The Worrying Trend of Self-Replicating Committees

A good friend just contacted me, upset and frustrated. Her estate, Botanic Gardens View (BGV), has popped out another Sale Committee. Out of the blue. With another property agent (Huttons) while the first Sale Committee (SC) is still active (with CBRE). Looks like a two way fight has begun in her estate to garner interest and signatures.

The difference that the 2nd SC and agent is offering for owners of BGV? 1-for-1 exchange.

In and of itself, an enticing carrot and certainly a compromise for those owner-occupiers who wish to continue staying there. Move out for 3 years, move back in, presto, brand new apartment.

Except it's not really a collective exchange - the flats are 30% smaller, there's no guarantee what floor, face, etc you'll get. It's also doubtful if people opting for the exchange will have any say whatsoever in the design of the new apartments. In other word, not only are you getting a smaller flat, you're going in blind.

That's partly why collective exchanges are (a) damn difficult, (b) handled with finesse by a few small law firms such as Phang & Co, (c) appealing but in reality having the potential to shortchange owner-occupiers in the end.

But the carrot isn't the point. The worrying fact is that while the first SC has barely started to get around to collecting signatures, the second has emerged. Each with their own carrots.
Who's to say a third, with Ah Beng Agency ("we force your signature by hook or by crook, both sure painful wan") will not emerge? Or a fourth, or fifth? I wrote about the problem of multiple SCs in the past, in the case of Watten Estate, and it looks like BGV's hit with that issue too.

With the development charge increase, developers are now getting fussier in selecting which en bloc to go for (if any). But now all it takes is an eager agency to step in, offer their services (often 'free') so long as a group of like-minded owners is willing. And prime spots like BGV are in demand nowadays, with agencies very keen to win the 80% signature race and get the windfall (along with the owners of course).

Sure it means 'greater choice' for owners, but think this through:-

1. If an owner signs the CSA with Agent A, can he sign the CSA with Agent B as well? What are the consequences if he does so, and which CSA is valid (or are they nullified)?
2. One CSA is already legally tricky (full of legal terms, definitions, loopholes even), but two? Agents and lawyers will give you the short and sweet version during their presentations of what's included in the CSAs, but you can NOT trust what is said because it is what is NOT said that is equally important (sometimes more so). Many en bloc'd estates are now beginning to realise that their CSAs contain clauses that give a lot of their rights away, or have hidden clauses that allow SCs to do unscrupulous things (such as 'bribe' fencesitting minority owners with your money). Considering the multi-million dollars nature of some of the sales, you must be careful and go through each clause. That's double the time needed now, what with 2 CSAs/agents/lawyers/SCs.
3. Under what conditions will one SC bow out of the competition? If two SCs were to compete within the same estate, and each owner can sign only ONE CSA, that's a 50% distribution between the 2 CSAs. This means one may never achieve 80% unless one SC quits and nullifies their CSA. So when should one SC quit in favour of the other (considering both are self-interested/selfish groups who's going to blink first in the showdown)? Under what protocols (eg if an SC is able to achieve 50% in 6 mths time, the other should give up) or rules of the competition?
4. 2 SCs = 2 aggressive groups of people out for your signature = double the hassle and double the annoyance if things get out of hand between the 2 SCs. Given that there's no need for professionalism between the two competitors it can become a slugfest with owners caught in the middle (eg half-truths hurled against the opposite party). Imagine - Monday Huttons rings your bell, Tue CBRE rings your bell, Wed Huttons comes back to clarify some stuff CBRE might have said, Thu another party calls you to say that "the other party smokes pot", Fri both parties call you to say that "the competitor is in league with Voldemort, don't go near them". Sat you just want to cast the Cruciatus Curse on the SCs. Sun you plan to expelliarmus the annoying SC mugglies and boot them out of the estate.
   
5. Shouldn't there be some regulations that management committees can set up for the creation of SCs, to curb the potential rampant replication? Considering that any SC must work with the MC, or for that matter, obtain the owners' list from the MC, couldn't MCs impose non-refundable fees for any SCs that wish to set up shop? Such fees must come from the SCs themselves, and cannot be deducted from the sale proceed if successful. The fees can then go into the sinking funds for communal use, and should be a significant sum (eg $5000 per SC member) to deter the frivolous creation of SCs. That way, owners know that these SCs are serious about their intention to help sell the estate, and not there for their own self-interests.

In the meantime, I wish BGV owners good luck in their 2 way fight. Looks like it's going to get complicated.

Tags: botanic gardens view, botanic garden view, taman serasi, multiple sales committees, multiple sale committees, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

Measures to Ensure Transparency - Deconstructing a Parliamentary Discussion

The Pariah sent me a link to what looks like a 'transcript' of the parliamentary discussion around en bloc sale committees and the en bloc process in general, dated 22 May 2006. This was between A/P Ho Peng Kee, Snr Minister of State for Law, and Mr Chiam See Tong, Opposition Member. You can read the transcript here.

The discussion centered around en bloc sale committees (SCs) and the need for transparency, fairness, and accountability ('do not abuse its powers'). Let's take the points raised in this discussion paragraph by paragraph. In no way is this intended to be a direct attack on A/P Ho, but it is meant to open up a space for further debate on what is seriously lacking in the legislation, and on the issue of transparency.

Para 2: "The Board takes all objections seriously and examines them very carefully."
While this is true, the issue here is that the STB is bounded by what the legislation defines clearly as permissible objections - financial loss (defined in a limiting manner), acting 'in good faith' (again, defined in a limiting manner), and being partisan to the redevelopment. Given these tight boundaries, what 'objections' fall through the cracks, which can then be thrown out as legally excluded? Issues of intrinsic value of home, valuation of units that are factored in the original sale price but excluded in the en bloc method of apportionment, aggressive behaviours of SC/agent/law firm, lack of transparency, etc.

Para 3: "the Board had, on two occasions, dismissed the applications because the procedures set out in the legislation were not complied with."
Two out of what must be close to 100 en bloc sales by now, is not a lot. IF, however, one counts how many en bloc sales has to go TO THE STB (ie did not achieve 100%), then the number rises substantially. Has the government or the STB asked (and produced findings) on why these estates never achieved the 100% consent? Note the addition qualifier - "set out in the legislation" - which means there are numerous owners who might have complained about the issues mentioned above, but couldn't because these are not set in legislation. Furthermore, the proposed changes include one which aims to make it such that minor non-compliance with procedures would not cause the sale to be dismissed.

Para 4: "[Requiring the CSA to be signed within 12 mths will make it such that] all owners.. will not be kept in suspense for an indefinite period."
How about all owners being subjected to repeated en bloc attempts, on an almost regular basis? The 12 mth limit to an enbloc process will not preclude SCs from forming again and again. Unfortunately, I don't think the government has a record of how often estates repeat the enbloc process.
More importantly, while I applaud the effort to make the update of the enbloc process accessible to people in 4 different languages, more needs to be done to make the CSA itself accessible to laypeople, not just in different languages, but in everyday English rather than its current legalistic form.

Para 5: "[The proposal to require a general meeting to start a SC] will also serve as notice to all owners of a possible en bloc sale initiative being started."
I think this is the clearest case of where the policy makers are not in touch with "the ground". The fact is that almost all en bloc initiatives are started by a broadcast letter by the marketing agent to ALL owners, requesting them to attend an owners' meeting (or in some cases even a general meeting). Any agent with enbloc experience knows that the initial stage of announcing to all owners in as public a manner (notice boards, registered letters to owners etc) is crucial in getting the prerequisite 80%. Will the EOGM requirement change anything? Not likely.

Para 6: "I expect many useful points [from the public consultation on proposed changes] will be incorporated into the final amendment Bill."
I certainly hope so!! Over 100 feedback was sent to MinLaw, surely that has to cause them to consider some of the problems with current, and proposed, law.

Para 7: "the sale committee is perhaps the most important component in the en bloc sale process."
Absolutely, but posting "minutes of the sale committee.. so that all owners, whether majority or minority, will be kept au fait with the discussions" (Para 8) is insufficient. Anyone in the business world will easily realise that minutes are cleaned up versions of what transpired in a meeting. A transcript might be better, but an even better solution would be to require the sale committee to comprise of both pro- and anti-sale members. Something that Prof Jayakumar suggested but was not seen in the proposed changes.

Para 10: "[the idea of legislating a 1-to-1 exchange] is one area where we should leave it to the owners to decide, because not all owners may want a replacement flat."
Do read Pariah's blog for more details on collective exchange; she's probably the most knowledgeable person in terms of exchange. She points out that the suggestion raised by Chiam is not that everyone must receive a replacement flat via an exchange, but that the option be legislated such that should an owner want a replacement flat rather than cash payout, they may do so. Australia is looking into such a suggestion, as mentioned previously, and perhaps Singapore should consider it seriously too.

Para 10: "I know on the ground that owners who want a replacement, in fact, negotiate with the developers who are buying the property."
Wow. Can anyone who has in fact negotiated with the developers please contact me, so that I can believe this statement?
(a) Most agents don't even bother offering possible replacement flats for displaced owners (ie the investment arm is separate from the residential sales arm).
(b) Most CSAs do not include or build into it the possibility for owners to obtain a discount or first dibs, much less negotiate, with the developers on new units. If it does, it means a much lower sale proceed and that might upset investor-owners who prefer the higher premium.

I would dearly love to obtain a negotiated replacement flat, but was never given that opportunity at all. Those I've spoken to recorded the same situation. The whole issue of negotiating for new units before it is built, or even planned (or designed), is highly complicated, perhaps on par with the process of exchange. Unless A/P Ho is referring to owners approaching the developer/new unit agents and asking for a discount because they sold the land to them. In which case the usual discount would be given, rather than a special one, I suspect. Most sales agents want their commission after all.

Did the parliamentary discussion address the issue of transparency? Only narrowly defined, and certainly not enough to tackle the increasing dissent and frustration over the aggressive machinations of SCs. But for all the points raised above, they are made outside of parliament and it's a small voice in a sea of greed. I can only hope some of the feedback sent by the little people, actually make a dent in the law.

Tags: Singapore Parliament, En bloc parliamentary debate, sale committee transparency, collective sales, real estate, singapore, condo, en bloc, en-bloc, en-bloc sale, collective sale, enbloc, enbloc sale, property, Enblocking Singapore, Enblocing Singapore, Enbloccing Singapore

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" :)

Tags: collective sale agreement, collective sales agreement, multiple sales committees, multiple sale committees, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate, Enblocing Singapore

An Alternative to Collective Sales - NSW's Renewal Plan

Well, who would have thought this is impossible.

New South Wales is undergoing urban renewal reforms as well, and the Property Council of Australia has looked into the Collective Sale process that we have in Singapore. And they came up with an alternative that looks like (a) they've drawn from the Singaporean experience, (b) they've thought things through more thoroughly, not shirking from the complexity of what they hope to achieve, (c) they've taken into consideration the fact that Australian owners may not like the Singaporean model which favours financial stakes over social stakes and issues of hearth.

They call it the "Renewal Plan", and is akin to a systematic model of legislated collective exchange.

Note that, as far as I can tell, it is still under discussion or refinement. Anyone who has more information on it please contact me. (Wish I had found this earlier; it'd have gone into the MinLaw document!)

The original document that discusses the Renewal Plan can be found here.
The subsequent document that refines the Renewal Plan can be found here.
[These are pdf files - you'll need Acrobat Reader to read them. Search for "Renewal Plan" within the documents]

A choice quote from their document, which critiques the Singapore collective sale scheme:-

However, this scheme does not give owners the confidence that they [owners] will receive fair and equitable financial benefit from the termination of the scheme. Specifically, if objections have been made against the application for termination of the strata scheme, the Board will not approve the application if there is the potential of financial loss to an owner, or sale proceeds will be insufficient to fund or to redeem a mortgage or charge. The Property Council does not support this, as there is potential for manipulation of financial records and misinterpretation of “financial loss”. It may be more effective if the level of financial return was resolved through a “just terms” provision.
Similarly, this model lacks detail regarding the process to be followed once agreement that the strata scheme be terminated has been obtained. Detailed provisions relating to the vacation of the building by owners, redevelopment of the building and transfer of the remodelled units must be clearly established, however this could be set out in documents attached to the application for sale and termination of the strata scheme.

"Vacation of the building by owners" relate specifically to my discussion (Myth #6) on Completion Date. Redevelopment and transfer refers to their Renewal Plan scheme. Feel free to discuss the Renewal Plan in the comments section.

Tags: Renewal Plan, collective sale, collective sales, condo, en bloc, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate