Wednesday, 26 March 2008

David vs Goliath: Airview Towers Sale Dismissed by High Court

One man versus an estate worth $202 million, including top lawyers Harry Elias Partnership, well known enbloc agent DTZ Debenham Tie Leung, and Bukit Sembawang Estates. And Mr Ken Lee, representing himself, won against Goliath and got the sale kicked out. You can read the articles here.

What happened? Where did it go wrong? The case hinges on a clause in the CSA and the deadline of 12 mths to get the 80% majority consent. The CSA clause regulates the rights of a signatory (someone who signs the CSA) to sell their unit, after they have signed the CSA. In the case of Airview, according to the news report, 2 owners had signed the CSA and then decided to sell their units. The buyers however, only signed the CSA after the 12 mth deadline, even though they had "agreed all along to the sale". The SC and their lawyers argued that their late signing should not penalise the entire sale, because "their failure to sign was due to 'mistake or inadvertence' and so was a technicality". Justice Lee Seiu Kin however ruled that the 12 mth deadline must be adhered to, and if any one misses the deadline, they cannot be counted towards the 80%.

Why would anyone sell their flat, some might ask? Why get out of such a windfall?

For various reasons - urgent need to sell (eg emigration, business despatching family overseas), or owners wishing to capitalise on the enbloc fever. Say a person bought their flat for $1m, and it's now going enbloc and he stands to gain $1.8m. He puts it on the market for $1.4m; any buyer stands to gain $0.4m and that owner transfers the risk of enbloc sale collapsing to the buyer; owner gets a guaranteed 'windfall' of $0.4m while buyer accepts possibility of getting $0.4m.

What clause is this in the CSA, that forces this buyer to join the enbloc majority?

This one, which you should find in most CSAs (with some variation):-

Each of the Selling Owners (people who signed the CSA) hereby represents, warrants and covenants as follows:-
... not to do any of the following from the date of signing this agreement by each of the Selling Owner in respect of his strata unit:
(a) grant an option to purchase
(b) sell
(c) agree or contract to sell
(d) assign or transfer by whatever means;
unless third party/parties having such benefit thereof shall also join in as a party to this Agreement by signing the same forthwith or any Supplemental agreement if required by the SC; provided that the particular Selling Owner shall indemnify the other Selling Owners from any claims, losses, damages and/or otherwise arising therefrom.

A variation I've seen includes a condition, that this sale must be subject to the approval of the SC (yes, they rule your life). What this clause means is that if you signed the CSA, you can only sell your unit to someone who MUST agree to sign the CSA AND any other documents required by the SC. It also means that the seller is responsible for any claims or damages if anything botches up. But is this fair? Why should you as a seller, if you have legit reasons to sell, be held responsible if the managing agent and/or lawyers do not follow up on the sale and chase the new owners to sign the CSA? Why should you also be penalised for signing the CSA, by having such a clause that effectively limits the potential number of buyers (or worse, they must be approved by the SC)? Shouldn't the onus be on the marketing agent and SC to convince the new buyers to sign the CSA, rather than it be your job?

It remains to be seen what's the aftermath of the Airview Towers dismissal - will the 2 unit sellers get into trouble? Will Bukit Sembawang sue the majority owners, like in Horizon Towers? Will the 2 unit buyers get into trouble for not signing the CSA in time? Will Bukit Sembawang let the sale slide, as the news report suggests?

What cannot be denied though - that it is rather sneaky of the managing agent and/or lawyer for the SC to brush off the late signing of the CSA by the 2 unit sellers, as a mere 'technicality'. They really should have known better.

Moral of story - Be careful of what you sign. If the 2 unit owners never signed the CSA, they would not have gotten into any trouble that they might be in now.


Anonymous said...

Anyone can write anything in any contract, at the end of the day, if challenged, the court will decide if the condition is enforceable and/or fair. On the other hand, what if minority owners decide to sell to anyone, including to the developers, would that also be disallowed?

Anonymous said...

minority owners are more than welcome to sell to anyone, inc developers because they didn't sign any contract. but no developer will be stupid enough to buy units and then bid for the place because it's a valid objection straight away under the en bloc law.

Anonymous said...

"...but no developer will be stupid enough to buy units and then bid for the place because it's a valid objection straight away under the en bloc law."

Is this correct? I have read the ACT but am did not come across this. Perhaps I did not read it carefully enough. Can you help by pointing out which part of the ACT? Thanks!

The Pariah said...

Here's a STINGRAY under the Land Titles (Strata) Act ...

To apply to the Strata Titles Boards for a collective sale order, there is a Statutory Declaration (SD) by designated representatives of the Sales Committee. In this SD, they swear under oath that all the requirements of the LTSA for the en bloc sale have been complied with.

Poser: If the declaration under oath is false, what happens?

Penal Code, man - don't play-play!

Does it make a scathing mockery of the law if people can get away with false declarations under oath in selling other people's homes???

Signing-off with a menacing glint in one eye,
The Pariah

Anonymous said...

HI Dr. Minority,

Good to know you are still keeping virgil on this blog supporting all stayers and keeping us informed of the latest development .

We are all Davids in our fight to keep our roof from Raiders and neighbours who want to take profit from their nest egg.

How weird it is that over the Pacific Ocean ,large stretches of Cleveland and all over USA , where the credit crunch leaves behind empty houses in disrepair and neglect with no takers!

How weird is it that stuck on our 224sq mile of island on this side of the Pacific, developers are dying to get our little concrete box in the air for some ridiculous sum just to dismantle it to build more little concrete boxes for more Davids ?

Have all Goliaths gone mad, or have all Davids got to fight for their little bit of earth or abandon it when he cannot pay for it?

The thrust of this case is David is not going to be able to hang on to his little roof if the whole development start another raid ..if he beat this Goliath out of his camp , there are many more ..has DAvid got the resources, the zeal to carry on ap infinito??
Until we could change the law to protect the Davids of this world , little DAvids must stand united as a strong front to fight the inevitable..

The Oriental Express said...

To me the answer is very simple. One of the Airview owners owes my friend some money and refused to pay. I have warned him many times not to take advantage of this friend because I have seen with my own eyes, how those who take advantage of her never get blessings!

This strange story of David winning over Goliath? How do you explain it?

What goes around comes around!

Dr Minority said...

hi orientalexpress,

that's certainly a very refreshing take on Airview :) A karma treatment of the enbloc over there.

I wonder if the "what goes around comes around" applies to those ruthless 'condo raiders' who has taken away so many people's homes including my own? It'd nice to think that some day (hopefully soon LOL) these people will be the subject of misery that they have caused to many people.

That's a nice thought :)