Suggestion of Short Term Lease to be Included in SPA

Received this email from an owner whose estate is due to be torn down in a few weeks' time. He made an interesting suggestion for inclusion in the Sale and Purchase Agreement - for developers to consider short term lease for owners one month before the Date of Vacant Possession. Reader has requested anonymity.

Our estate has already gone en-bloc, and the Date of Vacant Possession is end of the month. We were given 6 months from Completion to Date of Vacant Possession (DVP). However, as owners and residents slowly started to trickle out of the estate in the last few weeks before Vacant Possession, some of them began to contact the developer asking for an extension of the DVP. I was one of them.

Why would people want to request for extension, if they know they have 6 months to clear out, I'm sure some may ask. After all, 6 months is a long time to get a new home ready, renovated, moved in.

• Some people have kids still in school, and moving them out during school time isn't ideal or appropriate.
• Some have to do renovation work, and that can get delayed and delayed.
• Some bought units that became available, and are now rushing to have renovation done.
• Some have work commitments that cannot be adjusted to the developer's deadline.

Some of us called the developer individually, and the developer categorically said no to us all. This was about 1 month before DVP. About 2 weeks before DVP, the developer turned around and asked if any of us were interested in a short term lease. To some, it was too late - they'd already moved out but they said if given a choice, they'd have taken up the lease. We were about to move, so we were interested - any extra time is useful for us. But wait, there's a catch... There's a minimum period, the rental is at market rate, and unless enough people signed up, there won't be guard or cleaning services.

Unreasonable! The place is becoming a waste dump with people leaving and dumping their things everywhere. The mosquitoes are rampant because of the abundant puddles of water (and abandoned fishtanks). And they want market rate with no cleaners or guards?

We heard the same situation with Leedon Heights. People there were given 8 months short term lease, but were offered it so close to their DVP that it doesn't make sense. Many of them (and us) have already made preparations to move out - movers, termination of services, temporary storage, temporary accommodation - that a LAST MINUTE OFFER of short term lease just isn't practical.

I can only imagine what is going to happen when Farrer Court hits the DVP. As it is, renovators are so busy that they can't commit to schedule... movers are fully booked up... how 600+ owners from Farrer Court plus hundreds more from Leedon Heights.. Farrer Road and surrounding areas will be jammed with movers and renovation workers!

I would strongly suggest, in the future, that all owners push for an additional clause in the Sale and Purchase Agreement: That the buyer will offer a short term lease for owners and residents, at least 2 months before the DVP, so long as they do not intend to immediately tear down and develop the land. The terms of the lease should be aligned with market rates and conditions (including retaining essential services in a condo), and should allow owners to target the main school holiday periods (June, December) for them to leave.

This will be of great use to all owners, so that they don't have to rush around looking for temporary lodging, and can wait until it is the right time to move. Developers can benefit from the rentals of an otherwise empty estate. Can't see why it can't be done!

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Tags: Enbloccing Singapore, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, singapore

Date of Vacant Possession - Maintaining an Estate when It No Longer Belongs to You

In response to an owner's dilemma over developers moving in to build a showflat after completion, the URA and Building and Construction Authority replied in the ST Forum on 17 August. You can find the full text in CondoSingapore here. I've talked about it previously here and here. Because the land legally belongs to the developer after completion, owners or tenants staying there are doing so at the 'goodwill' of the developer, often rent free. However, subject to the SPA, some owners are required to pay maintenance fees and continue to service the sinking fund, if they wish to stay till the date of vacant possession (VP). As Mr Han Yong Hoe (Director, Development Control URA) and Mr Ong Chan Leng (Director, Special Functions Division BCA) pointed out in their reply, owners/tenants staying in the estate after completion are "privately agreed upon between the developers and the residents". They further pointed out: "The developers and stakeholders of the project are directly responsible for safety at the worksite and they should take the necessary safety precautions to protect workers and the residents."

Now I want to show you two bits of legal text from a massive HUDC estate that was sold recently. The first is from the Tender document, and after negotiations, the second forms the Sale and Purchase Agreement which was signed by the SC and the developer:

Text 1:
The Purchaser hereby covenants that from the Completion Date, they will ensure that all the common property comprised in the Property is kept and will keep the same in good repair and tenantable condition and the services provided by the Management Corporation to the Property shall not be disrupted and the level of maintenance services shall not be affected until delivery of vacant possession of all Units and that the Managing Agents employed for the management of the Property at the Completion Date shall not be dismissed or terminated without just cause or reason prior to this date.

What it means is that the developer agrees to keep "in GOOD REPAIR and TENANTABLE condition" the estate, and that the services provided by the MC (security, electricity, cleaning services etc) shall "NOT BE DISRUPTED" nor its "LEVEL of maintenance services" affected until VP. Sounds reasonable right? It means the developer has duty of care to ensure that the estate is as it is, in a "state of good and serviceable repair" similar in spirit to the duties of the MC as defined in the BMSMA (Article 29(1)), irregardless of how many people are staying there.

Now after negotiations, look what happened to that clause (which is now part of the SPA):-

Text 2:
After completion and pending the delivery of vacant possession of all the Units by the Owners to the Purchaser, the Purchaser shall maintain the Property at a reasonable level (including maintenance of reasonable security services for the Property).

The vague term "reasonable" has replaced the much more defined duties of the developer in Text 1 which indicates no disruption, service level to be maintained etc. So what would "reasonable" mean? If there is only 1 owner staying in a 20 story block, does that mean the entire block can have its electricity cut except for that floor, and only 1 lift operational, perhaps between certain hours only? Or if half the estate is empty, that the security may be reasonably reduced, including simply cordoning off that estate and abandoning it? What about if your flat has an external pipe that is leaking badly and causing the floor to be flooded, would you be able to alert the developer to get it repaired?

What counts as "reasonable"? Why was Text 1 replaced by a vague Text 2? Who insisted on the change (Purchaser? SC?)? What form of recourse OUTSIDE of the developer is there for owners and tenants staying there after completion, should the developer ignore repeated complaints? Is the estate even insured? After all, the MC would have dissolved by then, there wouldn't be a managing agent to contact, but yet at the same time, some estates still require owners to pay maintenance charges.

A commenter in the ST Forum said that residents and tenants should be thankful that the developer allowed them to stay 'rent free'. Firstly, there are very valid reasons for staying there - owners may not have the cash capital to purchaser a replacement home until completion (when they get their proceeds), and only then start looking around for a new home. It's not their choice to stay in an estate that may deteriorate if no checks are made on developers.

Secondly, let me use this analogy:- A landlord rents out the flat to you, but comes in daily from 9 to 5 without your permission as a tenant, to renovate parts of your flat while your kids are around. The landlord also allows people to walk in and out of your flat unchecked. The landlord also points out that the leaking roof will not be repaired since it's not reasonable to repair; he's going to tear down the entire place in a few months time. He gives you masking tape and says "Put up with it". He tells you, never mind, rent is free but you pay need to pay utilities, and maintenance fund. He says, "this is reasonable wat, you getting to stay here rent free".

Will you get upset?

Do you even know what your rights are, after completion?

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Tags: date of vacant possession, vacant possession, sinking fund, maintenance fund, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

Post-Enbloc Sale aka Free-For-All

A forum letter in the ST today highlights the fact that while our enbloc legislation is very precise in the execution and protocols surround the SALE of the estate, it is extremely woolly about the CONSEQUENCES of the sale, ie what happens after the owners get their hands on the profits.

What happens? Well, after legal completion (the point when most owners get their sale proceeds), the land belongs to the developer. The managing council will be dissolved, there won't be a managing agent, your estate is in the control of the developer. Even though there are people staying there (including children and elderly), the developer (subject to the conditions stated in the SPA) often has the right to invade your estate and put up signboards, erect show flats (yes, in plural), conduct preconstruction testing and drilling. Your security will have a hard time keeping up with who comes in and when. In fact, as my post all the way back in Jan 2007 showed, expats have complained of developers not even maintaining the quality of the estate's service and maintenance (even though owners and tenants staying there after completion are still required to pay maintenance fees) and worse, creating all sorts of health and safety hazards on your land.

But who cares? Pro-sale owners have their money and are gone from the place. The only people left - tenants (some of whom are not even aware the estate's being demolished) and residents desperately looking for alternative homes, hoping for a bullish market to show any sign of slowing down.

What can you do? Nothing much, since any SPA is decided by the sale committee and the developer (with their lawyers), and if the developer wants to come in, will any SC say no? The only hope you have - do not sign the CSA until you get a rock solid written promise from the SC not to allow developers into your own, especially if you are planning to stay there. I'll update if I have more information on what legal recourse tenants and residents have against developers creating health, noise and safety hazards in your estate.

As a colleague wrote to me, "if civilians are required by law to wear safety gear when they enter a construction site, what happens when the construction site enters your home?"

Straits Times Printed Forum
Aug 13, 2007
En bloc sale: Work starts even before all move out
Chio Tan Seng

AMID all the stories on collective property sales readers of The Straits Times have come across, mine in Balmoral View has a twist.

The developer has moved in equipment to build a showflat even though seven units of this 22-unit condo are still occupied.

It means we cannot use the visitors' carpark and the recreation areas, apart from having to tolerate the dirty swimming pool, noise and dust. In the meantime, we are still billed for monthly maintenance.

Yes, our condo was an early bird in the 'en bloc wave', and prices paid to unit owners were low compared to the current level. We accepted the deal, and the last unit must be vacated by November.

But what right has the developer to rush in before everyone moves out?

Some to-ing and fro-ing with Building and Construction Authority officials revealed that, although the deal was completed in May, the developer had already applied for and got the necessary approvals from the Urban Redevelopment Authority (URA) to build a showflat in February last year.
Did the URA check with the Strata Titles Board on the legality of such a move, given that there are residents who do not need to move out until November?

By mid-June, heavy construction equipment was moved in and the construction of the showflat is now in earnest. The recreation area has been cordoned off.

Also, I see obvious safety concerns with children playing in the compound, especially with wooden scaffolding less than a couple of metres from the swimming pool.

I understand the developer's haste to catch the hot property market but this is at the expense of residents still living on the estate.

Can the authorities enlighten us on this unsatisfactory situation?

Tags: completion date, construction work, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, singapore

Tenants in En Bloc Condos - Protecting Yourselves

[Again, information on the REACH discussion forum can be found here and the Ministry of Law public consultation on en bloc legislation here and request for information on STB mediations here]

All these talk about en bloc sales, we tend to forget that aside from owner-occupiers and owner-investors, there's another group of people who will be greatly disadvantaged in the process of a successful en bloc - The Tenants.

Whether they're local or expatriates, the fact is that once an en bloc sale goes through, most landlords are not too concerned about your rental flat (it's going to be torn down), your surroundings (it's going to be torn down), and your contract (typically in the landlord's favour). Consider the following:-

1. If you do not have any clause protecting you in the event of a successful en bloc sale, the landlord can turf you out anytime (subject to notice, usually 1-2 mths), but YOU cannot move out on the grounds of deteriorating conditions, increased noises etc. You have to give notice, and yes, even though the place will be torn down, the landlord can still deduct costs for damage to property due to wear/tear!
2. Unknown to many tenants, there's a grey period between the legal completion date and the date of vacant possession. (Click on the "Completion Date" topic on the right.) For example, in my condo which has just been sold, there are clauses in the agreement that allows developers to come in during the period between completion and possession to (a) set up a showflat (b) conduct tests on the grounds (which may include drilling and much banging about).
   
3. After legal completion, the estate belongs to the developer and there are no management committee to turn to for any grievances. The developer is within his 'rights' to keep a minimal cleaning/security crew and ignore any urgent repairs (like a leaky roof over your flat). Depending on the agreement between the SC and the developer, there are instances where this period between completion/possession is considered 'rent-free' which means there's no need to pay maintenance fees. Of course, you can expect your landlord to continue to extract that from you (even though there's no more maintenance whatsoever).

So what can you do? Not much, except at the crucial point of accepting the contract you need to think about some of the things suggested below by a chap in the Expat Forum. Bear in mind - TONS of condos in Districts 9,10,11 are going en bloc, which means there's no guarantee you won't be subjected to the above problems unless you stay in a brand new condo (aka pigeon holes). Some suggestions include putting in a 'moving out clause' so that if things get unbearable, the landlord will pay your moving costs to your new home. But some disagree with this...

From "Expat Source" posted at the Expat Forum:

If you opt to put in a clause for your Landlord to pay your moving costs should you be forced to moved in the event of an en-bloc sale, you may end up disadvantaging yourselves. As they will keep you there till the last and then you will have to fight them for the money. You could be surrounded by empty apartments and progressive construction driving you nuts.

I would suggest that instead you put in the following:

1. An en-bloc clause that gives you 3-6 months notice should a sale go through, with the OPTION that you can leave at any point during that period should you find suitable accommodation.

2. A clause that in the event that your living standards are compromised by on-site construction, destruction of facilities, lack of standard of maintenance, facilities not being fixed etc that you have the option of giving notice and being released from your contract.

3. In the event of having to move because of an en-bloc sale that you have one month's free rent to cover your moving and re-siting costs, if your rent is above $5k be reasonable and ratio it down to 2 weeks etc.

This way you get to move out and are not stuck until the final days in a deserted condo with construction workers surrounding you. You have an option of moving out if they start to tear up tennis courts for show flats or drill holes for soil testing.

And you won't have to fight for the moving cost money as you will just simply deduct the rent.

Of course right now you should also look at putting major construction clauses in your contracts, if you move into an area that is currently peaceful with no sign of construction and the landlord or their agent tells you that none of the surrounding buildings are coming down or going up - you should have the option to move out if that situation changes dramatically within the term of your contract. However, you have to be reasonable, if you move into an area with ongoing construction or condos emptying out you have to take the responsibility for your move there. Again you add in the clause about moving costs deducted from rent.

It might be a sellers market but they also need the buyers in order to get the rent.

These clauses make them more accountable for the information they tell you and gives the landlord a cost if they or their agent are not being truthful.

Tags: en bloc rental, tenancy agreement, rental contract, legal completion, vacant possession, landlords, tenants, Enbloccing Singapore, Enblocing Singapore, Enblocking Singapore, Enblocking Singapore, collective sale, property, enbloc sale, enbloc, en-bloc sale, en-bloc, en bloc, condo, collective sales, real estate, singapore

More Voices - Selfish Developers and Every Resident

Two posts online with the first giving a very real recount of his experiences of the tail-end of enbloc sales, when everyone has their dosh and couldn't care less about those who have not cleared the property yet. This first posting is from an expat forum, where the poster "Porean" described his own experiences of what happens after the en-bloc sale is legally completed. I'd described the situation and the legal inadequacies here, but here's his account:-

From Porean
Posted 9 Feb 2007

My building's gone en-bloc and already the owners have torn down our tennis court to build a showflat, before the official date that everyone should be out. They want to start selling the new partments before demolition/building starts. Of course!

Spoke to the developers recently and was told that "we have a right to come in to do this because we own the building"
Lights in the corridor are dimmed to a minimum and our security guards have been paid late every month. One security guard was paid his salary on the 15th rather than on the 1st. And the building management says they no longer are employed to do what they used to do.

So folks, just a little taste of what happens when your building goes en-bloc. Business rules!

The second post is from sgforums, in response to a letter to the Straits Times Online Forum (which I've reprinted here) :-

From BillyBong
Posted 9 Feb 2007

I've always said that if residents choose to go for En-bloc sales, EVERY RESIDENT in that block must agree to sell. If even one refuses, the sale CANNOT go through.

Mr Hanafi spoke from the heart.

Instead of seaching for a home, our people have become greedy traders, driven by the smell of cold hard cash rather than a proper home. Their only justification that helps them sleep better at night is that they pocket a sizable profit over their original purchase price. And that makes the transaction worthwhile.

No thought is given to the reluctant owners, who now feel displaced against their will, or those who lose out because they stand to make a loss from the sale, despite STRATA claiming that CPF losses do not equal financial losses.

And one wonders why Singaporeans continue to complain about our own self-centered behaviour?

Tags: date of completion, completion date, date of vacant possession, real estate, property, enbloc sale, enbloc, en-bloc sale, en-bloc, collective sales, condo, singapore, collective sale

"Date of Completion" & "Date of Vacant Possession" - Myth #6 on Obligations

This post was from an expat tenant staying in a condo that has been sold off in a collective sale:-

We live in a condo that has been sold enbloc, all the tenants have been given notice to vacate by end May 2006 - a large portion have moved already but the place is still about 40% full. The previous Management company have handed over the property to the redevelopers already. In the last week they have been doing soil-investigation work for the redevelopment of the property, which involved a lot of drilling and digging and generally very noisy and inconvenient for the current tenants. I am curious about what the law says. Is it legal for them to start the redevelopment process whilst there are tenants still in the building. - Patch, 30/1/07, ExpatSingapore Message Board.

Another tenant has expressed the same situation, whereby developers have entered the premises to begin drilling and working the grounds, and the condo maintenance crew are left to a skeleton crew (probably comprising one poor elderly person in charge of clearing the bins, cleaning the corridors, and being security guard at the same time). What's the law on this?

For tenants and owners who choose to stay after the Completion Date, there's nothing in the Statutes that protects you from poor grounds management and developers coming in; everything is defined in the Collective Sale Agreement (CSA) that is a binding contract between the owners and the developer. Let me spell out the typical schedule in the CSA first :-

The COMPLETION DATE (CD) – this is the date typically 3-4 mths after the Strata Title Board application approval. This is the legal completion date, when all owners can get their millions, if they choose to vacate by this date. If they do not, they have…

The DATE OF VACANT POSSESSION (DVP) – this is about 3-6 mths and varies between CSAs. Some may be longer, some shorter. But typically, if an owner does not vacate by the CD, a small % of their proceedings will be retained (eg 15%) and returned when they vacate the premises, before or on the DVP.

What about tenants? Well, again the CSA will define the conditions, but typically the landlord has the right to allow tenants to stay in the premises up to the DVP, and collect rent until then. Which means the landlord would have given you notice to vacate by a set date, cut short your contract etc, do whatever to evict you from the condo, or he will pay a severe penalty for delaying the DVP. Squatters not allowed. Owners are allowed to stay in the premises between the CD and the DVP, 'maintenance-fee free'. Why will be explained below.

There’s also a clause in the CSA that allows developers to come into the property to obtain planning permission for redevelopment (hence the drilling and ground work). This can be done at anytime after the CD.

The implication of the CSA clauses?

• For owners, they don’t give a hoot after the CD because once they vacate the premises, they’ll get their millions.
  
• For landlords, they too get their millions (minus a deposit) AND they continue to get rent UP TO the DVP.
  
• Developers will come marching in, after the CD to begin processing the grounds.
• Management committees (MC) will not care about the premises when they’ve already gotten their money (after or on the CD). After the CD, the MC will not be collecting any monthly maintenance fees from owners; the months between the CD and DVP is 'free' to all owners/landlords who choose to continue staying there. Which means they may leave a skeletal crew but are under no obligation to do so, since the legal date of ‘transfer’ is the CD and not the DVP. The MC is effectively dissolved after the CD.

• SO to all involved in the en-bloc, when the lawyers and agents say that you have up to the Date of Vacant Possession to move out, think again. The months after completion will not be managed well, there will be almost no repairs, developers have the right to enter the premises to begin work. The quality of living will deteriorate so badly in the months that you will want to vacate as soon as you can.
• My advice to TENANTS – take the landlord to task, and argue for a break in the contract so you can move out. The quality of living in your existing place will rapidly deteriorate. The landlord is reaping monthly rental on top of their sale proceedings, just by allowing you to stay in a rapidly abandoned building.
  
• Hopefully any tenant who is aware of enbloc completion at their place will not sign for a stay beyond the CD, because the owners will have no responsibility to you (beyond the four walls of your unit) after that point.
  
• My advice to OWNERS - think carefully about the schedule that your agents/solicitors have given to you, and defined in the CSA. Read your CSA carefully.
  
• Let's say you have achieved 100% or are persuaded that it's in the best interest to sign the CSA to get 100% signatures, after all you have 3-4 mths to the CD after successful tender/STB approval and then 3-6 mths to DVP to vacate, that's still enough time for you to look for a new home etc. But after the CD, the management council and sales committee have no further obligation to you; only the solicitors who hold on to whatever deposits or act to penalise people who stay beyond the DVP. So, if there is no STB application, you have effectively 3-4 mths to find a new home and begin moving out.
  
• If you achieved only 80% and need to go through STB approval, that's a wee bit better. You can use the time during the STB approval to begin looking for a new home (STB approval timeline about 6 mths). That gives you, from point of tender approval, 6 mths + 3-4 mths to completion.
  
• You do NOT want to be staying in what is probably legally an abandoned condo after completion.
  

Tags: completion date, date of completion, date of vacant possession, en-bloc obligation, collective sale, collective sales, condo, en-bloc, en-bloc sale, enbloc, enbloc sale, property, real estate, singapore