Financial Loss Couple Goes to Court

Two pieces of news - Mr Yeo Loo Keng and his wife Cheryl Lim are bringing their financial loss case to the High Court. Good for them and I wish them all the best in their fight. I can only hope that the High Court is able to see the inherent contradiction between the legal definition of financial loss - as one that embodies individual rights - and the 'landmark ruling' by STB which states that CPF losses could not be counted as such since (I believe) it is within the realm of individual rights, along with renovations and interests.

Here's the relevant section from the Straits Times 2 Mar 2007. Following this is another letter to the Today paper dated 28 Feb 2007 by Henry Lim.

Couple go to High Court in last bid to stop sale
Straits Times
2 Mar 2007

The couple's lawyer, Mr Leong Yung Chang of Veritas Law Corporation, said the main thrust of the appeal would be that loss of CPF money should be considered a deductible expense.
He also confirmed this will be the first time the High Court will hear such a case.
Although we face the risk of losing, we feel the public needs to know the High Court's position and if it ratifies STB's ruling,' said Mr Yeo.
He also said he felt the laws on collective sales, passed in the 1990s, have 'swung the pendulum too far against the interests of minority members'.
There's a general feeling of a need for greater protection for people like my client who are forced to suffer a loss,' said Mr Leong.
For the collective sale to be approved, the reserve price has to be met and 80 per cent of Waterfront View's owners have to agree.
Madam Valerie Ong, a 45-year-old housewife whose estate is currently in the process of a collective sale, told The Straits Times that she sympathised with the couple's position. She said she believes a policy review' of collective sales is overdue, especially with the huge increase in such sales in the last few years.
Waterfront View's sales committee member Kevin Tan said he was surprised at the couple's decision, but was prepared to fight all the way'.
If he wants to up the ante, we have no choice but to respond.'
Another resident, Mr David Govinden, said residents would definitely be upset that the couple are taking the matter further, as we thought the chapter was over'.
Mr Yeo said he had no intention of causing inconvenience to residents but was acting within his rights.
I don't want to regret not appealing. This is the final step we can take,' he said.


Senior citizens look forward to peaceful retirement, not financial gain from en-bloc sales
Letter from Henry Lim
Today - 28 Feb 2007

Handsome profits are the chief reason for en-bloc property sales having gained so much popularity. In the early days, en-bloc sales were confined mainly to old developments, with developers also taking the opportunity to build up their land banks. Over recent years, however, the main motivation has become the huge monetary gain from such sales, regardless of the age of the development.

We have also seen attempts by homeowners going to court to stop such sales for personal reasons but without success, the argument being that the current law does not allow for personal reasons to override majority concerns. The en bloc fever has, unfortunately, caused some uneasiness among senior citizens who have hoped to live out their retirement years in their present homes and who view relocation as unnecessary and disturbing. Some senior citizens have downgraded to small private apartments for practical reasons. It is thus very upsetting if they find themselves having to relocate years later. My wife and I are among these. We recently moved to a small but comfortable apartment, hoping to live out our retirement without having to move again. Alas, we have just heard that our development is considering an en-bloc sale. We are very upset and anxious about what the future holds for us. I am sure many other senior citizens also harbour such anxieties, and look forward not to financial gain but to a peaceful retirement.

In this respect, the Housing and Development Board (HDB) has taken the lead with its Selective Redevelopment Scheme (SERS) whereby new apartments are built to relocate affected HDB owners before any redevelopment starts. It has made the relocation process more acceptable and convenient, especially to older folks.

For private developments, I would like to suggest that a time bar be imposed before a development can be sold en bloc. Taking into consideration the needs of senior citizens and need for re-development of old properties, it would be reasonable to allow en-bloc sale if the building is more than 30 years old from date of completion.

This advance notice would allow all owners to plan for their future accommodation, whether they intend to buy for short, medium or long term. If a person is over 50 and looking for a home to stay in till his last days, he should then consider buying a new property which will at least give some certainty that en-bloc sale will not take place for the next 30 years.

I strongly feel that the authorities should review current rules governing en-bloc sale, to give due weightage to the concerns of senior citizens, while at the same time not stifle future redevelopment.

Tags: financial loss, senior citizens, collective sale, property, enbloc sale, enbloc, en-bloc sale, en-bloc, en bloc, condo, collective sales, real estate, singapore, Enblocing Singapore, Enblocking Singapore

ST Forum letter & Financial Loss Discussion

A letter from Straits Times Forum Online on en-bloc sales, another from a blogger on the financial loss case and one from a forum discussion on the financial loss.

Straits Times Forum Online
13 Feb 2007
En bloc sales:Is there no protection for the minority?
by Ananda Perera

I refer to the letter, 'En bloc sales: Have laws to protect minority' (ST, Feb 9).

I empathise with the writer. We seem to be gripped by en bloc fever. The writer raises some thoughtful issues.

Is there no protection for the minority who have very good reasons not to be forced into en bloc sales?

Unlike some, they are not waiting for better prices and holding the willing majority to a ransom.

As a nation, we seem to make haste for quick gains leaving aside much talked about heartware for those unable to keep pace.

Cost of living will keep on going up. Yet, most pensioners, like me, will hardly get any increases on our fixed pensions, as we are beyond the age to qualify for workfare.

Such groups will keep on feeling the pinch as GST and other price hikes kick in.

The increasing cost of living does not seem to be factored into government pensions.

How we treat our senior citizens today is how the young in authority today will be treated tomorrow.

Can anything be done for such minority groups to ensure a fair distribution of economic wealth, at least for past services rendered?

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This is from zynfandel who posted a clear and concise explanation on the unfairness of the financial loss couple, dated 7 Feb 2007. I've reprinted that posting here, hope she doesn't mind! (Let me know if you do, zyn.) Her blog is "in vino alcohol".

From what I understand from the rather unclearly written articles, this one guy at Waterfront View is trying to block the en bloc sale of his estate because the proceeds he will get from the sale of his unit won't be enough to refund the amount that he has so far withdrawn from his CPF account, plus interest, to pay for the home.

That is also rather unclearly written, so let me explain slowly.

Most people who buy a home take a loan to pay for it, and then pay back the loan in monthly installments, partly in cash and partly from CPF funds. Let's say you buy a home for $1 million and your estate goes en bloc with each owner getting $1.2 million. Sounds like you made a profit, right?

But there are two things eating into this profit: the interest on the loan you took, and the "opportunity cost" interest on the CPF funds you withdrew from your account.

Supposing you took a 35-year loan, but your estate went en bloc only 20 years after you bought your home, so you still have 15 years left on your loan.

After you sell your home in the en bloc, you have to use the proceeds to pay back the remaining loan first to the bank. Then you have to give back to CPF the entire amount that you withdrew from your CPF account to pay for your home - PLUS the interest that the withdrawn amount would have earned if it had happily sat dormant in your CPF account (currently 2.5%, I believe). After this, if you still have any money left over, then good for you. Most of the time, apparently, you don't even have enough to pay CPF back in full, so you just give them whatever's left over.

So most people take that into consideration before they sell their homes. But in an en bloc sale, where only 80% of owners need to agree to sell the estate, some people are being forced to sell, even if they don't want to because the sale proceeds won't be enough to cover both the remaining bank loan as well as what is owed to CPF.

In the case of the Waterfront View resident, he bought his unit for $515K and will get $660K after the sale. But he still owes the bank about $343K and CPF, about $407K. After he pays back the bank, what's left over ($660K - $343K) won't be enough to pay CPF back in full.

And this is where it gets unfair. CPF says, oh, it's ok dude, you don't have to make up the shortfall into your own CPF account. Go ahead and sell your house and stop blocking the en bloc.

Of course the guy is all, wtf CPF, this is my retirement money, you morons.

The only way you can block an en bloc is to prove that you are making a loss if the en bloc goes through. But today the Strata Titles Board ruled that CPF losses don't qualify as such a loss.

So my question is, why the hell not? CPF money is still money, and it's money that's supposed to be sacrosanct in Singapore, for heaven's sake, because without CPF we'd have loads of impoverished old people (even more than the loads of impoverished old people we already have).

I suppose the argument goes like this: you don't have to repay CPF in full anyway, and it's unlikely that the unhappy resident could have sold his individual unit at a higher price in the market in any case, so why not just sell now and put the most he can back into his CPF? Also, if a lot of people don't manage to pay back the full CPF amount, then most estates will never get sold because there will always be someone making at least a CPF loss.

But the point is that maybe he was planning never to sell his home, which means he would have had a permanent home over his head and never have had to pay CPF back. And now, having already paid all that interest on his loan, he'll have to find another home to buy, take another loan, and this time he'll have less in his CPF account to withdraw to help finance that new home.

Which then brings me back to the minimum 80% owner consensus to sell an estate en bloc. If an estate has 500 units, that's a potential 100 residents who are dead set against the sale. But if they don't suffer losses big enough to stop the sale, then they lan lan have to sell. People keep complaining about the intimidation tactics and unending harassment they suffer from marketing agents trying to persuade 80% of owners to go en bloc. Shouldn't the barrier be set back at 90% now that the market is doing so well and developers have already built up considerable land banks?

This all seems very unfair but maybe there's something I don't know. If anyone can enlighten me I would be very grateful.

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Finally, one posting in sgforums.com on the financial loss case which gives his interpretation on why this unfairness is allowed to be perpetuated:

The board (largely comprised of people who are working in areas that gain from en-bloc sales, mind you) distinguishes between 'necessary expenses' and 'personal expenses'. Legal fees, stamp duty, privatisation costs are necessary expenses paid by everyone involved in any flat purchase/development. Interest however is a personal expense along with renovation costs.

In political terms, the STB has to balance between encouraging and facilitating en-bloc sales on the one hand, and being equitable on the other. If financial loss includes CPF losses, a substantial number of en-bloc sales might be blocked due to the financial loss clause. People keen to sell their places, and do not suffer such losses, will be obviously put out by such a decision if they have a single person in their property that will suffer from CPF losses.

Of course they have forgotten that the financial loss clause was put into the Land Titles (Strata) Act to protect individuals who might be forced to sell and not receive any profits after deductions. This clause is built specifically for the individual and not for the collective interested in selling the development. By excluding CPF losses, the collective is given greater consideration.

The damning nail in the coffin for the couple is the CPF letter which states they do not have to make good their CPF shortfall, which means in effect they can spend the rest of their lifetime paying the outstanding amt. This gives STB the leverage to point out that this is the couple's own problem, and should not be used against the collective interested in selling.

I hope the couple brings this up for appeal at the next level - the High Court. I think it's a lopsided definition of financial loss that is rapidly favouring en-bloc sales rather than protect the individuals who will suffer from it.

Tags: financial loss, en bloc, singapore, real estate, property, enbloc sale, enbloc, en-bloc sale, en-bloc, condo, collective sales, collective sale

Other Minority Voices - Better Arguments Against Enblocs

I'm greatly heartened to see more forum letters that point to a need to reevaluate the legal practice of enbloc sales. Reprinting them here for all to read - all from Straits Times, two printed and two online. All very well argued. Bravo!

En bloc rules have unintended effect of distorting the market
Straits Times Forum Online
by Waleed Hanafi
7th Feb 2007

In the article excerpting a speech by Mr Ngiam Tong Dow, 'Maximising the lie of the land' (ST Review, Feb5), there is the claim that Singapore's rules governing en bloc sales of private property are innovative and that the 'happy outcome is that both the individual and public interest are served'.

Singapore's en bloc rules have led to people being forced from their homes and neighbourhoods, and to rampant speculation in the property market.

Rather than maintain their buildings, owners are incentivised to suspend maintenance in order to maximise profit at the expense of those who truly want a home instead of just an investment.

Why use the sinking fund to repair the building when you can just wait until things deteriorate and you can persuade your neighbour to give up and sell out?

Mr Ngiam says he is 'glad to see that the invisible hand of pricing has often worked its wonders'.

In fact, it is the distorting hand of government that has permitted the abrogation of property rights and the distortion of pricing.

If the market was truly efficient, the price of flats would fully reflect the value of the building and the land they stand on.

With construction costs running at about $200 per square foot, how does one explain the sudden jump in value of a property from $1,000psf to $2,400psf simply by destroying the existing building?

It is because the prospect of an en bloc sale encourages short-term thinking and treats buildings as tradable assets, instead of homes.

If one takes the example of Ardmore Park, it is hard to understand any reason for the destruction of pretty much every building on the street and the surrounding neighbourhood. These were sound, desirable residences. What exists now looks like a war zone.

In most other economies, these buildings would increase in value, given their location and quality. If an owner wanted to profit from the increase in valuation, he would sell to a new buyer, not vote for the destruction of the property.

When a building does go en bloc, it is not a triumph of the majority over the individual, as Mr Ngiam asserts, but rather the triumph of the developer, the estate agent, and a few speculators.

The environmental cost of destroying perfectly sound buildings because of this price distortion is inexcusable.

The real cost is borne by those forced to live through the destruction of the existing building and eventual construction of a replacement.

The reality on the ground is quite different than the idyllic picture painted by Mr Ngiam.

Rather than an efficient market in which willing buyer and willing seller set prices, the en bloc rules have had the unintended consequence of distorting the market, disincentivising building maintenance and upkeep, raising housing costs and destroying the quality of life for tens of thousands of residents of Singapore.

Why demolish perfectly livable old apartments? New isn't necessarily better
Straits Times Forum Online
by Susan Amis (Mrs)
9th Feb 2007

In the craze to sell older condos en bloc, has anyone stopped to consider the consequences of demolishing perfectly livable old apartments and replacing them with new developments? Many expatriates who come to Singapore want to spend their housing budgets on large, older style condominiums because they offer large amounts of space for children to run around in, established gardens, three or four bedrooms and big balconies or courtyards. There is low demand for brand new small apartments for a typical expat family of four.

As these new developments are completed over the next few years, who will be buying the thousands of expensive new apartments on the market? Surely there will be a glut of these types of properties once the developments are completed? Potential buyers who intend to rent out these apartments to high-income earners will need to investigate the pitfalls of investing in these new developments.

Noise pollution from construction sites is also a huge problem and will become worse over the next few years. It is becoming increasingly difficult to find a quiet place to live in. Many expats are insisting upon a 'construction clause' in their rental contracts that allows them to break the lease should construction noise from surrounding properties impede their quality of life.

New isn't necessarily better, and a lot of expats are lamenting the current lack of desirable older housing in Singapore.

Ensure no one suffers financial hardship
Straits Times Forum (Printed)
by William Foo Kuo Meng
9th Feb 2007

I AM shocked by the landmark ruling of the Strata Titles Board that losses incurred in one's CPF account are not considered a financial loss in the case of an en bloc sale ('Couple lose fight on collective sale'; ST, Feb 6).

CPF funds are for our retirement, housing and medical needs and are our hard-earned savings.

With the current buoyant property market and frequent en bloc sales, it is time that the rules governing such collective sales be reviewed to ensure that no one else will suffer similar financial hardship as a result of actions beyond their control.

En bloc sales: Have laws to protect minority
Straits Times Forum (Printed)
by Valerie Ong Guek Kim (Mdm)
9th Feb 2007

I REFER to the article, 'Couple lose fight on collective sale' (ST, Feb 6).

I sympathise with the couple who lost the fight when the Strata Titles Board ruled that their CPF principal amount and accrued interest owed to their CPF accounts are not considered a financial loss.

My condominium is also going through an en bloc sale. That very term now sends shivers down my spine. With large estates like Waterfront View and Gillman Heights being demolished, where are the owners to find another abode? Demand is outstripping supply and home prices have escalated. The amount reaped from an en bloc sale would rarely get an owner an equivalent property. New developments that spring up on properties that have gone en bloc are almost double the price per sq foot of the original.

Also, friendship and neighbourliness are thrown aside in the name of progress. En bloc sales are blind to whatever reasons a family may have for not wanting to move, be it proximity to the children's schools, elderly dependants and amenities or plain attachment to one's home or neighbourhood.

So what benefit is there for the majority? It is the developer, the marketing agent and speculators who benefit.

Will the Government consider the environmental cost of destroying perfectly sound buildings in the light of the scarcity of sand that Singapore is facing?

With all the negative consequences of en bloc sales, I request lawmakers to put themselves in the shoes of the minority and protect their quality of life.

Tags: Straits Times, Straits Times Forum, ST Forum, collective sale, real estate, property, enbloc sale, enbloc, en-bloc sale, en-bloc, condo, collective sales, singapore

Financial Loss Clarification - Minority Voices

This from the poor couple who lost the battle with STB over financial loss of their en-bloc sale of Waterfront View. I see that the majority owners were vindictive enough to try to force the couple to pay for the legal costs. At least the STB had some modicum of sense to reject that proposal, or the couple would be $300k to $400k poorer, on top of their financial loss.


Landmark ruling on figuring loss in en bloc sales; CPF amount withdrawn and accrued interest not allowed in determining loss
Business Times 6 Feb 2007
Reported by Kalpana Rashiwala

The prospect of CPF losses cannot be used to stop an en-bloc sale, the Strata Titles Board (STB) ruled yesterday. In a landmark decision, it said the principal amount withdrawn from CPF accounts and the accrued interest cannot be taken into account when determining whether a financial loss has been suffered by owners involved in such a sale.

The board made the point in a decision approving the $385 million collective sale of Waterfront View in Bedok to a joint venture between Far East Organization and Frasers Centrepoint.

Waterfront View is a privatised HUDC estate. The STB tribunal, with the board's deputy president Alfonso Ang presiding, did not agree with the view of Yeo Loo Keng and his wife Cheryl Lim Pui Yew - who are objecting to the collective sale of Waterfront View - that their 'net proceeds of the sale are insufficient to redeem our mortgage and CPF charge' and that this amounted to a financial loss. The Yeos had an outstanding mortgage of $341,118.90 as of Oct 11 last year, which they could repay from their $660,377 share of proceeds from the en-bloc sale, even after making allowed deductions.

The CPF Board wrote to the couple in November last year, confirming that 'if the sale proceeds after deducting the outstanding housing loan owing to the mortgagee DBS Bank Ltd is insufficient to fully refund the principal amount withdrawn and accrued interest to both your CPF accounts, the CPF Board does not require both of you to make good the shortfall to your CPF account in cash.

'Instead only the net sale proceeds (i.e. the selling price less outstanding home loan) is required to be refunded to your CPF account', the CPF Board said in its letter.

The STB tribunal said in its ruling that the section of the Land Titles (Strata) Act that should apply is Section 84 (A) (7) b, which allows the board to throw out a collective sale application if it is satisfied that the proceeds to be received by any objecting party are insufficient to redeem any mortgage or charge on the property.

In view of the CPF Board's statement that it will allow the redemption, the Yeos could, with the proceeds of sale, redeem both the bank mortgage and discharge the CPF charge on their property. DBS Bank has the first charge on the property and CPF Board has second charge.

The tribunal said it is therefore satisfied that the Yeos' objection does not come within the ambit of this clause in the Act.

The Act also defines a financial loss - which could be grounds for STB to throw out a collective sale application - as having been incurred by an owner if the sale proceeds he receives, less any deductions allowed by STB, are less than the price he paid for his property.

The STB tribunal further ruled that the privatisation fee for converting Waterfront View from a former HUDC estate to a private estate - $19,535 per unit - be allowed as a deductible expense in determining whether a financial loss has been suffered by owners in a collective sale. This is because the process of converting the title is a necessary expense, without which Waterfront View will not be eligible for en-bloc sale.

Additionally, the tribunal upheld earlier decisions by STB on the following deductibles - that interest and renovation costs not be allowed but that the cost of legal fees and stamp duty at the time of purchase of the property be allowed.

It also ruled that a penalty the Yeos paid to DBS Bank for early loan repayment should not be an allowable deduction because it is a 'private contractual matter' between the bank and the Yeos.

Under the grounds of decision read by Mr Ang, the Yeos 'do not suffer a financial loss based on the net proceeds of sale less the allowable deductions - legal costs and stamp duty at the time of purchase and the costs of privatisation'.

The couple bought their apartment at Waterfront View in 1994 for $515,000 and will receive a gross sum of $660,377.35 in the collective sale. 'They had not suffered any financial loss even if deductions allowable are taken into account,' the tribunal said.

It turned down an application by the majority owners' counsel, Michael Kuah of Lee & Lee, to require the Yeos to fully bear the costs of calling expert witnesses and law firm Lee & Lee's fees for the STB hearing. Among other things, the tribunal said the objections raised by the Yeos were 'not frivolous' and they were acting within their rights in objecting to the collective sale.

BT understands the costs of the entire application to STB - including about $60,000 legal fees charged by Lee & Lee for the proceedings, plus a further $20,000 for expert witnesses, and the costs of placing notices in the newspapers - could work out to about $300,000 to $400,000. The amount has already been set aside through sums of about $1,000 per unit, collected separately from the majority owners. Leong Yung Chang of Veritas Law Corporation, representing the Yeos, said his clients are considering whether to appeal against the STB ruling.

And some additional reporting from the Straits Times (6/2/07) on this matter, by Jessica Cheam:

A disappointed Mr Yeo said: 'CPF might say we do not need to make up the shortfall, but it is our money being written off in the end, as I'm being forced to sell.'

He added: 'Future home owners will have to think very carefully before deciding on an en-bloc sale.'

Although Mr Yeo lost the case, STB deputy president Alfonso Ang pointed out that the report on the proposed method of distribution of sale proceeds filed by the sale committee 'fell short of the high standard expected especially when involving a project of this size'.

Under the committee's proposal, the total sale will be distributed evenly among all units regardless of storey or size - an issue Mr Yeo contended with, as he paid a premium for a high-floor unit with a reservoir view.

I feel sorry to Mr Yeo Loo Keng and Cheryl Lim, but they fought for what they believed in. Good for them.

Tags: Financial loss, method of distribution, collective sale, real estate, property, enbloc sale, en-bloc sale, enbloc, en-bloc, condo, collective sales, singapore