STB - Judiciary or Volunteers?

This article on the Today paper (5 Jan 2008) was quite interesting and insightful in highlighting some of the problems of the STB in terms of its functions and members (article available here). Mr Yadav pointed out that the STB is made up of volunteers and this may create conflicts of interest. He asked "who better than a group of impartial persons to manage this delicate balance other than the judiciary". The perception of the STB in many minority owners' eyes is after all quite negative - out of hundreds of enblocs that have gone through STB, and given the numerous complaints about underhanded methods used by marketing agents and sales committees, only a handful of dismissals was ever made. It brings up the question - is STB there to be a check-and-balance mechanism in ensuring fairness and equity in enbloc sales, or is STB there to facilitate enbloc sales? If the former, why were the hundreds of thousands spent on legal fees by minority owners wasted away raising complaints, issues and concerns about how the sale was handled, only to have all their complaints, issues, concerns pushed aside to approve the sale?

The law points out that good faith must be secured in the sale, yet it narrowly defines the meaning of good faith through sale price, method of distribution and relationship of purchaser to owners. What about if the sale was not conducted in good faith, eg if the agent made misrepresentations to secure CSA signatures, or if the meetings were not conducted appropriately, or if the negotiations between purchaser and SC was not done in a fair manner? These have been raised at STB hearings by various minority owners, but legally they do not constitute good faith.

I'm reminded of a transcript of a general meeting at one enbloc site, where a (now ex-)member of the STB, who is also a lawyer representing the SC, made an appearance to the estate to assuage the worries about both Horizon Towers and the (then) impending legislation. In the meeting, he weaved between his role as the lawyer in charge of sale and his role as an STB member. When asked if there would be any conflict of interest, he brushed it off by saying that in any STB hearing involving the estate, he will not be a member of the STB tribunal. This of course does not say anything about whether he may or may not have shared insider information with other STB members, and because he is paid by the SC/marketing agent, he gave information about the runnings of STB and about the HT case (some information of which were not public knowledge). If this wasn't a failure of conflict of interest I do not know what is - that a STB member can use his (supposedly neutral) position to appeal to owners to sign the CSA, indirectly or otherwise.

I wrote about this potential conflict of interest more than a year ago here. At that time, I looked at the breakdown of panel members. Since the new legislation, STB has increased the number of members from 30 to 39. I include the new breakdown, with the old breakdown in square brackets.

Lawyers 8 [5]
Judges 2 [2]
Academics (Lecturers and Professors) 6 [5]
Engineers 4 [4]
Surveyors 4 [2]
Architects 4 [4]
Property Consultants 6 [8]
Consultants 3
Accountants 2

New entries are consultants (non-specific) and accountants. Out of the 8 law firms represented, 4 stated that they deal with enbloc sales. Again, like in the previous post, in these various categories, I'd consider judges, academics and accountants to be fairly neutral with no corporate conflicts of interest. I'm also discounting other extraneous factors eg a law professor who is a condo raider lol. In other words, I'm only looking at their affiliation (firms) and their career function (a law professor is more likely to be neutral in hearings than a property consultant from Savills for example).

Vested Interest Panelists in STB (or members who may have conflicts): 29
Neutral Panelists in STB: 10 (or 25%)

The 2007 list of members had 7 neutral vs 23 vested (or 23%). Under the 2008 list, it means that in a tribunal of say 4 members, there's a 1 in 4 chance of a member who at least can be said to be a neutral person.

I think Mr Yadav is correct - there's only two safeguards against unscrupulous enbloc sales attempts - the law and STB. STB needs to be more neutral in their membership selection, and the judiciary is one way forward. The law also needs to consider carefully that matters of good faith must encompass far more than just price, distribution and relationship. It must recognise the political nature of enbloc sales as well as the social consequences of enbloc sales in disrupting peoples' lives.

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Tags: strata titles board, strata title board, collective sales, en-bloc, en-bloc sale, enbloc, enbloc sale, collective sale, singapore

Parliament Debates Land Titles (Strata) (Amendment) Bill

Over 400 suggestions from 100 submissions. Result - 30 proposed amendments to the Land Titles (Strata) Act.

News have started to trickle in and you can find details on CondoSingapore forum, here and here. The idea, according to Prof Jayakumar, is to make the enbloc sale more transparent, fairer and clearer. Debate is to continue next month, with the Amendment Bill gazetted by October 2007.

Some of the proposed amendments are listed below. I've noted in blue those that were in the original amendment proposal outlined in Mar 2007:-

• Requirement for sales committee to be formally appointed in a general meeting, and SC members have to declare any vested interests related to the deal
  
• Sales committee required to conduct a general meeting to discuss appointment of lawyer, agent, property consultant
• Providing updates on bids received and how sales proceeds will be divided
  
• 'Cooling period' of 5 days after the CSA is signed, in case owners changed their minds. Can only be done once.
  
• Owners' voting rights to be decided by the area of their flats in addition to share values
• Every home owner must have a lawyer explain their legal rights in the CSA
• Having a lawyer present to clarify doubts when owners sign the CSA and key terms and clauses to be listed upfront in the legal document
• Lawyer to be witness to the signing of the CSA
  
• STB to be given power to increase the amount minority owners get from sale proceeds for (say) renovation costs done recently
  

An excellent point raised by Philip Fong of Harry Elias Partnership is to implement a code of best practices: "There are no regulations as to how much information is actually given to the owners, so they know enough to raise questions. So in that sense, what I think would be worthwhile to consider is for the appropriate authority to come up with a code of best practices and if there are deviations from these practices, then they must be justified by the sales committee."

Some initial observations - unless there are more proposed amendments to be rolled out in the near future, it looks like (a) the emphasis is on transparency issues more than fairness issues (b) the 10 year arbitrary margin for triggering 80% enbloc consensus remains unchanged, despite many home owners hoping that something will be done about the senseless destruction of their homes. What MinLaw needs to remember is that the primary drive, the main reason for having enbloc sales, is the idea of urban renewal in the first place (which necessitates looking at the 10 year mark), and not the idea of profiteering (which would necessitate looking at transparency issues).

I'll continue to update you on the Parliament's discussion of the Amendment Bill as and when information comes in.

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Tags: Singapore Parliament, Land Titles (Strata) Act, Amendment bill, collective sale, collective sales, condo, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

VICTORY for Horizon Towers - Enbloc Application Dismissed

[Updated 4 Aug morning to include news reports and names of law firm/agent as printed in the news]

Given the hundreds of enbloc applications that have gone through STB, isn't it ironic that there's been very few STB dismissals so far? Prior to Horizon Towers, the only two cases I could gather were Mandalay Court (March 2000) and Grenville Condominium (June 2000), both occurred right after the Land Titles (Strata) Act amendments in 1999. Mandalay and Grenville were dismissed due to procedural errors in their enbloc sale application, and in both cases relating to extraordinary general meetings (EOGMs) either being held late (Mandalay) or not being held (Grenville). Because of this technicality, STB dismissed their applications. Subsequently, both estates' SCs reapplied for a 2nd application to STB and both were approved.

On 3rd August, Singapore Stock Exchange News listed the following announcement about Horizon Towers:-

Following the hearing of the Strata Titles Board ("STB") in connection with the application (the "Application") by the vendors of the Property for the STB to order the sale of the Property in accordance with the Option to Purchase, the Company wishes to announce that the STB has on 3 August 2007 dismissed the Application.

The Company understands that the Application was dismissed by the STB because the Application had been made by the vendors without full compliance with statutory requirements. Horizon Partners is currently considering the STB's decision and reserves all its rights, including its rights against the subsidiary proprietors of the Property who signed the collective sale agreement and the Sales Committee of the Property.

An inside source highlighted that the dismissal was done due to possible procedural errors. From the 3 main news sources, here are their 'sketchy' descriptions of these errors (all dated 4 Aug 07):-

CNA: "applicants failed to include certain documents"; "some papers were defective"
BT: "insufficient notices were posted and some documents were not filed"
ST: "a notice put up on July 11 last year saying that owners with 80.81 per cent of share values in Horizon Towers had signed the sale agreement. A sale needs 80 per cent consensus. But only 79 per cent had agreed to the sale at that time, lawyers said." (Incidentally, they did achieve 84% but I guess the point here was that on 11 July the notice was incorrect.)

Update: ST 8 Aug 2007 gave clearer details of the law firms and lawyers involved.
HPL - SC K Shanmugam and William Ong of Allen & Gledhill
Majority owners - SC Jimmy Yim of Drew & Napier, SC Chelva Rajah or Tan Rajah & Cheah.
Minority owners - Kannan Ramesh, Senior partner of Tan Kok Quan Partnership, Phillip Fong, Senior partner of Harry Ellias Partnership.
A company owning several units hired Dr SK Phang who enlisted SC Michael Hwang.
Agent for Horizon Towers remained, as far as I could tell, First Tree Properties Pte Ltd (BT 22 Aug 2006).

The interesting points are:-

1. Again, STB emphasises the need for all applications to conform to the law in terms of procedures. Note that the merits of the application (done in good faith, method of distribution, financial loss) were not considered in these dismissal cases so far. It appears even seasoned law firms and enbloc agents may stumble over the legal protocols needed for enbloc sales. The moral of the story - make sure you adhere to the law. To the letter.
   
2. For those who are against the sale, it means not just objecting on the grounds of lack of transparency/lack of good faith/poor distribution/financial loss, but documenting meticulously every single letter/event/meeting that has ever occurred with regards to the enbloc as well as taking minutes/recording the sessions. Such information may turn out to be very useful later on. It also means that people have to be brave to object to the sale of their homes (preferably as a collective group), and that means objecting on all fronts - not just on the enbloc sale but on the procedures that were done to begin, move and secure the sale. Some agents and law firms are being paid hundreds of thousands if not millions to sell your homes and by golly, why should they have it easy? :)
   
3. Most CSAs/SPAs have indemnity clauses protecting SCs and majority owners from anything but acts of God (okay I exaggerate but you get the idea.. read your own CSA/SPA). Can Hotel Properties Ltd sue the SC/majority owners for procedural mishap?
4. A deja-vu may occur again when the new amended enbloc legislature kicks in later this year. I've already seen one CSA with contract-out clauses, or clauses that attempt to bypass the new laws. Even a clause that compels majority owners to agree that an EOGM occurred to elect the SC (a new proposed amendment to the law) even when it didn't actually happen. What will be the consequences for all owners (majority/minority) when the law is changing and people (including lawyers) are caught in the middle, waiting to see what fixes/amendments need to be done to their enbloc process? In the meantime, can current CSAs be worded such that they bypass or circumvent the new laws? Surely this can't be the case?

Tags: Horizon Towers, STB Dismissal, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, collective sale, property, singapore, real estate, Enblocing Singapore, Enblocking Singapore

Help Needed: Experienced STB Mediation Folks Required!

Apologies to all about not updating the site. I'm keeping it as minimal as possible for now so that readers can find the information on the Ministry of Law Public Consultation here and the Feedback Unit's REACH Discussion Forum here.

In the meantime, I've been approached by a group of minority owners who would like to hear from others who have been through the STB mediation process. They do not know what are the next steps (they have submitted their objections), neither do they know if a legal representative is required for the mediation or not etc. If anyone has any information on this black boxed process, please let everybody know via the comments section of this posting. Such information will give minority owners greater confidence in preparing for the legal battle ahead.

It'll be useful to others to know so that any potential minority owners can be better prepared before they enter the STB hearings. Some points you can include for all to read:-

1. What factors did you bring up in your objections (financial loss, bad faith, apportionment). Which ones were allowed and which were rejected by the STB?
2. Did you go as a group or as individuals?
3. Did you obtain a lawyer to represent you (or the group)? Must you have a lawyer?
   
4. What was the STB hearing like? Was it akin to a court hearing with the sales committee's lawyers and the STB 'judges'?
5. Can you hire a lawyer after any initial STB mediation or does the STB disallow that? How many sessions do you have to go through?
6. Did your sales committee's lawyers try to impose their charges on you (or your group), especially if the objections were found by the STB to be unjustifiable/untenable? (eg did the SC try to deduct a certain amount from your sales proceed, more than everyone else?)
7. Any other points.
   

Much appreciated.
ps. Updated En-bloc list Scary how the list of confirmed en-blocs is growing!

Tags: Strata Titles Board, Strata Title Board, STB, STB Mediation, Mediation, en-bloc mediation, Enblocing Singapore, collective sale, Enblocking Singapore, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

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

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