now. Opposition MPs, NMPs have talked about the arbitrary nature of 10 year age limits for estates, the need to factor non-material considerations, the need to have courts mediate enbloc sales and not STB, etc.. these were ALL raised almost 10 years ago, and ignored.

An interesting quote from Mr Shriniwas Rai, then a practising lawyer and an STB member, which relates to the previous post on the Constitution. He said:

We have got limited land supply and community interest must take precedence over that of the individual right. As I said earlier, one of the advantages that we have is that because we did not enshrine in the Constitution the right to own property, as some other countries did, we have this development.

I do not have what he said earlier, and I assume "this development" refers to the proposed enactment of the LTSA amendment. But is he right - is it that the right to own property is NOT in the Constitution, as he pointed out? This would seem to contradict Mr KS Rajah's point (see previous blog).

I'll try to upload the documents when I can, but I'd like to quote this excerpt from a speech given in Parliament by a well known opposition MP (initials starting with J and ends with J):

Mr Speaker, Sir, let us not make any pretence. This is not a case of a minority or even a single man holding out against the society. It is not a question of society's interests that will be adversely affected if we give way to the man's wish and freedom to do what he wishes. This Bill simply panders to the greed of the developers and the other co-lessees who see, as has been said, a way to get rich quickly. That would appear to be the only reason for this Bill. There is no question of any national interests coming into this. There is, as has been pointed out, the Land Acquisition Act and even there, let me say, it is felt by many that that Act itself is being abused from its primary, original purpose which was that it should only be used for national interests; it is used for lots of other reasons now. So let us not pretend that a minority, even if it be a single man, is holding society to ransom.

This adds another instance to the list that is already growing in Singapore where the citizen is coerced. He is coerced to do something against his will, against his freedom to do what he wishes to do. Is that the kind of society we want in Singapore where a citizen is coerced at every turn and corner? Or is it a society where the citizen feels that he is free to make his own choice provided of course it does not harm the society at large? I am sure the answer to that must be quite plain.
My objection to this Bill is on principle. I think it is wrong to force one man to give up his property. I do not want to go into the reasons why he may be against the sale. Some reasons have been advanced but whatever it is, it is the principle. Do we rob a man or woman, as the case may be, of his or her freedom to do what he or she wishes to do with the property? Why is that necessary in Singapore? As I said, in a number of things, citizens are now being coerced. I think there should be a limit to this coercion.

Excellent words right there.

Monday, 24 March 2008

Constitutional Ambiguities (at least for the layperson!)

A few housekeeping matters first. I must sincerely apologise to everyone about the lack of updates on the blog. Personal matters, illness and now with the date of vacant possession coming up, I've been busy with sorting the eviction from my much cherished home. I'll try to get my a$$ around to updating the Enbloc List soon (I've said that repeatedly, I know!). As some of you may be wondering, CondoSingapore Forum on Enblocs, a hotbed of information as well as arguments/fights, was recently down. They lost a good 7 mths' worth of postings on enbloc matters, apparently due to a hack attempt. The administrator has continued to update the forum with the latest news articles on enblocs, so kudos to him despite the loss of data.

Last week, a series of Straits Times Forum letters appeared regarding enbloc matters. Ms Susan Prior sparked off by talking about the loss of the 'sense of kampung' in our communities, especially our condos, and she pointed out: "... in Singapore, your home is not really your home and can be taken from you by your neighbours". You can read her letter here.

This sparked off two responses on two fronts - one attacking her point on 'kampung' and another by Mr KS Rajah (apparently the Senior Counsel KS Rajah) which argued that "Ms Prior's fears that her home is not really her home and can be taken from her by her neighbours may not be strictly accurate". Again these letters are available here.

Mr Rajah's argument centred around, interestingly enough, the Singapore Constitution, which you can find here. Now I'm a layperson, certainly not a lawyer, and my interpretation of his letter is based on my common understanding (however little that is) of the law. His point was that under the Constitution "the power to acquire, hold and dispose property is a 'liberty' that is protected by law". That got lots of people confused - if this is the case, is the enbloc law unconstitutional?

Let's go back to the start of Mr Rajah's letter - he wrote in response to Ms Prior about neighbours taking away other neighbours' homes. In this point, Mr Rajah was merely stating the obvious. He's not ignoring the enbloc law; rather, he's taking Ms Prior's argument - that a neighbour can force you to lose your home - to its literal sense, and rebutting that via a legal argument. A neighbour can't force you to lose your home, eg by kicking you out of your home, or by causing bodily harm, or by seige, or by enbloc.

His key point is this single sentence: "The acquisition must be through legal means." In other words, the acquisition of your property must be done within the (enbloc) law.

What he seems to 'sidestep' is that it is precisely USING the law that people are LOSING their homes BECAUSE of other people and for rather selfish reasons. He ends the letter with a 'softer' tone: "Ms Prior's fears that her home is not really her home and can be taken from her by her neighbours MAY NOT be strictly accurate" (my emphasis). It's not ".. by her neighbours IS NOT accurate". Indirectly he acknowledges that what Ms Prior is saying is in a way correct, but within a legal framework, what she's saying isn't correct. Lawyers being lawyers, they pick their words very carefully and there's a difference between "MAY" and "IS" (which is a stronger assertion).

Now the point of contention here, the space that is opened up by Mr Rajah's argument, is whether the enbloc law is constitutionally illegal or not. For example, further down in Singapore's Constitution (not mentioned by Mr Rajah) is this: "The Government shall have power to acquire, hold and dispose of property of any kind and to make contracts." (Sect 37(1)) followed by 37(2) " The government may sue and be sued" lol.

Now, let's say I'm damn bloody stubborn. I refuse to sign the CSA or SPA, and refuse to give my title deeds to the SC's lawyers, no matter what. This goes all the way to STB and I superglue the title deeds and any documentation for my property to my butt. I will not "dispose" of my property and I wish to "hold" it. What can the SC do?

In the Land Titles (Strata)Act Sect 84C (found here), the President, Deputy President or Registrar of the Strata Titles Board is authorised to appoint ANY person (typically a representative from the SC, ie a layperson, or sometimes their lawyer) to act on my behalf, to execute the transfer of property. We know that has happened in the past, when someone refuses to sell but has his/her property wrenched away under the LT(S)A. This opens up the following questions:

  • Is the STB "the government"? Given that the members of the STB are often not associated with any governmental body, but are citizens from private firms (often with stakeholder interests in enblocs), is their authority to execute a transfer of property, although allowed by law, illegal under the Constitution?
  • For that matter, given that under the LT(S)A Sect 84C, any person can be authorised by the STB to execute the transfer of property, not a judge, not the government, is this constitutionally legal?
  • I have no issue under the old LT(S)A pre-1999, when a 100% consensus is required to sell an estate. That makes sense under the Constitution - if everyone has a right to acquire, hold a property, they have the individual right to dispose (sell) it too. But the law was changed to 80% majority triggering the sale, subject to STB's approval. This means that some individuals will invariably lose their 'liberty' to hold their property. And in many cases, under enbloc CSAs, many individuals lose their 'liberty' to dispose their property in any way they want it. CSAs often include clauses that restricts how you can sell your property once the enbloc process begins, after all.
There are two ironies to the space opened up by Mr Rajah for constructive debate about the constitutional legality of the enbloc law:

  • It's going to cost a lot of money for any minority owner(s) to bring up this matter to the Supreme Court for discussion. Not a lot of people can do that, which means this matter is likely to disappear into the archives of forum letters.
  • Even if it goes to the highest courts for discussion, how will the impact of the fact that enbloc sales account for a major component of our budget surplus this year, affect such decisions? After all, only approx. 9.4% of Singapore's population live in condos (2005 Dept of Statistics Housing Characteristics), which means the "urban renewal" argument is really quite flimsy. The only reason why enblocs are facilitated by the government is a purely economic one. If the enbloc law is found to be constitutionally illegal, will it be removed, or amended so that it becomes legal (a more likely scenario, I'd think)?
Please feel free to respond, particularly if my reasoning on this matter is incorrect.