Wednesday, 28 February 2007

Excellent Comment with Numerous Valid Points

A chap by the name of "Pariah" posted this in my comments, what must arguably be the longest comment ever made! Nevertheless, he/she has made some very valid points in his cogent arguments about En-blocs. Do have a read through... I particularly liked his idea in point (7) on a more rigid structure for allowing subsequent en-bloc bids to occur. This will be useful for owners who do not wish to be traumatised by repeated attempts, year after year.

Pariah - thanks for your very thoughtful, and well-argued comments! It heartens me to know there are others out there, and I'm not a lone rambling voice in the wilderness.

From The Pariah, posted 26th Feb 2007

In this New Millennium, the spate of Collective Sales has hit those of us in Districts 9 and 10 where East meets West, as Dr Minority puts it so elegantly.

1. Constitution. Is it even constitutional, I wonder? Perhaps, it is only in this little red dot where North nearly meets South where a law could be passed in 1997 with such equanimity by a Parliament of 82:2 mandating collective sale of Privately-Owned property based on 90% share-value majority if your estate is less than 10 years old from the date of issuance of TOL (Temporary Occupation Licence) or 80% majority if 10 years or older. Should a collective sale of a property bought prior to the enactment of this law be subject to this 90% (or 80%) majority?

2. Impact vs Regulation. What is even more galling is that after passing this "innovative" piece of legislation in 1997, they have conveniently left a huge void on everything else related to it.

2.1 To sell the entire estate - there is no regulation or legislation to govern the Sales Committee who dictates the terms of such collective sale and the apportionment method of sales proceeds that are binding on ALL owners. The Sales Committee might as well be a "Committee of One" because - naturally - only like-minded owners will be invited to join. Also, shouldn't the law legislate that the Sales Committee be auto-dissolved once the CSA attempt fails to garner the requisite share-values?

2.2 To repair a broken lock in the estate - There is an entire statute under the Building Maintenance and Strata Management Act to regulate the Management Corporation.

3. Paradigm shift. Pray, let's not be hemmed-in by the marker lines drawn for us.

3.1 Labels of "majority" versus "minority" are misplaced. We are talking about Private Property that we bought at prevailing market prices with our hard-earned money. No government subsidy. Not dipping into taxpayer's money. Are we living on some communal farm all of a sudden when it comes to collective sale?

3.2 10 years! This would be hilariously funny if it wasn't so tragic. How long did your fridge last? Mine is still frightfully cold after 13 years! Man, we are talking about bricks and mortar here. The law says "less than 10 years" and "10 years or more". The first CSA attempt on my estate was four years from TOL - even the central air-conditioning system provided by the developer to me was still under warranty!

3.3 What kind of Master Plan does our MND drum-up when the land use/plot density ratio could be hypothetically out-of-sync from Day 1 of TOL issuance? Hongkong is now talking about 40 years whereas in Singapore we have been slapped with this CSA potential/risk from Day 1 of getting TOL. Bizarre, no?
On our finite-resource Planet Earth, wouldn't it be more sensible to bar CSA for the first 20 years from TOL at a minimum?

4. Property share-values. Dr Minority has done his homework about share-values approved by the Commissioner of Buildings. The share-value bands were only narrowed recently and hence the legacy problem was created by COB in the first place. The esteemed Commissioner apparently did not have the foresight to envisage that a self-appointed Sales Committee of a collective sale could apportion sales proceeds based on such Committee's totally arbitrary formulae/weightages pegged to share values.

5. Apportionment method. A rocket scientist it does not take to derive a mathematical basis of apportionment. Searing as this may sound but it is unconscionable that the Strata Title Boards sanctions such arbitrary apportionment method of sales proceeds by a self-appointed Sales Committee.

5.1 At the time of purchase, you pay for every sq cm of space. Every month, you pay for every share value as approved by COB.

5.2 Now, based on a collective sale forced down your throat if you are amongst the dissenters, you are obliged to accept the apportionment based solely on share value or some dreamed-up weightage even though your apartment is 50% larger than your neighbours.

5.3 Apply a mathematical basis of apportionment. The ratio of "common property" versus aggregate "strata title area" could be established by a quantity surveyor (eg, 1000 sq m of common property of the estate versus 4000 sq m of aggregate strata title area of all apartments - ratio of 1:4). The collective sales proceeds, say $15mn, should then be divided into these proportionate ratios. Hence, $3m would be apportioned based on share values of each apartment and $12mn would be apportioned based on the strata title area of each apartment, thus mathematically and factually accounting for the full apportionment of such collective sales proceeds of $15mn.

6. No-brainer. In most estates, the larger units are invariably outnumbered by the smaller units. It is a no-brainer when it comes to apportionment method because the majority of the owners who own the smaller units would naturally vote to use share-values-only or to assign a weightage to share-values favourable to themselves.

7. High-rise slums. Estate maintenance of a development with CSA potential/risk is a Catch-22 issue. In high-density high-rise living on a little red dot, high-class slums can evolve willy-nilly in our Global City. We should have a scaled time-bar for next CSA attempts relative to the estate's age (eg, no CSA for less than 20 years from TOL; 5-year time bar after a failed CSA attempt for estates between 20-40 years from TOL, 3-year bar for estates above 40 years). If owners have an assurance that this CSA cycle has a timeline (and not going into infinity), then the quality standard of buildings in Singapore will be upkept and maintained properly.

8. Financial planning/CPF. Most of us would have used CPF monies substantively to buy a private property. CPF policies ostensibly encourage prudent and stable investment of our CPF monies with net positive gain over time. Hence, the CPF criteria are more stringent for investment properties versus owner-occupied properties.

8.1 The greatest irony is CSAs are almost guaranteed to result in an investment downgrade or downsize for owner-occupiers who need a replacement unit (if new replacement unit) or constant churning of investment (if old replacement unit as yet another CSA is likely to eventuate). This does not even take into account that real estate investment is truly unique - Unit #01 may be much less favoured and therefore worth less than Unit #02 even if both are in the same block on the same level with the same design layout.

8.2 All of us have different cashflow needs, risk appetites and investment-risk/time-horizon profiles. However, CSAs enforced on dissenting owners in effect communalizes all of us into "cashing-out" our original real estate investment.

9. Architectural legacy. Ever notice the difference between apartments built in the 60s, 70s, 80s, 90s and 00s? With all this urban renewal from Day 1 of TOL, what architectural legacy could we even hope for?

10. Community bonding. We are losing our citizens despite our near-First-World trappings. We talk incessantly about community bonding but our policies do everything to DIScourage bonding.

10.1 We are after all human and being human, we tend to be territorial. If we are serious about community bonding, principles similar to HDB SERS should be applied to CSAs to keep a sense of neighbourliness and community - more so for the people with private properties (and their children) are likely to be more mobile in terms of migration possibilities.

10.2 As the developer/buyer of an estate under collective sale is tapping on the land use potential belonging to the original unit owners, developers could be obliged by law to offer a same-size replacement unit at the redeveloped estate or within a 1-km radius of same or higher quality.

10.3 Interestingly - in contrast - Singapore can't even seduce our Permanent Residents to give up their Malaysian, Indian or Mainland Chinese passports despite whatever commonly perceived downsides of these countries at present.

11. Environmental impact/wastage. Again, we have a senseless contradiction. We harp on Asian values, of which frugality is one. Yet our policies foster wanton wastage as gleaming marble floors of less than 10 years or even of 25 years if well-maintained go under the wrecker's ball. It takes an obscene amount of energy to produce a ton of aluminium window frames and yet it's kosher to twist them all up with a CSA and to smash all these double-glazed full-height windows to smithereens?

12. Individual versus Minority versus Majority. However hard we try, I reckon Singapore will not become a Global City of First World Standard in essence (perhaps in trappings, we can pass it off).

Why? Because the hallmark of such places at its peak is giving people the space to grow and evolve into a rich pluralistic diversity yet with a strong commonality. Underpinning their society, there is invariably a healthy respect for the individual (what more for the minority?).

Sadly, we Singaporeans have learned to be a parrot-society veering to a convenient singularity with highly selfish motivations of kaisuism. Instead, underpinning our society, we have tyranny by the majority - be it in HDB Lift Upgrading or Private Estate Collective/En bloc Sale.

Knowing the mass media's pro-CSA slant and the dearth of civil society in Singapore, I have not even bothered to write-in to the mass media. Instead, I have chosen to give grief directly to our humble civil service and statutory boards and whatever mouthpieces the government has deigned appropriate for us to squawk into.

Only Time will tell if the powers-that-be really "listen". And if they did in fact "listen" but can't or won't take what we say into account for whatever reason (valid or otherwise), then at least they could "talk-back" so that we dissenters to collective sales at least would know why we are being led to slaughter, eh?

Let me end off by saying that - at the bottomline, we Singaporeans know the Price of everything but the Value of nothing.

Sunday, 25 February 2007

25-35% Failure Rate for En-blocs - Business Times

It's ironic that while the Straits Times have embarked on an exercise of fantasy when they wrote articles that perpetuated en-bloc millionaire aspirations, the Business Times came up with an article that gave pause for thought, and a reality check. Selected excerpts follow.

Given that our areas of Holland and Newton have been escalating in terms of reserve prices, with Elmira Heights at Newton now going for $1070 psf and Holland Tower at Queensway going for $1000 psf, the prices of new developments will rapidly exceed $2000 in these areas in the near future. There is absolutely no way any resident can afford to buy a new unit here without pumping in substantial amounts or taking out a hefty loan again. Equally importantly, these prices are rapidly driving up rentals in the areas to the extent that mid-level to upper-level expats on their various forums are making conscious decisions not to work in Singapore any longer or move further from town in order to afford decent sized (and priced) rentals.

Failure rate hits 24-35% for en bloc deals
Business Times 22 Feb 2007
By Arthur Sim (BT)

Asking prices may be going up, but not all collective sales are going through. About 25-35 per cent of more than 100 last year either fell through or are still on the market after failing to achieve reserve prices, property consultants say.

No green light: Grangeford Apartment has yet to achieve the required 80 per cent mandate from owners to sell and the rising price of replacement property could be the reason.

Sy Wan, who is on the collective sales committee for Grangeford Apartment in Grange Road, says some residents fear they will not be able to afford a similar new apartment in the neighbourhood if they sell. Mr Wan himself is looking at a Housing and Development Board flat.

Last year the official price index for uncompleted non-landed properties in the Core Central Region, which includes Districts 9, 10, 11, rose 6 per cent in Q4 and 25.4 per cent for the whole year.


Prices of prime collective sale properties have been rising lately. In October 2006, Ardmore Point sold for $1,369 psf per plot ratio. By December, The Parisian nearby sold for $1,734 psf per plot ratio, or 25 per cent more.

CB Richard Ellis executive director (investment sales) Jeremy Lake expects fewer transactions this year. 'It's extremely difficult to get 80 per cent because the market is almost too good and some owners are not prepared to commit to the minimum,' he says. Also, sellers' concerns about increasing replacement costs 'have become more evident' in the past three to six months.

Colliers International estimates over 30 of 110-130 collective sale sites launched last year remain unsold.

Director (investment sales) Ho Eng Joo estimates that 70 per cent of collective sales in 2006 were in Districts 9, 10, 11 - the traditional enclave of the well-to-do. Yet many could be looking at downgrading. 'En bloc sellers are becoming increasingly concerned about the replacement price for new homes because they have gone up substantially,' Mr Ho says.

Savills Singapore estimates that of 120 residential developments put on the market in 2006, 43 have not been sold or are still on the market.

Director (marketing and business development) Ku Swee Yong reckons most sellers are looking at 10-15 per cent upward adjustment. But he cautions owners not to ask too much, as developers also have to factor in rising charges and, more recently, higher construction costs. 'Property prices have been rising over the past 12 months, but associated development costs have also risen significantly,' Mr Ku points out.


Thursday, 22 February 2007

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?

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.

Finally, one posting in 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.

Tuesday, 20 February 2007

The Ugly Side of En-blocs - The Press

In schools, students are taught that reporting the news is meant to be neutral, balanced and objective. It is with such sadness that over the Chinese New Year weekend, the local papers The Sunday Times decided to print a huge spread on 'serial en-bloccers', people who systematically gain profits from selling their homes, along with everyone else's, including those who do not wish to vacate.

What happened to the flip side of en-bloc sales? Why were there no reports of those people who were against such sales? Whatever happened to balanced reporting?

It is with great irony that a friend who consulted me over writing a letter to the forum had it rejected a few days earlier. (I have tried before and was unsuccessful in getting them printed.) I guess the tone and focus of the negative consequences of en-bloc sales would contradict the full page spread on the joys of making money at other people's homes.

Of interest in this particular spread is the story of the 2nd serial en-bloccer, Mr Patrick Kummar, who does not rent out the property but chooses to stay in them instead. I'm curious to know how he finds it so easy to move home so often. The 1st serial en-bloccer profiled stays in a landed property and buys up 'enbloc potential' units strictly for profits. Mr Kummar has decided not to move out of his 3rd home now in Orchid Apartments in Eng Neo Ave, another enbloc potential. He pointed out:-

" 'Every time I sell en bloc, I get pushed to a more inferior area of living. With the money I get, I can get the same kind of living, but not in the same area. Standard of living drops,' he said.
Also, homes sold en bloc can bring out the worst in neighbours.
Mr Kummar said that at Kim Lim Mansion, things got so ugly that one owner threatened the others who were unwilling to sell by saying: 'If this were Hong Kong, this would be settled by the triads.'"

I wonder how he would feel now, if he's on the other side of the fence - the minority - who do not wish to move? Or will he join the boat the minute the en-bloc process begins? We'll never know I guess. Still, everytime I think the local press has become more mature over the years, they do something like this that points to the one-sided reporting they're so good at.

I'm also printing my friend's unpublished forum letter, for what good it can do now. He's used some of my ideas but the words are his, and in exactly 400 words (which he complained struggling over).

Law needs to consider not just financial stakes, but social stakes, in any en-bloc sale
by Mr HH Khoo
Submitted to Straits Times Forum, Rejected 14th Feb

I refer to the letter by Valerie Ong (ST, Feb 9). Given the en-bloc frenzy, I believe the law (Land Titles (Strata) Act) regarding en-bloc sales needs to be carefully re-assessed, particularly with regards to the concerns of the minority who stands to lose their homes in the process.
The law clearly defines subsidiary proprietors (SPs) largely according to the financial stakes they have; decisions around en-bloc sales are made in terms of financial gains, distribution methods, financial losses, and share values. However, to an increasing group of SPs, a flat is more than a financial investment. They have a social stake invested in their home as well. Over the years, they have formed a community around them – conveniences, shops, clinics, schools, familiar places and people. Indeed, the government has been actively encouraging citizens to build communities around their homes. Yet, as numerous letters by minority SPs who decry the loss of their social stakes show, the law completely disregards the social value of a home.

The law needs to differentiate between ‘home-owners’ and ‘investment-owners’: Home-owners have lived in the development for a substantial number of years; investment-owners typically rent out their properties, have no social investment in them, and would not hesitate to sell them if the prices are good enough. I strongly believe there is a high correlation between most minority SPs and ‘home-owners’.

An analogy is that of the General Elections whereby only citizens are allowed to vote because they, not foreigners, have social and financial stakes in the country. Yet the en-bloc law collapses ‘citizens’/‘home-owners’ and ‘foreigners’/‘investment-owners’ together and allocate them equal ‘voting rights’. Why shouldn’t home-owners, given the social stakes they have in their homes, be given the greater say in deciding whether an en-bloc sale should proceed or not? A possible definition of home-owners could those who have stayed for more than 70% of the property’s age when en-bloc begins. Home-owners should then be given double the voting rights to reflect their social stakes in the place.

In 1995, Goh Chok Tong said “there is no better stake in the country than a flat or a house”. The law excludes social stakes invested by home-owners and force many home-owners to lose the very stake encouraged by our government. How can any sense of ownership occur if our homes are taken from us by a majority who often do not care beyond the dollar value?

Sunday, 18 February 2007

En-bloc blogging - Another Voice

I was searching the internet for other blogs that might've talked about en-bloc matters, and found, purely by coincidence, the author of one of the ST Forum's letters - Mr Waleed Hanafi. What was even more interesting was that the letter published on the ST Forum, was censored or edited. The original (and more critical) letter was reprinted on Mr Hanafi's blog, located here.

His blog is Innocence is Curable and he wrote another post on the topic as well. Worth a read! :)

It isn't easy trying to get your letter published in the Straits Times Forum, both printed and online. I've tried before (several times) without any luck. Even when the letter is (in my opinion) well argued and written, it is not a guarantee that the forum editor will agree to printing it. Censorship or plain practical editorial considerations (given the limited space)? We'll never know. But if you've attempted to send a letter about en-bloc sales to the Forum and it never appeared, do let me know. I'll be glad to print it here.

A Happy Chinese New Year to the Chinese readers, in the meantime :)

Monday, 12 February 2007

More Voices - Selfish Developers and Every Resident

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

From Porean
Posted 9 Feb 2007

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

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

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

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

From BillyBong
Posted 9 Feb 2007

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

Mr Hanafi spoke from the heart.

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

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

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

Saturday, 10 February 2007

Other Minority Voices - Better Arguments Against Enblocs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday, 7 February 2007

Financial Loss Clarification - Minority Voices

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, 6 February 2007

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.


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?