Myth #9: Understanding the Law and Knowing Your Rights

Nominated MP Siew Kum Hong wrote an op-ed piece to Weekend on 11 August 2007, which highlights his very thoughtful views of enbloc sales in general, and the Horizon Towers situation in particular. I will not reproduce his entire piece, but you can find it on CondoSingapore's Forum here. Note - Mr Siew has his own blog and has posted additional comments on his piece here.

I do want to comment on some of his points, specifically his argument that "just like any other commercial transaction, there are very real commercial and legal risks in collective sales":-

"With so much at stake, inexperienced sellers could and should have engaged lawyers to advise them personally. It is the sellers' own responsibility to ensure they understand all their liabilities and comply with all legal obligations.They also could and should have negotiated for terms they are comfortable with."

"If a seller is uncomfortable with the collective sale agreement (CSA) which binds the sellers collectively, he or she could always not sign it. If the concern is over the SPA with the purchaser, then a seller can seek to impose greater controls and oversight over the actions of the sale committee before signing the CSA. It is difficult to sympathise with a seller who sees only the promised dollar signs and signs without fully understanding its implications."

What Mr Siew said above is the correct interpretation of the law, and of common sense, truth be told. Everyone should read carefully the terms and conditions of anything they sign (be it credit card application, signing up an account on a website, installing a software). But the reality is very different of course (how many read the Microsoft terms and agreements before clicking on the "I agree" checkbox?). But putting aside human laziness to read such text, there's another set of very real problems that works in favour of the sale committee, the marketing agent, lawyers and developers, ie the enbloc sale:-

1. Anyone with a non-law degree, much less a non-law PhD, will struggle with the CSA and the Sale and Purchase Agreement (SPA). In densely packed multiple subordinate and embedded clauses, these contracts can induce migraines simply by attempting to understand it. If people can barely understand it, how can owners who (a) can't understand English, (b) can't understand legal English, (c) do not have the resources to get a lawyer to read it, realise what rights they have or do not have? If the law requires that the advertisement and announcement of the sale be in 4 languages, why can't the law require that the CSA be in 4 languages as well as plain English?
2. Most people assume that the sale committee (SC) are selfless people, who represent their interests and rights, and hence will not question in detail the intricate clauses in the CSA/SPA, which is almost always drafted by the SC and lawyers without input from the owners. Most estates have no say whatsoever in the nomination, election, voting and ratification of the SC. How much harder, then, for input into the drafting of a legal document like the CSA or SPA?
3. The approach advocated by most agents, including the professional enbloc firms, is that a SC should not be consultative in the drafting of the CSA; they see this as only taking up more time and a waste of time. So they advocate that the CSA be prepared and at the first Owners' Meeting, have it ready for signing. "Take it or leave it" without any choice in revisions. At what point can an owner negotiate for terms? They simply can't and can only do so by not signing the CSA. But if 80% are ignorant enough to do so, then what good does your refusal do?
4. The best method to ensure a CSA or SPA is truly representative of all owners, including minority owners, and to impose greater control and oversight on the SC is to require that owners who have reservations on the sale/CSA to be a member of the SC as well - a form of check and balance or an alternative voice that gives critical feedback to the over-riding pro-sale mentality. However, every CSA I have seen thus far has a clause requiring that each SC member must sign the CSA within a time frame (typically 7 to 30 days). This immediately excludes any form of "control" or "oversight" when owners who have reservations about the sale cannot offer his/her services to the community, except perhaps as a minority voice posting on a blog.
5. The problem is input by owners into any drafting of the CSA, much less SPA (which is mainly handled by the SC and lawyer in conjunction with the developer), is near impossible. The law does not require it, nor does it form a legal objection in any way when STB hears of it.
   

Mr Siew has his heart in the right place, and has talked about the legal aspect of any contract that one must be cognizant of. Unfortunately, the reality on the ground which many enbloc estates are facing, is that people who wish to negotiate, feedback, discuss about the CSA or SPA, are not given the opportunity to do so. It is a myth that one can know and negotiate one's rights in an enbloc sale. Transparency, accountability, and due process, go against the nature of a quick sale, after all.

And even more unfortunately, only the law can change this.

Tags: Siew Kum Hong, collective sale, collective sales, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, real estate, singapore

Myth #8 - Transparency - Advantage to Who?

I've been asked this in an email and thought it's important that this be discussed here - the issue of transparency.

Let me begin with a quote from a recent ST article on minority owners and a side-conversation I overheard: "A consultant's role in a collective sale is to help owners make informed decisions, but 'there will always be owners who, for different reasons, will not want to sell, no matter the price, and we respect that" - Ms Tang Wei Ling, DTZ Debenham Tie Leung.

Now the side-conversation, overheard at The Coffee Connoisseur while sipping coffee. A property agent was seated next to me, trying to persuade his client, over the phone, to part with $4.7 million for presumably a flat or house. He kept on saying to the client, that he is very certain the property's value will increase next week, and wants the client to commit to the sale today. Off the phone, he told his friend (colleague/partner/wife/girlfriend) the client was indecisive and he just had to say something to make the client sign (and hence gain his commission). This includes of course saying things to persuade the client. Now obviously the property value MIGHT increase; we don't know except in hindsight. And if the client commits, he can never know if it'll go up or down. So in a way, he's not telling a lie - just half-truths.

An email was sent to me from someone undergoing an enbloc in her estate. She was frustrated with the lack of information from both the SC and the marketing agent. She said she has to initiate information from the agent and often they are not forthcoming. Often, the SC was not forthcoming and refused to reply to her. How many of you have encountered this situation?

She asks if there's any regulation regarding the issue of transparency. After all, given the DTZ quote above, an agent's job is to help inform owners (ALL of them) to help them facilitate the enbloc sale.


The proposed en-bloc law changes are supposed to tackle the issue of transparency (as stated in the position paper) but whether that will happen remains to be seen. What is the case now is this:-

• Transparency is not an issue that STB will consider as a matter that can block an en bloc sale.
  
• Information is a double-edged sword. The more information you have, the more informed your decision can be. But it also means the more likely you are to ask questions or critique certain things, or be dissatisfied with certain aspects of the en-bloc process.
• Hence, agents often encourage that transparency be kept to the barest minimum, to minimise potential slow down to the enbloc process from too many queries raised, too many complaints etc. By the barest minimum, it means being around for Q&A during the CSA signing, so that they can persuade you to sign; writing letters to all owners informing them of the stages of the process etc; how much you'll be getting etc. The 'positive' aspects that will push the sale forward. That is their job after all.
• What don't they tell you? The minutae of the CSA clauses - that's the job of lawyers. And unless you are trained to read legal documents, CSAs are as foreign as doctors' scribbles. Agents and SCs are not likely to tell you, for example, that once you have signed the CSA, you give the SC near-total rights to anything and you can't sue them. They don't tell you that while the RP can be revised upwards (if stated in the CSA) given market conditions, that the SC is under no obligation to do so (to guarantee a quicker sale, rather than a maximum profit). They don't point out what are the other representations that the SC might have heard, what alternative methods of distributions they turned down and exactly why. They don't tell you why they chose a particular method of distribution and be made to defend that choice. All these information may work against you signing the CSA, and selling your unit collectively.

So is there 'transparency'? Only very narrowly defined (and which can be legally upheld in court) in the form of the agents/lawyers being present for Q&A, letters sent out etc. BUT the information given may not be complete so as to allow owners to make "informed decisions", but rather half-truths or worse, withholding information, so that the sale can proceed expeditiously.

That's why you need to read up on en-blocs yourself. Use the information on blogs such as mine and Pariah's, forums, etc to check on information not forthcoming. They might keep such things from you, but that doesn't exclude you from learning on your own.

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

En blocs Creating Rifts in Neighbourliness

Now that the MinLaw Public Consultation is over, I've been slowly getting back into updating the blog. The En-bloc List is updated as usual, and I'll be abstracting parts of the letter I wrote to MinLaw onto the blog when time allows.

In the meantime, an article in the oddest of places in the Straits Times - Mind Your Body - talked about the issue of neighbourliness. Written by Sharon Loh, it points to the issue of strong bonds and long-term ties by people who stay in the same neighbourhood for years. What en blocs seem to have done, and Sharon rightly pointed this out, is to not only create rifts among neighbours (ugly rifts at times between majority and minority owners), but also to remove the need to be neighbourly, particularly when (a) some people don't even stay in the estates but rent them out (owner-investors), (b) you anticipate moving out in 10 years when the enbloc consensus becomes more tenable at 80%. Social relations is often the glue of any nation, but what is en-blocs doing to middle-class Singapore, when it is forcing a large number of citizens to relocate? This relates to one of the myths I have written, about the need to consider social stakes in any en bloc process.


Love thy neighbour
By SHARON LOH
MIND YOUR BODY - IN THE KNOW
Straits Times 16 May 2007

Recent events have been making me think about neighbourly ties, never as strong since high-rise dwellings replaced kampungs, apparently.

More than the reports of warring neighbours in court, I am disturbed by the rash of collective sales, some of them acrimonious. It is tyranny of the majority - neighbours forcing neighbours to sell their homes.

Are our homes merely financial assets? If they have no emotional ties, we are in trouble.

I thought another sign of trouble was the story of an elderly woman who fell in her kitchen and lay there for two days before neighbours noticed she had not left her house.

But that turned out to be a story of good neighbours. Once the alarm was raised, a group of them swung into action to make sure she was all right.

Maybe all good neighbours are not lost. I have been the recipient of many quiet acts of kindness from my own, most of whom, I am ashamed to say, I still barely know.

What is neighbourliness?

According to a paper by UK think-tank Smith Institute, it is not 'heroic forms of help and support' but 'small and unremarkable actions and behaviour that give people a sense that they are secure and at home in their own places'.

Neighbours do not need to be best friends. Keeping an eye on each other's property, exchanging greetings and not making too much noise late at night are small things we can do for each other.

Perhaps neighbourliness has receded because we are no longer so reliant on one another. My mother had to ask the family next door to keep a watchful eye on me and my brother when she went to work because none of our nannies would stay.

These days, with many more resources, there is much less need to go next door for help.

But as the population ages, that proximity will become important. More than anyone else, elderly people who live alone and are no longer as mobile as before, need their neighbours.

Neighbourliness is a balance of reciprocity and altruism. People look out for each other not only because they expect the same in return but also because they gain satisfaction from knowing they can help. Old people do not want to be dependent on others, but interdependent.

How can we promote neighbourliness? One correlation is age and length of residence. Older neighbourhoods tend to have stronger bonds, so perhaps we should work on long-term ties.

In the end, though, a good neighbour is something we choose to be.

I hope more of us will choose it. Welfare groups say that people, especially the elderly poor, are falling through the cracks because they do not know where to get help.

Government and welfare agencies can do only so much. We are each other's eyes and ears.
sharonl@sph.com.sg

Tags: neighbourliness, neighours, neighborliness, Enbloccing Singapore, Enblocing Singapore, Enblocking Singapore, collective sale, property, enbloc sale, enbloc, en-bloc sale, en-bloc, en bloc, condo, collective sales, real estate, singapore

Myth #7 - Strata Titles Board & Conflict of Interest

As some of you know, the Strata Titles Boards (STBs) is in charge of processing all en-bloc sale applications. They are also the body that one appeals to if you have any objection to the en-bloc sale. The other legal body is the Singapore High Court.

Basically, if you have any issues with en-bloc sales, the buck stops at the STBs.

So let's look at who they are. Everytime an application is submitted to STBs, they form a 3 or 5 person 'committee' (called the Strata Titles Board (STB), as opposed to Strata Titles Boards). These people are drawn from a list of 30 people, appointed by the Minister. From their website : "These members of the panel have a wide range of experience and include accountants, architects, engineers, lawyers, property consultants and surveyors".

Let's look at the breakdown of these 30 people:-

Lawyers - 5
Engineers - 4
Surveyors - 2
Architects - 4
Property Consultants - 8
District Judge - 2
Lecturers - 5

Now in any hearing on the en-bloc sale, the panel should be impartial and have no vested interest in the act of selling land collectively. That's only fair and that's how the law should operate - panels should be neutral, impartial, have no conflict of interests or vested interests in promoting collective sales. Otherwise, how can an appeal to the STB be deemed a fair appeal?

Did you know that out of the 5 lawyers, FOUR of them are in companies that actively promote themselves as solicitors for collective sales? Or that from the 8 property consultants, TWO are from Savills and Jones Lang LaSalle, two of the most active marketing agents for collective sales? If you then factor in the question of who would benefit from collective sales, you'll need to include lawyers (from dealing with the legal aspects of the sale), architects (who designs new developments), property consultants (who sells developments), surveyors (whose services are required for land and property sales), and engineers (in the designing of developments). The only group who may be deemed as people who may not have vested interests are, in theory, lecturers (they only have architect and law faculty) and the two retired district judges.

So,

Vested Interest Panellists in STBs (or members who may have conflicting interests to any appeal): 23
Neutral Panellists in STBs: 7

You have to love the system for selecting the very people who are most likely to say YES to a collective sale. And given that nowadays, most objections are not really about financial loss (although it has to be crouched in those terms; look at the case of Eng Lok) but about losing their homes which goes beyond any financial value, there is a surprising dearth of the very people who should be involved in hearing these minority owners' plight.

Members of Parliament.

Shouldn't each STB hearing include the MP of that en-bloc property's constituency? Even if not, the imbalance due to huge conflicts of interest in terms of collective sales in the STBs panel of members needs to be seriously redressed.

Is it any wonder the Nurse of Eng Lok Mansion lost her appeal to block the collective sale? Is it any wonder that there has been, historically, no collective sale that has been rejected by the STBs?

Tags: Strata Title Board, Strata Titles Boards, Singapore law, collective sale, collective sales, condo, en-bloc, en-bloc sale, enbloc, enbloc sale, property, real estate, singapore

"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

Myth #5 - Urban Renewal

NUS Geography professors Lily Kong and Brenda Yeoh have provided an apt definition of urban renewal or redevelopment:-

Urban redevelopment primarily has meant demolition of the old and construction of the new on the basis that such a program provides better employment and investment opportunities, improves living conditions, and leads to physical, social, and economic regeneration. Such an interpretation of urban redevelopment places values on 'efficient', 'rational' and 'pragmatic' use of limited land resources. .. Indeed, such an approach suggests that, in some places, urban planning becomes no more than a 'technical problem of clearance and construction' (Kong and Yeoh 2003: 46)*

They pointed out that "urban renewal generally has emphasised demolition and reconstruction rather than conservation and preservation" (2003: 78). This certainly applies to en-bloc sales, where developments are demolished and new buildings constructed, often offering either smaller units but larger quantities, or larger (and hence more expensive) units and smaller quantities (the boutique condominiums). The trend, particularly in the prime districts, is veering towards the latter. Look at Holland Hill Mansion which is going to be redeveloped into 2000 sqf units, larger than the average existing units in the area. With an estimated cost of $1500-$1800 psf, we're talking about $2.5 mill upwards per condo in the new Holland Hill development. Now how many people can afford that (or more specifically how many local citizens can do so)? The target group is obviously foreign investors who have the capital to purchase such luxury apartments.

But more worrying is the fact that a LOT of the en-bloc'ed developments are less than 20 years old. In fact, based on the en-bloc sales of 2005-2006**, the average age of the en-bloc developments, upon the first attempt at en-bloc, is about 12-15 years old.

This is not urban renewal. This is urban mutation.

This is possible courtesy of the rather arbitrary development age set by the government, of 10 years. Any development that wishes to en-bloc itself and is <> 10 yrs old, you need only achieve 80% consensus, which is what most en-blocs are aiming for nowadays. Note this is different from Selective En-bloc Restructuring Scheme which targets older HDB estates, approximately 30 odd years.

What are the consequences of this?

• If you wish to continue staying in condos but can't afford landed properties, it would mean that you will be required to move from condo to condo, at least 3-4 times in your adult working life. Every condo is now waiting for that golden age of 10 yrs to begin the en-bloc process.
• It means you'll have to undergo the hassle of house hunting, looking for suitable schools for your children, reestablishing social ties with the community, securing bank loans etc.
• Given that if property market continues to be bullish, your windfall from the en-bloc sale will be able to secure you another unit NOT in the same district but further from the central parts of Singapore. This has implications for travel time and travel inconveniences.
• You will need to encounter en-bloc madness and greedy neighbours 3-4 times.
• It completely ridicules the notion of 'freehold' which is meant to be a property you hold for life. It makes no ownership difference if your property is 99 yrs or freehold, aside from some differences in land value.
• Environmentally, there are huge wastage in the demolishing of all these buildings and developing new ones. Not all building materials can be recycled.
  
• It means you will not recognise the place where you and your children grew up in.
  

Some argue that Singapore is so small, that moving around is not a problem especially considering how much profit one gains from multiple en-blocs. Yet it can cost you anything from 4-10 folds if you stay in the central districts as opposed to the outlying ones. There are issues of convenience, and yes, even prestige in staying in a small clearly demarcated part of Singapore.

Some say it's better to demolish before escalating maintenance costs make living in the development untenable. Yet, does this not speak of the poor construction quality and building materials if they can't last 10-20 years? Most apartments in central districts in Western countries are easily 50 years or more, and are surprisingly well-maintained. A well-managed management committee would have been able to take into account potential upgrades to the development in addition to maintenance, but this is obviously not happening; why upgrade when you can demolish at a profit?

Urban mutation, because mutative processes occur at a highly accelerated rate, is what is happening here in Singapore, not urban renewal.

* Kong, L. and Yeoh, B.S.A. (2003). The politics of landscape in Singapore: Constructions of 'Nation'. New York: Syracuse University Press.
** Calculated based on en-blocs from 2005-2006, age of development drawn from various websites when possible, and average age at point of initial en-bloc is approximately 70% accurate.

Tags: urban mutation, urban renewal, freehold property, en-bloc age, en-bloc in Singapore, collective sale, real estate, property, enbloc sale, enbloc, en-bloc sale, condo, en-bloc, collective sales, singapore

Myth #4 - Maximising Land Use

I've read the forum postings in both the Straits Times and the Today newspapers that advocated en-bloc sales. The strongest argument for it, aside from that of financial profit (which cannot be seen as an argument as it is politically incorrect), is that of maximising land use.

Well. If such SPs are so socially concerned about the future of Singapore's land use, then logically, in the name of maximising land use...

• Botanic Gardens ought to be en-bloc'ed, its living residents evicted out of where it is currently located, preferably into Tuas, and the entire land area there redeveloped into private properties or foreign embassies. It is, after all, a waste of prime land*.
• The Istana is located in prime commercial land as well. Perhaps it too should be enbloc'ed and the President evicted to Tuas. Beside the Botanic Gardens so that tourists can visit both at the same time, and enjoy the scenic factories. We can build an Integrated Resort right on the Istana property. Talk about maximising land use.
• Religious buildings in prime land - that's a waste of space too. Let's enbloc the St Andrews Cathedral and the Armenian Church, demolish them and build mini casinos in their place.
• Now what is that wasted empty space in the middle of the city? Oh yes, the Padang. Enbloc, destroy and rebuild in the name of maximising land use!
  
• Since 85% of residential properties in Singapore are public housing flats, with the remainder private housing (the only ones allowed to undergo en-bloc), for maximal land use it would make sense to aggressively redevelop public estates on a 10 year cycle (like private en-blocs, which have an 'age requirement' of 10 yrs). Let's see how the heartland voters would feel if they were subjected to 10 year cyclical evictions.
  

Taken to its logical conclusion, the argument of maximising land use would imply the above redevelopments as rational choices. Yet, we don't move the Padang, the Istana, the Botanic Gardens. Why? Because of historical reasons? Because of attachment to place?

Aren't these the very same reasons that minority owners who are against enblocs wish to argue for sometimes? So why the double standard of saying that private properties should be demolished to maximise land, and yet remain silent on these other places?

The hypocrisy of greed. Tsk.


* Acknowledging another blogger who suggested this idea and I read it a long while back :) From singaporelifetimes.blogspot.com.

Tags: land use, maximising land use, collective sale, en-bloc, property, singapore, Istana, Botanic Gardens, Padang

Myth #3 - Ownership and Equal Rights

Let's begin with a test of your knowledge on election knowledge. Let's say you're the People's Action Party (PAP) and it's General Election Year. You are an MP in a single-seat constituency and that constituency comprises of 50% Singaporeans and 50% Permanent Residents and Foreigners. Does the law allow permanent residents and foreigners to vote during the General Election?

No. Only Singaporean citizens can vote during the General Election.

Why is it that only citizens have voting rights? According to an article in Electoral Studies (2001), Blais et al* pointed out that 48 out of 63 countries (democracies) have included a clause that limits voting to citizens only. The restriction is based on the notion of community membership and having a personal stake at the votes :

"Before being allowed to vote, one should be fully integrated in the society he or she lives in. Recently arrived immigrants may be presumed to be less familiar with the issues.. Some find shocking that recent immigrants .. might prevent the majority of citizens of long standing from getting what they want" (Blais et al 2001: 52).

I draw the analogy between voting rights for General Election and voting rights for Collective Sale because both have to be seen in terms of community membership and the personal stakes involved, rather than just purely financial stakes. By 'personal stakes' I mean those subsidiary proprietors (SPs) who own a unit in the property, and have been staying there for a substantial amount of time (eg 6 years or more). For these SPs, which I call 'owners', they have formed social attachments to the place - they are familiar with the surroundings, enjoy the various conveniences in the area, have formed social networks with neighbours, with retailers etc, have children who go to school in the area etc. They have a substantial personal stake in the collective sale because if they move, they lose all these social attachments. For them, 'home' is not just a financial value, a profit from the en-bloc sale (although to some it can be that); to owners 'home' is a place they find sustenance in familiarity and where they find a sense of community - a nurturing of their social being. A person who moves too often very quickly loses any sense of attachment to place; 'home' becomes an empty void, just an address to reside in until the next move.

Investors, the other group of SPs, intent on selling their units for a profit, call this 'sentimentality'. They cannot understand why people would NOT want to sell for a large profit, and yes, it is very likely that if their own home (not the invested unit) could be sold for a tidy profit, they'd upheave and move elsewhere. No attachment, no social sense, no obligation to anyone but themselves and their profit margins. The investors are similar to non-citizens, people who have decided not to take up citizenship and create attachment to the place.

And yet, these non-citizen investors have the same equal rights to decide the fate of the property as the "citizens of long standing" owners.

There is a fatal flaw in the definition of ownership in en-bloc sales. Any collective property should be seen as a 'mini democracy', one where more voting rights should be accorded to those with community membership and personal stakes, and less voting rights to those who have no vested interest in the 'mini democracy' except for financial ones. If the future of societies should be decided only by those who are actively involved in it (citizens/owners), why should this be any different?

Why should your property be dictated by people who hold no sense of attachment to the place beyond the financial?

Obviously if all owners decided to vote for the en-bloc sale to proceed, that is only fair and one cannot find fault with that. But more often than not, some owners are the minority, who do not wish to sell, and yet are often drowned out by greedy people (be it owners and/or investors).

Owners, SPs who have stayed in the property for more than 6 years, should have double the voting rights, compared to SPs who have stayed for less than 6 years. Those who stayed there long, should decide what to do with the place, not newcomers who care not for the place at all.

* Blais, A, Massicotte, L. and Yoshinaka, A. (2001), Deciding who has the right to vote: A comparative analysis of election laws. Electoral Studies, Vol 20, pp. 41-62.

Tags: collective sales, collective sale, enbloc, en-bloc, subsidiary proprietor, property, Singapore

Myth #2 - Conflicts of Interest and Neutrality

Most people assume that the key player in any en-bloc sale is the Sales Committee. The Sales Committee (SC) is formed to act on the behalf of the owners of the development, to engage marketing agents, to hire the solicitors needed for the collective sale, to keep all owners abreast of the ongoing sale, and to act as representatives to the Strata Title Board.

Typically, there should be no less than 3 members in the SC, and the committee is formed through election during an extraordinary meeting (EOGM) with all owners. The motivation to be in the SC is without a doubt to effect the sale of the development as quickly as possible.

However, one must ask who comprises the SC and whether there are issues of conflicts of interest between them and all the owners of the development (not just those keen to sell).

Most of the time, the starting point of any en-bloc sale is when marketing agents contact the development to express interest in representing them, or when the development contacts marketing agents to see if there is an interest in the property. But in both cases, it is largely the property's Management Committee (MC) that does the initial probe. The MC consists of owners, both residents (ie people staying there) and investors (ie people renting the property out). The responsibility of the MC is to monitor the funds collected by the managing agent of the property, to engage the agent to make repairs, upgrades, maintenance of the property, on behalf of all owners.

But here lies the conflict: The mandate of the MC is to maintain or update/upgrade the development whereas the mandate of the SC is to sell off the development in whatever condition it is in, as quickly as possible.

Why is this a problem? Because most of the time, the MC becomes the SC. Because they are the initiators of any potential en-bloc sale, the MC holds the EOGM in their capacity as a pro-tem SC. Most of them have, at this stage, audited a number of marketing agents to see what value the property is worth and which of them are the best for the en-bloc sale. By the time the EOGM is held, the MC/pro-tem SC has already chosen a strategy to pitch to the owners, the marketing agent, the method of apportionment, the reserve price of the property. Of course all these are subject to change and more importantly, subject to election into the official SC.

But most owners would view the pro-tem SC members as proactive and best able to represent the sales of the property. Plus the larger the property, the less likely people will know one another, and a person in the MC is as good as a person in the SC; election becomes arbitrary.

Why should this be a problem? Because of the conflict of interest. The members of the SC, while they are in it, are still members of the MC. Unlike politicians who assume office and are required to resign from any career positions that might be a conflict of interest, there is no such regulation for SC members.

The consequence?

1. Because the MC (who is in most cases effectively the SC) is in charge of the maintenance fund of the condominium, they have a say in whether to use it to maintain the property or even to upgrade/update it. But because they are the SC, there is no incentive to maintain, to paint the exteriors, to make repairs, when their primary purpose is to sell the place off. Why waste that money if the buildings are going to be torn down? Effect - the place gets run down.
2. Because the place gets run down, the SC will tell owners of the downsides if the sale does not go through - increasing maintenance funds required to upkeep the place (which if they had maintained in the first place, would not have been a major issue), place getting more decrepit driving rental and property value down.
   
3. Because the MC is typically the first group to become aware of en-bloc potential for the development, they typically freeze any repairs, maintenance etc to push owners into selling. So they know that once the 10 year age mark is reached for the property, they need only 80% agreement for the sale to go through. In effect, they stop the upkeep of the property except for the bare minimum (eg security, electricity, sports facilities). Forget painting the exterior or interior, forget updating or upgrading the place, even if the MC has the sinking fund to do so.

Why do I know this? Because I was the only member of my property's SC that is not a member of the MC and became privy to the unethical behaviour that SC members will do to force, compel, push owners to agree to the collective sale. This was confirmed by colleagues who had been or are involved in enblocs, and they said the same thing - most of the time, the members of the MC becomes members of the SC, with consequences like those numbered above.

Letting the place run down, because of a potential sale, is ethically and legally wrong. Of course it's hard to prove legal evidence of the MC mismanaging the property, and unless there is a strong consensus against the sale, most owners would not care what happens to the property beyond the potential windfall they'll get.

I believe that any member of the Sales Committee cannot be a member of the Management Committee, to prevent conflicts of interest and to ensure fairplay in the collective sale.

The Land Titles (Strata) (Amendment) Act 1999 has a clause - Section 84A(9) - that defines the issue of 'good faith' which is supposed to capture the neutrality of the sale process. It states that the Strata Title Board (which mediates the enbloc sale) cannot approve an application for the collective sale if it "is satisfied that (a) the transaction is not in good faith after taking into account the following factors: (i) the sale price for the lots and common property in the strata title plan, (ii) the method of distributing the proceeds of the sale, (iii) the relationship of the purchaser to any of the subsidiary proprietors or (b) the sale and purchase agreement would require any subsidiary proprietor who has not agreed in writing to the sale to be a party to any arrangement for the development of the lots and the common property in the strata title plan".

The reason for this clause is to ensure the sale process has been executed fairly and objectively, "in good faith". But when the SC knowingly engages in tactics that impels owners to sell the property, by telling them "the place is running down", "costs of maintenance will go up", or by simply refusing to continue to maintain the property, then the sale process no longer becomes fair or neutral, that is, it is "not in good faith" especially to ALL owners including the minority.

Anybody who has been through an enbloc and is in the minority camp of not wishing to sell their property will know of these tactics I refer to. Unfortunately, the law does not provide for the condition that members of the Sales Committee cannot be the managers of the property funds.

Moral of the Story: If you are suddenly thrown into the madness of enbloc but do not wish to sell your property for whatever reason, ensure that during the EOGM you point out that you think the SC members should not be in charge of your condo's funds, so that irregardless of the sale process or however long it takes for any sale to succeed, your property will still be well-maintained and even updated/upgraded given sufficient funds. Point out that the MC is obliged to look after the interests of ALL owners, and to ensure your home reflects its best residential potential.

[Examples of great MCs are those that upgraded their property, eg Botanic Gardens View/Mansions went through an aggressive renovation to improve their exterior, interior & lifts, some condos have implemented ERP technology for their carparks or improved their security systems, or upgraded their sports facilities etc.]

I can only hope someday this will change.

Tags: sales committee, management committee, condominium, enbloc, enbloc sale, en-bloc sale, en-bloc, collective sales, collective sale, singapore

Myth #1 - The Value of 'Human Resource'

My wife and I spent the first 25 years of our lives in Singapore. Like most middle-class citizens of this red dot, we grew up in a progressive slew of increasing house sizes, from flats to terrace to semi-d as our parents accumulated financial capital during the industrial/post-industrial era. We then moved to Europe to study and work for the next 20 years. There we were happy in flats, and we seldom moved. We liked stability, familiarity with our surroundings and community. We stayed on the outskirts of a small but sizeable town (one that's been struggling to gain city status but it never quite achieved it). We had two homes. The first was in the town itself, and was a flat in a building over 90 years old, obviously witnessing various world wars. I'm no architect nor do I know the various terms they use, but it has a gothic look I guess (red brick facade), and while it looks 'old', the interior has been refurbished repeatedly over the decades and is very well-maintained. The second was outside of the town, smaller and just over 30 years old, a baby by that country's building-lifespan standard. It too was well-maintained, with modern amenities.

We moved back to Singapore for me to take up a position in one of the universities here. We bought a flat in District 10, near Holland Village, one of our childhood haunts, and thought we could sink our roots here for the next decade or two. The condominium was built in 1989 making it about 15 years old, an ovary by European building-lifespan standards. We renovated the place which took a year (when we were still overseas).

Exactly 6 mths after we moved 'back home', we received news of the enbloc.

They were going to tear down the entire estate (if it sold), and rebuild a new one. One that can house more people, or to be more realistic, make more money for the developers.

Why do this? Developers and the government call this 'urban renewal'. But it points to the first of a number of (urban) myths about Singapore.

MYTH #1:

For years, it has been drummed into Singaporeans by the government, that we have no natural resources. Our human resources are our greatest asset, which is why the heavy expenditure on defence (to protect the citizens from attacks from unknown sources) and education (to protect the citizens from attacks from unknown sources). The people are the most valuable resource in Singapore.

Not true.

Land is the greatest resource.

People? Repopulating Singapore is a matter of either encouraging its citizenry to become baby producing families (done that), or opening the gates for (suitably qualified) foreigners to become citizens (and become baby producing families). Sure our educated classes are not producing the number of babies the government wants (note this applies only to the educated folks), but there's an ambitious drive to recruit foreigners into the country and get them to settle down here.

Land? That's tougher. We can only reclaim so much land and at specific areas of Singapore. Hell will break loose if those estate owners near the coast with their prized seaview suddenly find themselves removed further from the coastline.

And we can't jolly well invade and annex Johore.

LAND more than humans are our greatest asset. And it is this, and its subsequent 'land value', that is the driving impetus for the recent 'en-bloc fever', as developers fight over each other to snap up 'prime land'. Specifically, these are land in District 9, 10, 11 which are near the shopping belt, the consumer heart that is called Orchard Road. Everything real estate around Orchard Road have shot up in land value, and the stellar increase in land prices has trickled down to areas like ours at Holland V, about 5 minutes driving from Orchard.

Which is why people are willing to sell their grandmothers, or at least evict er I mean relocate them, so that they can buy/sell their prized real estate. Doing so can net you the prestige of being called an "overnight millionaire" from dealing with the bullish property market.

So the next time you hear the diatribe about our people being our greatest asset, think about whether selling your grannie is more profitable, or selling your home (especially collectively).

Tags: land use, land resource, human resource, Enbloccing Singapore, Enblocing Singapore, Enblocking Singapore, collective sale, real estate, property, enbloc sale, enbloc, en-bloc sale, en-bloc, condo, collective sales, singapore