Wednesday, 15 October 2008

How Many CSAs can a CSA CSA?

I received this email from Mr Francis Zhan, retired Chairman from Regent Gardens (RG), which has given me (implied) permission to "keep [my] readers informed" of the development at RG. Let me post his email first (with private information anonymised), and then I'll respond, drawing from the RG judgment by Justice Lee Seiu Kin (available here, or here on scribd).

Dear Dr. Minority,

I read with great interest your blog on en bloc activities in Singapore, and thought I may be able to contribute the latest information on the most controversial en bloc sale in Singapore from the horse's mouth.

I am the last Chairman of Regent Garden Condominium, and have been its Chairman for 16 consecutive years, treasurer and council for the earlier 4 years.

You are probably aware of the situation surrounding our en bloc sale so I will not waste time with history. I will deal with the crux of the issue which is the key issue the majority owners are appealing to the Court of Appeal against the High Court's ruling on 16 May 2008.

Justice Lee S K had ruled that a purchaser may enter into a side contract with payment to the 6 minority owners to secure their agreement to the en bloc sale as nothing in the Sales and Purchase Agreement forbade such an arrangement. And to make his ruling practical, he issued an order that the 6 minority owners be enjoined as parties to the original CSA! (written judgement was released a week ago).

In effect, therefore, there are TWO collective sale agreements -- the main CSA with S$34.0m. to be shared by all 31 owners, plus an additional or sub-CSA with S$X.0m. to be shared by the 6 minority owners. To add insult to the injury, one of the 6 minority owners filed a suit claiming for "financial loss" based on the S$34.0 sale price, ignoring the additional receipts from the share of the S$X.0m.

We cannot understand how the Honourable J. Lee could arrive at such a conclusion without examining the meaning of a Collective Sale, and his judgement therefore produces TWO COLLECTIVE SALE AGREEMENTS. We are not even questioning the manner in which the purchaser obtained the consent of the 6 minority owners (vis a vis the Prevention of Corruption Act), and merely asked for the logic of such an arrangement, if validated by the Courts.

If a property owner can stay as a minority owner and gets two, or even three (as in the above case) cheques as against the majority owner getting only one cheque, who on earth would want to, or dare to, sign the CSA as a majority owner?

Will appreciate if you can keep your readers informed of this latest development, and transmit the information to any other forum on en bloc sales, for the benefit of the community because I don't want to see another property owner taken for a ride.
If you need any documentation on the above sale, do not hesitate to contact me. I can also be reached on my mobile XXXXXXXX.

Francis Zhan,
Retired Chairman,
Regent Garden Condominium.

I note with interest that Mr Zhan wrote "we" in his email, which I take to imply he represents the majority owners of RG, as it would seem the problem is with the minority owners obtaining additional sums from the sale, through some alleged private agreement with Allgreen (the buyer of RG).

The judgment for RG is very complex and addresses a number of issues. I want to pick on one only which is Mr Zhan's comment that the Judge effectively allowing more than ONE CSA to be executed, in this case, TWO CSAs. I'll draw from the judgment where necessary.

Firstly, the CSA is a very specific document. I cannot emphasise this repeatedly to as many people as possible. It's a contract, with all that a contract implies. As such, any clause that is present or absent in it has implications to the sale. In almost all CSAs I've seen, it's very very comprehensive, especially with regards to the protections of the majority owners and the SC. It sometimes include, in one I've seen, woolly clauses such as what happens when the sale price offered during the tender is less than the reserve price. This merely reflects poor contractual writing, in my opinion, especially considering how air-tight some clauses can be to protect the SC etc. The point is that there is only, and only, ONE CSA in any enbloc sale, and ONE Sale and Purchase Agreement. Mr Zhan's argument of TWO CSAs is therefore a rhetorical, and not a legal, one.

What he's alleging is that there is one CSA and SPA, and for the minority owners, there are private contractual agreements with Allgreen. Not CSAs. This is most obvious when you realise that the CSA binds and encompasses all owners eventually (should sale be approved) but any private agrement binds only the minority owners.

Can the developer do that? Mr Zhan disagrees obviously, since it creates the situation that allows for "greedy" minority owners to hold out and ask for more through private agreements. It also causes "an unequal and disproportionate amount to be distributed to all subsidiary proprietors" (Clause 22). Surely that is unfair to the majority involved! It means that everyone should endeavour to be the minority, to get more!

Let's examine that closely.

  1. If everyone waits it out, hoping for more money, then the sale will not go through. This means everyone will not get anything from it. In reality, this always happens. You have some minority owners who steadfastly refuse to sell, and others hoping to wait until the reserve price goes up, before signing. To collapse minority owners to being merely "greedy" is stereotyping and reflects simplistic thought. Enbloc sales are complex, and people will sign the CSA for various reasons, including but not limited to, greed.
  2. It's an "industry practice". Clause 44 of the judgment points to Mr Tan Tiong Cheng of Knight Frank who admits that "the practice of offering additional payments to minority owners to procure their consent to the sale of the relevant property is widely adopted within the industry". This means that at the very least, marketing agents, enbloc lawyers, and serial enblockers are aware of this. Under the new enbloc laws, minority owners now have the possibility of additional compensation if justified. This would be unfair to majority owners, but it's the law. What an owner has to consider, is if s/he will obtain such compensation or not, and hedge their bets.
  3. There's risk involved. Clause 26 shows how a third party notice against minority owners was made to determine, among other things, whether because of the private agreements, the minority owners are therefore liable to majority owners for damages. In other words, if a minority owner accepts the private agreement, s/he may be opening themselves up for potential lawsuits against them. So it's not instant cash in your hands.
  4. Because it's "industry practice", what the SC SHOULD have been done is to provide explicit clauses in the CSA and SPA to prevent such payments to be made (Clause 44). In other words, as mentioned earlier, how comprehensive your CSA is, is crucial. The judge went at length to point out that such provisions are not included in the RG CSA/SPA and hence, Allgreen is within legal means to provide supplementary payments to some owners. It's legal.
  5. The judge also asked the question of whether the additional payments to the minority owners constitute "detriment" to majority owners. Were they disadvantaged because they now have to sell below what others are getting, or below market value? He reasoned thus: "The fact that the majority owners now have to sell the property below its “market value” cannot suffice, since under ordinary contractual principles parties cannot be allowed to escape a properly formed contract simply because it turned out to be a bad bargain after they had ascertained what the development charge was. Nor can the fact that the majority owners end up receiving disproportionately less than the minority owners constitute “detriment”, since [the lawyers for the majority owners] would then be making the proposition that although the majority owners had, at the time of signature, been perfectly willing to sell their units at a particular price, the fact that the minority owners will receive a larger sum in order for the sale to proceed is somehow detrimental to the majority owners even though this will permit the sale to be carried out on exactly the same terms as the majority owners had contracted for in respect of their units." (Clause 48). In other words, when a person signs the CSA, at the expected value and terms, he should not want, or be found wanting, since it's a binding contract.
I return to Mr Zhan's key question: "If a property owner can stay as a minority owner and gets two, or even three (as in the above case) cheques as against the majority owner getting only one cheque, who on earth would want to, or dare to, sign the CSA as a majority owner?" The answer, as always is not simple. You sign the CSA knowing full well it's a contract and a binding one, with all the legal consequences that entails. If you are for the sale, sign it with independent legal advice on the implications of it. If you are not for the sale, review the CSA as it'll bind you later on, should the sale be approved by STB. In the final calculation of things, the CSA applies to everyone, be it majority or minority. But to refrain from signing in the hope of getting more from private agreements, is to hedge your bets - hoping that you'll get such an agreement from the developer (in many cases that does not happen), hoping that you will not get sued, hoping that the sale will go in accordance to the terms of BOTH the CSA/SPA and the private agreements.

I should also note that in the RG judgment, the judge has pointed out that there is no written agreement between Allgreen and the minority owners (Clauses 66 to 76). The arguments he made are on legal grounds, and point to the definition of what would count as a "further agreement". He found that there was no legal basis for such a "further agreement". I'm not a judge nor even a lawyer, and hence cannot assume to argue against his decision on this matter. That is a matter for the majority owners to make a case.

The morale of this RG tale? Mr Zhan's suggestion that it forwards the anti-enbloc front - that holding out for more money as a minority owner is a good thing - has to be tempered with the legal and financial risks involved. As in any legal case, having damn good lawyers make a difference in whether you can defend yourself or not. I therefore have to disagree that there are multiple CSAs involved in RG's case, have to disagree that minority owners are inherently 'greedy', and have to disagree with the simplistic view that minority owners stand to gain everything by holding out for private side-payments.

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Anonymous said...

Thank you, Dr. M for putting this in layman language. The moral of this saga is, sign with eyes open. Rushing into a transaction without a proper valuation to gauge the value of one's own property is to give it away with both hands.

Anonymous said...

enbloc ruin lives!

NEAS MOM said...

The "sand-castle" en-bloc is long gone and dusted(some of us went to see the December requesting if they could send each and every household at least some kind of concrete letter, so as those who are still shopping for answers till today can move on.) His reply was if anyone is still being confronted that the en-bloc is not finished, there are limits that they can do.
The multiple en-bloc parties have gone their seperate ways and nothing out-of-the-ordinary, had surface.
Some of us have overcome our fears and feeling the old magic returning.If the oldies can do it, so can you?(my best choice of healthy-living was not allowing the brain-game intrude into my life.)

Anonymous said...


On 9th December,at 8.30 am we received a telephone call from the security post ,advising us that fallen tree branches had landed on and damage 2 of our cars during the night and that a contractor was in attendance to remove the fallen branches.




We refer to your letter of 16th December 2008 and a recent reminder.

Council has delideratedat length on your claim for compensation for damage vehicles SGN 9XXX and SGR48XX caused by fallen branches following a rainstorm in the early hours of 9 Dec 2008.
Council has also sought advice from our insurance broker, Newstate Stenhouse (S)Pte Ltd and regrets it unable to accede to your claim. You may like to seek reimbursement from your motor insurers.

Yours sincerely,
HO KAM WENG for and on behalf of COUNCIL
Council members.
(Depending on the coming issues,
I will get one of my 'AVAILABLE' sons to send the original letter and photos to DR. MINORITY to post it on his website as a guidance for owners who may be caught in similar situations)
This cars owner of this condo (TULIP GARDEN)has now been promoted to 'SNUB BY THE COUNCIL'
because of her bluntness. CHEERS.

Anonymous said...

To whom it may concern, I have said my piece of mind,and will not be taking any 'Q & A'. I have just cut my holiday short cause mum was'nt coping well with her husband of nearly 70 years not being around any more.(Its our top priority for now) Sorry for being outspoken. Perhaps this can be deleted later on.

Anonymous said...




The owner of the 2 damaged vehicles
went on an enquiry spree. She asked the 2 night guards if there was a 'storm' that night. Their answers were that they could'nt remember. She called the contractors who did the clearing on the branches.(They would'nt comment. They knew who their paymasters were.) She phoned the estate-supervisor. He did'nt know!(He has a part in the feedback-input,so God knows what was behind the CYA close-door meeting, since none of us had any privy to it!)


David Copperfield-hope you're reading this.

sholock holms said...

there's just too much intriguing plot to digest.

Mother-Hen said...

If you're someone at some stage of 'en-bloc' felt a cruel blow,you are not alone.

If you are still searching for satisfaction, you are not alone.

If you feel you are stuck in a loop with the turbulences of post en-bloc traumas, you are not alone.

Seek counseling. It works wonders for me. I laugh at things that comes along my way now.

Cheers. said...

Murphy's Law?

9 .12
21. 6 (turn around)

or Monster-in -Law ?

Cheers. said...

A little bird was flying south for the winter. It was so cold the bird froze and fell to the ground into a large field.While he was lying there, a cow came by and dropped some dung on him.
As the frozen bird lay there in the pile of cow dung, he began to realize how warm he was.
The dung was actually thawing him out!
He lay there all warm and happy, and soon began to sing for joy.A passing cat heard the bird singing and came to investigate.
Following the sound, the cat discovered the bird under the pile of cow dung,and promptly dug him out and ate him.

Morals of this story:
(1) Not everyone who shits on you is your enemy.
(2) Not everyone who gets you out of shit is your friend.
(3) And when you're in deep shit, it's best to keep your mouth shut!
Management Lessons(Refresh)

オテモヤン said...


趙嘉慧 said...

IS VERY GOOD..............................

Jhon Staphen said...

"If a property owner can stay as a minority owner and gets two"
What does this means.??
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TechCom said...

Amazing groot boodskap
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