The en bloc balancing act

THE law on en bloc sales looks set to be beefed up, on the back of lessons learnt from the many tussles of the past year.

When the Bill to amend the Land Titles (Strata) Act was introduced yesterday in Parliament, it contained far more rules than the Ministry of Law (MinLaw) had proposed five months ago.

This, on the back of over 400 suggestions it received during public consultation in April and May. Then, the ministry called for a further round of focus group discussions with stakeholders.

The result? Not only a new balance between the interests of minority owners objecting to a sale and that of their majority neighbours — MinLaw’s stated intention from the start — but also, a step-by-step policy to govern en-bloc sale proceedings.

The current lack of regulations has led to growing complaints by residents about the conduct and validity of collective sale agreements. At Gillman Heights in Telok Blangah, for example, objections have been filed to the Strata Titles Board about how the sale is being apportioned, among others.

The new rules attempt to address this by involving owners in the important decisions of an en-bloc sale — from the formation and composition of the sale committee, to the governance of the committee’s proceedings.

One of the new “main purposes” of the 42-page Bill is to enable any subsidiary proprietor who has signed a collective sale agreement to retract his agreement to sell.

This can be done within a cooling-off period, similar to provisions for timeshare and direct sales here and property transactions elsewhere, such as in Australia.

For future en-bloc sales, owners have five days and can exercise this right only after signing the agreement the first time. In theory, this would address complaints that owners are forced to sign agreements. For example, Today has reported on such complaints at Minton Rise in Hougang.

Another requirement, devised to tackle allegations of duress or misrepresentation, is to ensure a lawyer is present when an owner signs an agreement, if done in Singapore — so that the legal terms and liabilities are explained and the latter’s doubts addressed.

Even so, the en-bloc sale committee must now list all the important elements of the agreement to owners: The reserve price, the apportionment method, the fees payable to lawyers and marketing agents, and so on.

Bernard & Rada Law Corporation associate director M Kumaran, who oversees his firm’s en-bloc cases, believes lawyers will welcome the new Act because of the clarity of the procedures.

“When you have greater room for judgment calls, there’s a greater risk all round,” said Mr Kumaran, who cited two other areas where there is greater transparency under the Act.

The first is as simple as publicising the minutes of the sale committee meetings within a certain period, while the other is as significant as regulating the mode of sale.

MinLaw has revised the Bill so that every sale launch must be by public tender or auction. While the sale committee can engage in follow-up negotiations with any bidder, a sale by private treaty must be concluded within 10 weeks of the close of the tender/auction. Otherwise, the committee must go back to the tender results or launch again.

This helps owners to know better if they are getting the best sale price, said Mr Kumaran.

In his experience, buyers prefer private treaties because it gives them more control of the bidding process. While popular developments are more competitively sold through tender, it is also not uncommon for these to be concluded via private treaty before the end of the tender, he said.

Research director Nicholas Mak of property consultancy Knight Frank believes the en-bloc process “may be lengthened” with the additional requirements to be met and with greater involvement of owners.

For example, the decision to form a sale committee and the election of its members can only be done at a general meeting of the management corporation, not on an ad-hoc basis.

The committee must bring up the appointments of the property consultant and the lawyer at a general meeting before it makes its decision. Owners can even decide to take away these decision-making powers.

MinLaw has also specified the eligibility criteria for election to the sale committee, and made clear it cannot use the funds of the management corporation for its activities.

Other feedback MinLaw has considered includes the additional consent requirement by owners. It had proposed, in addition to the threshold of 80-per-cent consent based on share value, that 80-per-cent consent by number of units also be required.

It has now amended this second requirement to 80 per cent by area, and 90 per cent if the development is less than 10 years old. This will largely apply to mixed developments with residences, offices and shops, mitigating the shift in interests from commercial owners’ to those of residents.

Source : Today – 28 Aug 2007

Easier asset division after a split

DIVORCED couples will soon find it easier to divide their matrimonial assets in a “smooth and equitable” manner, thanks to changes to the Central Provident Fund (CPF) scheme.

From Oct 1, an ex-spouse no longer has to wait for her husband to turn 55 and be eligible to withdraw his CPF. These rules, passed under the CPF (Amendment) Bill in Parliament yesterday, now allow the immediate transfer of CPF monies to the ex-spouse’s CPF account, so long as the latter is a citizen or Singapore Permanent Resident.

There is also no need for the member to set aside the prevailing minimum sum and Medisave minimum sum first before distributing the rest to his ex-spouse.

Manpower Minister Ng Eng Hen said the aim was to “facilitate the division of matrimonial assets under the Women’s Charter, provided there is no leakage from the CPF system”.

The House also approved changes to allow family members to support one another financially, including raising the top-up limit to the prevailing minimum sum. Previously, this was pegged to the individual recipient’s minimum sum level, which would have been much lower.

Another change involving divorced couples will allow for the immediate transfer of a property to the former spouse. Currently, when a member uses his CPF to buy property and a court orders the ownership to be transferred to the ex-spouse, the member must return, in cash, to the CPF account whatever amount is due to it. With the change, this is no longer necessary.

Instead, a charge will be placed on the amount of money used to buy the house, such that if the ex-spouse sells the house later, that money will be refunded to the member’s account.

And to help more Singaporeans have enough for old age, members will be allowed to transfer funds from their ordinary account to their grandparents’ retirement account, if both parties meet the top-up criteria. Previously, they could only do so using cash. Top-ups will also be allowed to spouses and siblings under-55 using CPF or cash from January.

Members of Parliament welcomed the changes, but asked for more public education measures. Agreeing that the changes were complex, Dr Ng said simple cartoons would be used to convey messages and more roadshows would be organised. He will also deliver a ministerial statement in Parliament on Sept 17.

Source : Today – 28 Aug 2007

CapitaLand buys remaining 50% stake in Eureka Office Fund

CapitaLand has acquired the remaining 50 percent stake in Eureka Office Fund for S$590.6 million.

The fund owns the commercial building known as 1 George Street and 163 strata-titled units in The Adelphi.

It also owns a 20 percent interest in Temasek Tower.

CapitaLand says the transaction is not expected to have any material impact on its net tangible assets or earnings per share for this financial year. – CNA/ch

Source : Channel NewsAsia – 28 Aug 2007

Changes to en bloc rules will benefit all players in the long run: analysts

Market watchers and analysts are still studying the impact of proposed changes to rules governing en bloc sales unveiled in Parliament on Monday.

Some say the revision will benefit property developers as it means greater clarity and certainty to their initial investment.

Owners of Neptune Court at Marine Parade are exploring an en bloc sale.

And insiders tell Channel NewsAsia, that so far, only about 40 per cent of owners are lending support to the move.

And unless they can get another 40 percent to say yes before the changes kick in, a later bid at a collective sale will have to comply with stricter rules.

S K Phang, Lawyer, Phang & Co, says: “Some people might say look hey it’s going to cumbersome, we got to comply with the new requirements, let’s quickly sign, so that may have that positive effect, so it might reach 80 per cent. So when the new rules come into effect, you’ve already reached your 80 percent and the rules don’t apply any more.”

Phang & Co is currently handling a few of such cases and a few others that have achieved the required consent.

Its lawyers say the en bloc market has already become less heated due to the increase in development charge and current volatility in the financial markets.

Industry insiders say some speculative investors who’ve paid deposits for potential en bloc units have allowed their options to purchase to lapse because they no longer see the potential to cash in on the en bloc frenzy.

According to some analysts, the proposed changes to rules governing en bloc sales will indirectly benefit developers or buyers.

This is because they can be more sure of the deal going through, once it is inked.

But they say it’s unlikely to affect the pricing or demand for future deals.

Nicholas Mak, Consultancy & Research Director, Knight Frank, says: “The demand for en bloc sales sites is actually a derived demand. It depends on developers’ sale of their projects, redeveloped projects. If the sales of developers’ projects are going well, developers will need to replenish their landbank, there by increasing the demand for en bloc sales. So, I think that the amendment is not likely to affect the demand but rather the market on the whole. The property market on the whole will be a greater determinant of the demand for en bloc sales.”

Others believe once the market has adjusted to the new rules, it will be positive for all parties in the long term. – CNA/ch

Source : Channel NewsAsia – 28 Aug 2007