Friday, 2 March 2007

Financial Loss Couple Goes to Court

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

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

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

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

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

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

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

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

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

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

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


Anonymous said...

Surprise, surprise ... Buying a newly constructed apartment with a newly issued Temporary Occupation Permit (TOP) is no assurance that collective sale won't hit within the next decade.

I personally know of two developments in my neighbourhood in District 9 where TOP was issued in the 1990s. One estate was demolished 7 years or so from TOP. The other is now in the process of demolition and is about 12 years after TOP.

Technically, collective sales are possible from Day 1 of TOP issuance because the Land Titles (Strata) Act, Cap 158, sets out the 90% majority consensus for buildings where TOP was issued less than 10 years ago (and 80% majority for buildings where TOP was issued 10 years or more ago).

Anonymous said...

I hope this greedy couple gets whats comming to them.

They want their cake and eat it too? No one forced them to leverage to the hilt to take out a maximum loan over the full 30 yrs.

They didn't have to splurge on a private property lifestyle. They could have gotten a smaller, cheaper HDB and this wouldn't have happened.

But no. They decided to take a loan and live the high life in a private property. Shouldn't this lifestyle cost something? or anything? How can the loan be FOC? How can the quality of life be FOC?

So, why should everyone else have to pay for this couple's 12 yrs of upgraded lifestyle while 85% are still staying in HDBs?

I hope this couple will be made an example of and given a judgement that's devoid of the leniency shown to them during the first hearing.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

[DrMinority here - deleted Pariah's comment and reinstated it with requested amendments]

This Waterfront Ville case has another interesting angle to it: It came under the AMENDED rules relating to CPF charge which came into effect on 1 Sep 2002 (viz, bank mortgage ranked first, CPF charge ranked second).

In fact, there has been a slew of changes which - wittingly or unwittingly - facilitates Collective Sales in one way or another and they are all ADDING-UP:

(A) Sep 2002 - CPF charge to rank after bank mortgage. Hence, lower incidence of "financial loss" occurrence because CPF doesn't require you to pay back the withdrawal shortfall nor the accrued interest shortfall whereas banks are not so kind.

(B) Jul 2005 - Non-related singles can use CPF funds for 2nd property if they have not used CPF monies or have refunded such CPF monies previously used. Hence, if you are bunking with parents/relatives in HDB, or if you did not use too much of CPF funds for present property and can pay-back CPF, then you can form various permutations with different friend-groupings and go shopping for "potential" en bloc properties and get "en bloc windfall" by beggaring-thy-neighbours. In fact, even married persons are tapping into this 'en bloc windfall' by partnering with different permutations of siblings/parents to go shopping for en bloc potentials.

(C) Jul 2006 - CPF relaxes the Minimum Lease Period from 60 years to 30 years. Hence, this helps owner-occupiers forced through a collective sale to downgrade to a shorter lease property.

(D) Mar 2007 - HDB has yet again relaxed the Minimum Occupation Period for sub-letting the entire HDB flat. Hence, owner-occupiers forced through a collective sale have more rental options.

Wah lau ... you see, Singapore's Gahmen is so thoughtful, so coordinated even when they force you to sell your private property! So we must not be such ingrates! Sorry lah, but last time I kind of recall that the Gahmen talk a lot about home ownership, retirement planning, becoming the Switzerland of the East, leh? But that was last time, hor ...

Change is the only constant - so keep moving house lor!

Anonymous said...

This is an ALERT to:
All owner-occupiers who still want to have their own roof
And a call for your IDEAS.

Do start thinking about the following pointers unless you want to be a “Squatter”, “Refugee” or “Downgrader or Downsizer” – take your pick! Not so bad lah - you may just be “home-less” but not “roof-less” in our Global City of Singapore!

In a collective sale, you are forced into the same boat as your neighbours. But as an owner-occupier you have vastly different vested interests from those who are investor-occupiers.

They get a “windfall”.
But you get “wind” as your home “falls”
Under a wrecker’s ball!
[… hee, hee, I can be a poet with gall
without a roof to cover my all
if the collective sale calls.]

Mega Picture: The Gahmen has announced a target population of 6.5mn people within the next 40-50 years (up by a whopping 45% from the 4.483mn as of 2006). The Singapore Tourism Boards’ target tourist arrivals for 2007 (just one year) is 10.2mn visitors.

Helicopter View: Pre-1960s, Singapore’s area was 581.5 sq km. After nearly 50 years, we are 699.4 sq km as of 2005 (geez wheez, we are 20% bigger!). Unless Mother Nature and/or God (sorry lah, even the PAP in their angelic white is not in this league) cause tsunamis to shift our neighbours coastline further away, or seismic movements to shrink their land mass or meltdown from global warming to submerge the nearby land, this 699.4 sq km plus another 3-7% is about it. Anything more will probably trigger "Close Encounters of the Fourth Kind"!

Roof-top View (or more accurately, your kitchen window view): Bearing in mind the above Mega Pic and Chopper View - if you peer out from your kitchen window, you may see developers and neighbours hovering around and hoping to force you into a collective sale with bits of legislation, pieces of policies and chips of regulations to facilitate this forcing as the Unseen Hand.

So, you as owner-occupier receive, say, $1mn from the collective sale today. Your neighbour as investor-owner also receives $1mn. Fair and square, eh?

1. Hey, but you need to buy a replacement roof today with that $1mn (unless you are prepared to be a “SQUATTER” for the next decade), yes? Your neighbour can afford to wait out the property highs and buy a replacement unit only when the property cycle turns. The dollar amount is the same but the value of the dollars is different for an owner-occupier. So you are already time-disadvantaged.

2. Oh, was your unit of the same strata-title area as your neighbours? What about the share-values as you have been paying maintenance fees based on those share-values? If any of these two factors are different, then you should ask for the apportionment/distribution of the sales proceeds to be based on mathematics and facts, yes?

At the time of property purchase at own independent free will, the purchase price and the share-values were based on facts and law. At the time of collective sale forced upon you, is it OK that the collective sales proceeds are now to be based on subjective, uncertain and unknown factors?

Should you be subject to the whims of the Sales Committee, or the scruples of the Majority Owners, or the discretion of some government body or some dreamed-up 50-50 weightage of the valuers without any professional basis except that 50-50 is the easiest idea to sell?

Don’t pray-pray. Don’t forget that you plundered your CPF retirement savings and borrowed up to your eye-balls when you bought your present property, yes? You can bet that you will be repeating this plunder-and-hock all over again if you buy a decent replacement unit after being forced into a collective sale! So don’t play-play either.

3. Ooops, clutching that $1mn in hand, did you then discover that you cannot buy a “comparable” replacement unit? In fact, there is no such thing as a “comparable” replacement because your property is unique. The nearest you can get in terms of being “comparable” is another unit of about the same age, size, quality in the vicinity … which probably means you have to be a “REFUGEE” for the next few decades as you keep moving house with each ensuing collective sale.

If you want a “new” replacement unit, then you must “DOWNGRAGE” or “DOWNSIZE” because of the cardinal bid-offer spread in market prices.

4. Hang on, but aren’t the developers tapping into the land potential that you had the foresight to invest in when you bought your property years ago? So – in addition to the cash settlement option - shouldn’t the Gahmen mandate that the developers also give you an option to replace it with a same-size, same-floor unit after redevelopment within the usual construction period and with the necessary financial/completion guarantees?

If the developers want to build up their land bank, then they should look to the government’s land sales (and not boot people out from their homes). If the Gahmen can have a Housing Developers (Control & Licensing) Act to cap the financial/completion risks inherent in the purchase of properties under construction, then surely similar provisions can be crafted to protect owner-occupiers who are forced to sell through a collective sale? After all, we are sacrificial lambs in the larger interest of urban renewal and land usage maximization, yes?

5. Hold your horses, have you thought about the voting powers of the Majority Owners or of the Sales Committee? Many important issues in a collective sale are determined at these forums. So caveo cavi cautum as they say in Latino! Beware lah!

Example: In a 100-unit condo, you may have 70% investor-owners and 30% owner-occupiers – not unusual if your condo is in a district considered to be prime or popular with foreigners. Even if your neighbours are fair-minded people and they form a Sales Com of, say, 7 persons. Even if 2 members of the Sales Com (ie, 28%) are owner-occupiers, they will be outvoted even before voting begins. Even if they weight the votes of these 2 reps at 1.5, they continue to be outvoted!

Once you drill down, then you begin to see that the legislative 90% (80%) majority consensus to force through a collective sale may be skewered in various permutations.

6. Ahhhh … aren’t collective sales one of the ways to “Beggar-Thy-Neighbour” (BTN) and grab your own “windfall”? [Actually, BTN also stands for “Buay Tahan Neighbour” – whichever angle you are coming from … majority consenter or minority dissenter … we just hate each other’s guts in our own neighbourly fashion, don’t we)?

If you are an owner-occupier who still wants to own a roof and not be a Squatter, Refugee, Downgrader or Downsizer, should you start thinking of some ways to mitigate or minimize this BTN Effect? If you have any grand ideas, please blog and share.

For me, I always look to our esteemed Gahmen for inspiration. Interesting how the Gahmen will be “redistributing wealth to the disadvantaged” after hiking GST, eh? Errr … “Windfall” is “Wealth”, and …

Anonymous said...

Please Change ur template to black words white background! :) This site is very text heavy, but with poor eyesight, it is very difficult to read tiny white words on black background.

Take a poll if you have to.

Anonymous said...

Please read what I have to say below before you extend your sympathy towards the couple who goes to court to block the collective sale due to their financial loss(CPF savings) and before you conclude that they are worse off after the enbloc.

I seek to clarify this misconception because the reason for the enbloc of Waterfront View is totally different from other enblocs.

Residents there opt for it not because of wanting huge profits(there isn't anyway!) but because they want to avoid incurring future cash losses. The estate is privatised not long ago(that means HDB no longer maintaining the estate, everything must pay cash!) and have no condo facilities like swimming pool etc. In fact it is only a condo by name!. It is run- down with many areas requiring major repairs and maintenance. Not small repairs but big ticket items like replacement of lifts, pipes, roofs etc. On top of it, the sinking fund for development needs topping up i.e very soon every resident will be asked to pay cash for development. Due to these factors, resale value has dropped tremendously. Many of the older residents do not have cash to pay for future maintenance/developmental charges. Many tried to sell to escape from paying these extra cash but there is no buyer. So, The enbloc is really a God-send miracle to save these people from incurring future bank debts.

Based on figures presented, it seemed the couple stand to lose some CPF savings after the enbloc. However, one must bear in mind that should there be no enbloc, the resale value of their unit is only about $400K(based on the last transacted resale price of $380k recorded by URA) compared to the enbloc sale price of $660K. They will lose even much more if they sell. They may argue that they have no intention to sell so this does not apply to them. But being a privatised run-down estate with low sinking fund for estate maintenance and development, in time to come, they will still have to use cash (not cpf savings) to maintain and develop the estate. It is because of this future 'cash payment' to the sinking fund that majority in the estate opted for enbloc even though quite a number have to lose some CPF savings. It is better to lose these savings than having to borrow fresh loans from the bank i.e. incur new debts to pay their share of the sinking fund. Food for thought : How can we think of our old age retirement funds when we cannot even survive today?

Opting for the enbloc is a wise and prudent decision and not a greedy decision for majority of Waterfront View residents.In fact, only a small percent profit from it and these are people are original owners and already paid off their loans or take very small short loans.

The couple mentioned has made it very difficult for them by delaying the enbloc and caused them to bear more interests for their existing home loans and also having to pay for higher sale price of their replacement homes . So just for Waterfront View estate, lets direct our sympathy for the majority instead of the minority especially the couple mentioned. Cos' if they win the case, 582 residents will have to bear real cash financial losses and not cpf savings.