How Minute Should the Minutes of the Meetings Be?

There's been some questions raised recently about what should be included in the contents of the Minutes of an enbloc EOGM. Some argued that the minutes should only contain the resolutions, nothing more. Others say that minutes should be as detailed as possible so that people can be kept informed; it should include, for example, question and answers, comments, queries, issues raised. The amended LT(S)A is 'quiet' about this, aside from requiring that minutes of EOGMs be kept, and they be displayed or passed to owners.

First, let's get back to the amended LT(S)A. Prof Jayakumar during the 2nd reading of the amendments on 20 September 2007 clarified the reasons for the amendments. He pointed they are for procedural clarity,to "provide additional safeguards and ensure greater transparency for all owners" (Reading available here). So safeguards and transparency for all owners are among the main rationale for the amendments to the law.

Second, let's look at corporate practice. In 2003, the investor watchdog body Securities Investors Association of Singapore (SIAS) urged listed companies to keep detailed minutes of shareholders' meetings. They strongly suggested including "comments and queries by shareholders and responses by the board and management" (BT 18 Feb 2003). This, they argue, will improve best practices in accountability, transparency, corporate governance, and will make the company more responsible to the shareholders. From the BT article:

Members complain that many companies refuse to record even the gist of relevant questions asked by them and answers given by the chairman of the meeting,' the statement said. 'Especially in the current environment of greater shareholder participation at general meetings and the emphasis on greater transparency and disclosure, Sias finds this practice of keeping skimpy minutes to be totally unacceptable.'

'Not to record comments or queries from minority shareholders represents total disregard for and disrespect of minority shareholders. It expunges whatever they have said from the institutional memory of the company. It is as if they never said anything at the meeting, as if they are too unimportant to say anything worth recording.'

Are there examples of companies that provide detailed minutes? Microsoft publishes a verbatim transcript of their AGM online, as well as the AGM video. Locally, Qian Hu Corporation published detailed minutes of their AGM, earning them Investors' Choice Golden Circle Special Merit Award for transparency (BT 13 Mar 2004).

Shouldn't what SIAS suggest be the same good practice for our enbloc EOGMs? After all, isn't the law amended to allow for greater transparency and more safeguards for all owners, including minority owners?

Or to paraphrase SIAS, do SCs that choose not to provide detailed minutes of their EOGMs have a "total disregard for and disrespect of" owners who have the courage to stand up, ask questions and raise issues with the sale? "It is as if [such owners] never said anything at the meeting, as if they are too unimportant to say anything worth recording."

SIAS warned that one consequence of having skimpy minutes is that because shareholders feel they are insignificant, they are less willing to ask questions. Perhaps this is what SCs hope for - a subservient group of owners who will just nod, agree, and do whatever the SC wants them to do.

There should be no reason why SCs cannot provide detailed minutes of EOGMs, including the minuting of questions, comments, issues raised by individual owners and the responses from the SC. None, unless they do not think highly of 'transparency', 'safeguard', 'responsibility' and 'accountability.

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Tags: EOGM minutes, minutes, EOGM, Extraordinary General Meetings, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore

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

Staying Ahead of the Game - Protem 'Inside Trading'

A look at the expat forum's thread on enbloc sales and you'll see it swamped by local Singaporeans trying to jump onto the 'enbloc wagon' by trying to suss out where the next 'enbloc potential' is and getting a unit or two there just before they hit the enbloc sale road. Speculators are jumping around the East Coast, lurking in condos in hope that some poor chaps will unsuspectingly sell their homes to an enbloc investor who can then cash it all in and reap the millions (the going rate nowadays, as they say).

But what happens if certain people within the estate have privileged information that an enbloc is going to occur, and buy up units in said estate before any enbloc announcements?

Yes, the only group of people who are aware of such things are the Protem Sale Committee (PSC) members. In an email, I was told this happened in an estate where members of the PSC who already own units there, decided to buy up other units in the estate, and shortly thereafter announced to everyone that they will be starting the enbloc sale.

Why should this be a problem?

• From the perspective of a unit owner who wishes to sell their home (for whatever reason) - usually if word goes around of an impending enbloc, the owner would either sell at a premium or hold back on selling, at least until the amount s/he could get is known. In this situation highlighted above, most owners who sold their units to the PSC were not aware of any enbloc and hence sold it 'on the cheap'. To the people who were planning to do the enbloc.
• From the perspective of a unit owner in general - Most owners will want to wait and see what are the pros and cons of selling their units collectively. They therefore want a PSC/SC that represents them and are fair in their dealings with agents/developers/lawyers. But if owners know that the PSC members have several units in their estate, bought precisely because of an oncoming enbloc, what confidence is there that they do not have ulterior motives of their own? Are they truly representing owners or themselves? Are they selling for the benefit of everyone (which might require taking a higher RP for example), or for their own benefit (which might be a lower RP but faster sale, since they have bulk purchases)?
• From the perspective of the law - the new amendments will address a key issue of transparency. Any PSC members who utilises privileged information not available to public (including all owners) for their own benefit is not trying to be transparent to everyone. In fact, it is the exact opposite since they are most likely to have their own motivations and drives to push the sale through (eg have to pay off hefty loans taken up from snapping up units). The law needs to protect owners from such 'insider traders' and to have procedures in place that require all owners to declare when they bought their units (and have such information open for scrutiny).

In the meantime, the wild wild west continues.

Tags: protem sale committee, pro-tem sale committee, protem sales committee, pro-tem sales committee, collective sale, collective sales, condo, en bloc, en-bloc sale, property, singapore, real estate

Measures to Ensure Transparency - Deconstructing a Parliamentary Discussion

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

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

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

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

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

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

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

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

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

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

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

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

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

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