Sunday, 1 June 2008

"It is ugly. And it brings out the worst in Singaporeans"

An excellent article appeared in the Sunday Times today by frequent enbloc reporter Jessica Cheam. I'm going to reproduce the entire article in this post, simply because it hits lots of relevant points, and it is really a well-written piece. Feel free to comment as usual (and as usual, I do not censor comments except for spam.)

Just an interesting observation - Are Singaporeans (note - not expats who own properties) the main (or even only) culprits in the enbloc saga? From my own experience, it looks like the owner-resident expats are often the ones who would fight enblocs, and are often quite vocal about their stand against enbloc sales.

The Sunday Times (Singapore)
June 1, 2008 Sunday
En bloc sales bring out the worst in Singaporeans
Jessica Cheam

After a most spectacular year for the en bloc market last year, sales activity has finally frizzled out and for most parties involved, it is a welcome time-out. While property agents may lament the slowdown, one group of home-owners can heave a sigh of relief, as the threat of being forced to sell their homes retreats into oblivion.

Well, for most, anyway.

The recent debacle at the annual general meetings of two of the most iconic condominiums on the East Coast - Bayshore Park and Mandarin Gardens - proves that while the market has gone dead, en bloc woes have not, and will not, go away.

Some points of contention that arose at the meetings were the use of proxy votes to influence decisions, and conflicts of interest arising over the roles of management councils and sales committees.

In the course of my job, I have covered my fair share of en bloc deals, and as a non-partisan observer of proceedings, I have come to one conclusion about the 'uniquely Singapore' phenomenon that is the en bloc.

It is ugly. And it brings out the worst in Singaporeans.

Recent developments have also highlighted weaknesses in the law regarding collective sales and a private property owner's rights. This is despite the tightening of en bloc rules that kicked in last October, which ensure, among other things, that sales committees are properly elected, and collective sales agreements witnessed by lawyers.

This has no doubt cooled the en bloc fever which gripped the nation last year, with a total of 116 collective sales generating record investment sales of $13.64billion.

But some glaring flaws in the en bloc process remain. They include the distribution of sale proceeds, the role of the management council versus the sales committee, and the use of proxy votes at annual and extraordinary meetings.

Let me elaborate.

Firstly, owners should be compensated according to their flat attributes - height, cost of renovation, view.

I have found that pro-en bloc types usually own low-floor units, with average furnishings and view. Anti-en bloc types, by contrast, typically own beautifully renovated top-floor units with stunning views - it is no wonder that these owners want more compensation or refuse to sell, according to how much they have invested in their homes.

Current laws favour the average owner, who receives a pay-out equal to that of his top-floor neighbour, which is obviously unfair and has been the root of many conflicts and arguments.

The Strata Titles Board (STB) has also previously ruled that renovations, along with interest, are not a 'deductible expense', which means your renovations count for nothing in a collective sale.

To create a level playing field, provision should be made so that owners get fair value for their homes, perhaps by a government-appointed independent valuer.

Secondly, the management council and sales committee should be kept separate by law, since the role of the former is to maintain the upkeep of the estate, while the other's role is to sell it.

Current laws allow a sales committee member to be on the management council as well, but this has caused unhappiness at many estates - not just at Bayshore and Mandarin - where suspicion breeds among residents towards those who carry both positions.

On the issue of proxy votes, it is theoretically democratic. But it also allows decisions to be skewed one way, because residents who want certain things changed will attend meetings and get proxies from similar-minded neighbours to achieve the results they desire.

Meetings currently require only 30per cent of the total share value held by residents of an estate to attend, which enables decisions to be made without majority consent.

This should be looked at. One solution could be to raise the minimum requirement of residents present to 80per cent, or instead to do away with proxy votes altogether so that voting cannot be manipulated - perhaps via an online or e-mail voting system.

My advice in the meantime?

Don't buy into a strata-titled property if you do not want to be forced to sell your home. Current laws do not ensure you will be able to live in your condominium unit until your dying days - even though, in my opinion, you should be able to.

Most countries in the world allow this basic right, why can't we?

Perhaps the lawmakers could take some of these issues into consideration when compiling the next set of refinements.

Beyond the economic value of urban rejuvenation or boosting shareholder value for property developers, the en bloc phenomenon has ripped apart the moral fibres and harmony of our society.

Is this a cost our society is willing to pay?

On the one hand, I can sympathise with those who want to sell: they may be approaching retirement, or perhaps have plans to move away, and want to get the best price.

But there are people who have spent hundreds of thousands of dollars beautifying their homes to be their retirement nests, plus those who value the environment they live in beyond any amount of realisable value.

Do the former have the right to determine if the latter lose their homes? Owners still have a choice to sell their homes on the open market.

In terms of 'specuvestors' who swoop in to snap up units in the hope of making a quick collective sale buck, their motivation is even more inexcusable. It is okay to want to make money, but do it without hurting someone else.

It's not just Singaporeans who become embroiled in controversial sales, but also foreigners and permanent residents.

I just hope that my estate never has to go through this nightmare. It is sure to do permanent damage to relationships which have taken years to build up, but which take only a sale notice to destroy.

No comments: