Parliament Debates Land Titles (Strata) (Amendment) Bill

Over 400 suggestions from 100 submissions. Result - 30 proposed amendments to the Land Titles (Strata) Act.

News have started to trickle in and you can find details on CondoSingapore forum, here and here. The idea, according to Prof Jayakumar, is to make the enbloc sale more transparent, fairer and clearer. Debate is to continue next month, with the Amendment Bill gazetted by October 2007.

Some of the proposed amendments are listed below. I've noted in blue those that were in the original amendment proposal outlined in Mar 2007:-

• Requirement for sales committee to be formally appointed in a general meeting, and SC members have to declare any vested interests related to the deal
  
• Sales committee required to conduct a general meeting to discuss appointment of lawyer, agent, property consultant
• Providing updates on bids received and how sales proceeds will be divided
  
• 'Cooling period' of 5 days after the CSA is signed, in case owners changed their minds. Can only be done once.
  
• Owners' voting rights to be decided by the area of their flats in addition to share values
• Every home owner must have a lawyer explain their legal rights in the CSA
• Having a lawyer present to clarify doubts when owners sign the CSA and key terms and clauses to be listed upfront in the legal document
• Lawyer to be witness to the signing of the CSA
  
• STB to be given power to increase the amount minority owners get from sale proceeds for (say) renovation costs done recently
  

An excellent point raised by Philip Fong of Harry Elias Partnership is to implement a code of best practices: "There are no regulations as to how much information is actually given to the owners, so they know enough to raise questions. So in that sense, what I think would be worthwhile to consider is for the appropriate authority to come up with a code of best practices and if there are deviations from these practices, then they must be justified by the sales committee."

Some initial observations - unless there are more proposed amendments to be rolled out in the near future, it looks like (a) the emphasis is on transparency issues more than fairness issues (b) the 10 year arbitrary margin for triggering 80% enbloc consensus remains unchanged, despite many home owners hoping that something will be done about the senseless destruction of their homes. What MinLaw needs to remember is that the primary drive, the main reason for having enbloc sales, is the idea of urban renewal in the first place (which necessitates looking at the 10 year mark), and not the idea of profiteering (which would necessitate looking at transparency issues).

I'll continue to update you on the Parliament's discussion of the Amendment Bill as and when information comes in.

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Tags: Singapore Parliament, Land Titles (Strata) Act, Amendment bill, collective sale, collective sales, condo, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

Lost Pennies - Method of Apportionment Irregularities

The wonderful thing about going to conferences is you meet people of various inclinations and beliefs. Including those who believe strongly in conspiracy theories. In the course of an over-dinner conversation, one person pointed out that when banks round their 6 decimal point calculations, for every penny that gets rounded, banks stands to make millions. Nobody on the end-user side cares, but it happens, so sayeth the conspiracy theorist.

So I went back and picked 2 random CSAs with Method of Apportionment of the Sale Proceeds included. I entered those numbers into an excel sheet and let the program calculate automatically the apportionment and costs for each unit etc. From both CSAs, I found errors and discrepancies ranging from $58 to $6700 for units, and cumulatively variances in the range of thousands to tens of thousands. For example if the apportionment ratio (which typically is supposed to add to 1.0) falls under 1.0 by 0.000040 for a sale proceed of $800,000,000.00, you're talking about $32,000 which goes unaccounted for. And of course, calculations based on 6 decimal points will yield different sums from those based on 4 decimal points.

Since the method of apportionment gives clear costs for each unit, what happens to these 'lost pennies' as it were? Who keeps them? Does it go to the law firm (in which case the sum total cumulatively may be sufficient to buy a nice German engineered car)? Does it go to the SC for their efforts, to go into a Tung Lok seafood celebratory dinner? It most probably does not go back to owners since their proportion of the proceeds are calculated before hand.

What happens to the 'lost pennies'?

Try it out yourself. Anyone with some knowledge of spreadsheets (eg Excel) should be able to input the values from your Method of Apportionment (typically an appended Schedule of the CSA) and perform these calculations. Does it tally with what is printed in the CSA? If not, why not? If available, do the calculations for unit % apportionment (assuming you know the method of calculation for this value).

Moral of the story - sometimes the pages with the numbers don't necessarily tell the truth :)
Sub-moral of story - avoid conspiracy theorists during dinner time talk.

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Tags: method of apportionment, method of distribution, collective sale agreement, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, real estate, singapore, collective sale

Mayer Mansion - Owners Win Suit Against Developer

Another Going to Court case. You can find full details at CondoSingapore here. I doubt it will have bearing on Horizon Towers though (since this was a case of the developer not fulfilling the deal). Details are as follows:-

Estate: Mayer Mansion, Devonshire Road.
Source: BT 16/5/07, BT 22/8/07
Stage: Sold 12/12/06 to Travista, a foreign-owned developer for $30m. Travista sued owners through High Court on 3/4/07, Judge dismissed case on 14/5/07. Travista appealed to Court of Appeal but was turned down Jul 07. Estate sold to Golden Flower Group for $42m.
Lawyers for Owners: Mr Hri Kumar & Mr Tham Feei Sy of Drew & Napier for High Court case, Senior Counsel Davinder Singh, Mr Hri Kumar & Mr THam Feei Sy of Drew & Napier for Court of Appeal.
Developer: Travista (voided).
Reason: Travista did not complete the sale transaction by the due date and had therefore rescinded the SPA. Travista sued owners arguing that they are entitled to complete the purchase.
Details: When Travista failed to complete the sale by a stipulated date, owners considered the SPA rescinded. Travista sued the 13 owners, applied for injunction against owners exercising their rights (application turned down). High Court Justice Prakash dismissed case, declared the SPA rescinded, deposit forfeited, caveats lifted, Travista ordered to pay owners' costs of $15000 + disbursements. Court of Appeal dismissed the appeal.

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Tags: Mayer Mansion, going to court, collective sale, property, enbloc sale, enbloc, en-bloc sale, en-bloc, en bloc, collective sales, collective sales, real estate, singapore

Parliament begins discussing Land Titles (Strata) (Amendment) Bill

I know everyone is now awaiting for news on Horizon Towers, but in the meantime, Channelnews Asia (CNA) has just reported that on Monday 27 August 2007, Parliament will begin to discuss the proposed Land Titles (Strata) (Amendment) Bill, which will affect en-bloc legislation. You can read this little blurb here.

I'll update you on Monday if there's any news on this matter.

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Tags: Land Titles (Strata) (Amendment) Bill, Singapore Parliament, En-bloc legislation, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore

HPL to sue Horizon Towers' Majority Owners

The latest news on the Horizon Towers case just emerged tonight at 8pm+: HPL intends to sue the majority owners of Horizon Towers. This came from SGX and the relevant announcement is included below:

The Company [HPL] wishes to announce that Horizon Partners has today instituted proceedings in the High Court of Singapore for, inter alia:
(i) a declaration that the vendors are in breach of the Option to Purchase;
(ii) an order that the vendors do everything in their power to obtain a collective sale order from the STB; and
(iii) further or alternatively, damages for breach of contract in addition to or in lieu of the order in (ii) above or at common law, such damages to be assessed.

More news as it emerges. It's a major reason that one should always be very aware of their rights before they sign their CSAs, and importantly, what IS in their CSAs that opens the way for proceedings such as above to happen to owners.

Update: Midnight - CNA has started reporting it here.

Update: ST 24/8/07 - STB gave the reason for dismissal: Documents carrying signatures of 3 majority owners were not included in the application. Original SC members made a statutory declaration that all signed documents were included (when they were not). STB are not empowered to allow an amendment to be made to an application once submitted.

Update: ST 25/8/07 - HT owners will meet on 29/8 and 9/9 to discuss path forward. According to ST, two possibilities are available. (1) They could give in, allow the sale to go through at $500m and possibly pay damages to HPL. (2) They fight, and start 3rd party proceedings against possibly agent, lawyer and/or SC.

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Tags: Horizon Towers, HPL, STB dismissal, Strata Titles Board, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, collective sale, property, singapore, en-bloc lawsuit

Date of Vacant Possession - Maintaining an Estate when It No Longer Belongs to You

In response to an owner's dilemma over developers moving in to build a showflat after completion, the URA and Building and Construction Authority replied in the ST Forum on 17 August. You can find the full text in CondoSingapore here. I've talked about it previously here and here. Because the land legally belongs to the developer after completion, owners or tenants staying there are doing so at the 'goodwill' of the developer, often rent free. However, subject to the SPA, some owners are required to pay maintenance fees and continue to service the sinking fund, if they wish to stay till the date of vacant possession (VP). As Mr Han Yong Hoe (Director, Development Control URA) and Mr Ong Chan Leng (Director, Special Functions Division BCA) pointed out in their reply, owners/tenants staying in the estate after completion are "privately agreed upon between the developers and the residents". They further pointed out: "The developers and stakeholders of the project are directly responsible for safety at the worksite and they should take the necessary safety precautions to protect workers and the residents."

Now I want to show you two bits of legal text from a massive HUDC estate that was sold recently. The first is from the Tender document, and after negotiations, the second forms the Sale and Purchase Agreement which was signed by the SC and the developer:

Text 1:
The Purchaser hereby covenants that from the Completion Date, they will ensure that all the common property comprised in the Property is kept and will keep the same in good repair and tenantable condition and the services provided by the Management Corporation to the Property shall not be disrupted and the level of maintenance services shall not be affected until delivery of vacant possession of all Units and that the Managing Agents employed for the management of the Property at the Completion Date shall not be dismissed or terminated without just cause or reason prior to this date.

What it means is that the developer agrees to keep "in GOOD REPAIR and TENANTABLE condition" the estate, and that the services provided by the MC (security, electricity, cleaning services etc) shall "NOT BE DISRUPTED" nor its "LEVEL of maintenance services" affected until VP. Sounds reasonable right? It means the developer has duty of care to ensure that the estate is as it is, in a "state of good and serviceable repair" similar in spirit to the duties of the MC as defined in the BMSMA (Article 29(1)), irregardless of how many people are staying there.

Now after negotiations, look what happened to that clause (which is now part of the SPA):-

Text 2:
After completion and pending the delivery of vacant possession of all the Units by the Owners to the Purchaser, the Purchaser shall maintain the Property at a reasonable level (including maintenance of reasonable security services for the Property).

The vague term "reasonable" has replaced the much more defined duties of the developer in Text 1 which indicates no disruption, service level to be maintained etc. So what would "reasonable" mean? If there is only 1 owner staying in a 20 story block, does that mean the entire block can have its electricity cut except for that floor, and only 1 lift operational, perhaps between certain hours only? Or if half the estate is empty, that the security may be reasonably reduced, including simply cordoning off that estate and abandoning it? What about if your flat has an external pipe that is leaking badly and causing the floor to be flooded, would you be able to alert the developer to get it repaired?

What counts as "reasonable"? Why was Text 1 replaced by a vague Text 2? Who insisted on the change (Purchaser? SC?)? What form of recourse OUTSIDE of the developer is there for owners and tenants staying there after completion, should the developer ignore repeated complaints? Is the estate even insured? After all, the MC would have dissolved by then, there wouldn't be a managing agent to contact, but yet at the same time, some estates still require owners to pay maintenance charges.

A commenter in the ST Forum said that residents and tenants should be thankful that the developer allowed them to stay 'rent free'. Firstly, there are very valid reasons for staying there - owners may not have the cash capital to purchaser a replacement home until completion (when they get their proceeds), and only then start looking around for a new home. It's not their choice to stay in an estate that may deteriorate if no checks are made on developers.

Secondly, let me use this analogy:- A landlord rents out the flat to you, but comes in daily from 9 to 5 without your permission as a tenant, to renovate parts of your flat while your kids are around. The landlord also allows people to walk in and out of your flat unchecked. The landlord also points out that the leaking roof will not be repaired since it's not reasonable to repair; he's going to tear down the entire place in a few months time. He gives you masking tape and says "Put up with it". He tells you, never mind, rent is free but you pay need to pay utilities, and maintenance fund. He says, "this is reasonable wat, you getting to stay here rent free".

Will you get upset?

Do you even know what your rights are, after completion?

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Tags: date of vacant possession, vacant possession, sinking fund, maintenance fund, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate

Conflicts of Interest II - Sale Committee vs Management Council

I posted a while back what are the implications if a member of the management council (MC) sits in the sale committee (SC), largely centered around the problem of conflict of interest. You can read about this here. Since then, I've heard of more and more SC members who are members of the MC, in some cases dominating the MC completely.

Can you do anything about it? Maybe :) The Building Maintenance and Strata Management Act (2004) (BMSMA) makes for interesting reading. Did you know that as a subsidiary proprietor (SP aka owner), you can write an application into the management corporation to make available for inspection certain documents kept by the MC? (BMSMA 47(1)-(4)). Why is this even useful?

Because you can ask for:-

1. The names and addresses of the chairperson, secretary and treasurer of the MC as well as the managing agent.
2. The minutes of the general meetings of the MC
3. Book and statement of accounts

Why would you need these? (1) is useful to know. (2) will be relevant later when I explained another section of the BMSMA. (3) is useful because of the period between the date of legal completion and date of vacant possession, which I've explained here and here before. You want (3) to have evidence that the existing level of expenditure is maintained by the developer, when they take over your estate. I'll explain (3) in greater detail in a future post, especially considering the recent forum articles about developers entering the premises and constructing showflats even while people are staying there, or deteriorating existing levels of service and maintenance quality. Knowing what are the typical monthly expenditures for maintenance is good ammunition should you wish to challenge the developer for not holding up their end of the promise to maintain the estate at its original level (if stated in the SPA).

But (2) is interesting for the conflict of interest issue. For this, you need to know BMSMA Article 60 - Disclosure of Interests in Contracts, Property, Offices, etc. 60(5) states clearly:

Every member of a council who holds any office or possesses any property whereby, directly or indirectly, duties or interests might be created in conflict with his duties or interests as a member of the council shall declare at a meeting of the council the fact and the nature, character and extent of the conflict.

In other words, if you have someone in the SC who is also in the MC, that person must declare "the fact and the nature, character and extent of the conflict". Not only must he declare the nature of the interest (60(1)(a)), he shall not take part in any discussion, consideration, or vote on any matters related to the enbloc sale (60(1)(b)), and even be asked to withdraw by the chairperson (60(1)(c)) unless the council explicitly requests for information from the SC/MC member.

The declaration must be made at council meetings and the secretary must document every declaration in the minutes.

This is why you need the minutes, preferably before anyone doctors the documentation and inserts in any declaration. After all, if the SC/MC member fail to comply with this requirement, he/she is liable on conviction of a fine not exceeding $5000 or jail not exceeding 12 mths or both.

Do verify this with a lawyer or the managing agent. Check your minutes - was any declaration made? If not, why not? If the SC/MC member is convinced there is no conflict of interest, it is not up to him to assert that, since 60(5) above states that the SC member, who holds an office (in the SC), and has interests in selling the estate (which contradicts the role of MCs in upkeeping and maintaining the estate), directly or indirectly, is in conflict with his duties or interests as a MC member. Even after declaring his interests, unless asked by the MC, he is not allowed to discuss, participate in any discussion, on any enbloc matter raised in the MC meetings.

Given the complexity of this conflict of interest, should the SC/MC member not give up one committee seat or the other? If not, one must ask, why not? After all, if it's often a thankless voluntary job being in such committees, why take on 2 thankless voluntary jobs?

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Tags: conflict of interest, conflicts of interest, sale committee, management council, management committee, management corporation, mcst, collective sale, property, enbloc sale, enbloc, en-bloc sale, en-bloc, en bloc, condo, collective sales, real estate, singapore