Don’t just hammer home majority rule

In recent months, no three words have polarised people and emotions so sharply and stirred up such an impassioned outcry.

No, I am not referring to “ministerial pay hike” but “en bloc sales”, which similarly pits pragmatism against emotional logic. In fact, the latter cuts even closer to the bone for those who are affected, including getting booted out of their own homes. Stripped to its essence, the underlying principle behind collective sales — as the term implies — is the concept of majority rule over minority rights.

While such a principle is universally accepted as a defining hallmark of democracy, the complexion of the argument changes completely when we are talking about homes. As the adage goes, home is where the heart is. In fact, in many traditional societies, a man is seen as a failure if he cannot protect his home. Hence, it is easy to see why many minority owners are up in arms despite the fact that by giving in, they would typically be profiting to the sweet tune of a million bucks.

For any en bloc sale, it must be accepted that there would be owners who do not want to sell their apartments. Taken to the extreme, it would be nonsensical to sell a property if only one owner is keen. And it would be equally absurd for a single owner to hold back the sale, which was why the 100-per-cent-consent requirement was scrapped in 1997.

A public consultation on the legislation surrounding the en bloc frenzy, driven by the property bull run, is underway. With a myriad of issues at stake, the single key question that must be answered is this: How can we ensure a transparent process and adequate compensation for the minority owner, at an amount commensurate with his intangible losses?

While considerations such as recent renovation expenditures are easily quantifiable, intangibles such as emotional attachment and a family’s established routines — be it a proximity to the workplace, school or place of religious worship — are trickier to compute.

The Government’s proposals — to give the Strata Titles Board intervention powers to increase the sale proceeds for minority owners with valid objections and to issue guidelines on the evaluation of claims for financial loss — already go some way towards addressing some of the concerns of these owners. Any suggestions that could distort the market, including limiting the number of en bloc attempts within a specified duration, should be carefully assessed.

Nevertheless, more can be done to protect the interests of minority owners, especially in terms of devising measurable indicators to reflect intangible losses.

Providing a one-for-one exchange by allowing a resident to move back in after the redevelopment may seem a straightforward solution but may not be equitable, since the price of the redeveloped property would have ballooned exponentially, especially in the case of an ageing estate. Such a practice would also dampen the market by eating into developers’ profits.

One of the suggestions bandied about by industry insiders is to give owner-occupiers greater voting shares than investor-owners.

On top of that, one could peg the voting shares and compensation payouts to the duration of occupation. While we cannot quantify a person’s attachment to a home he has been living in for, say, 20 years, it is fair to assume that his sense of belonging would be greater than that of his neighbour who bought his flat just two years ago. Hence, it is only right that the former should have a greater say as well as a larger slice of the proceeds pie.

In the review, another major complaint among minority owners needs to be looked into: Their claim of unethical inducement to their agreeing to the sale. While it is assumed that one would give considerable thought before signing one’s home away, few owners actually understand the legalese — and what they are getting into — contained in thickly-bound collective sales agreements (CSAs).

For most residents, their only concern is the money they will get. But they are unaware, for instance, that some CSAs allow the use of an estate’s sinking fund — which comes from the residents’ pockets — to top up the purchase price.

Owners adamant about keeping their homes also claim they are left out of the loop, as the sales committee concentrates its time and effort on those who sit on the fence. This cannot be allowed. Since minority owners, whether they like it or not, have to move out on completion of the sale, they must not only be informed of the discussion but also have a voice in it.

Although most law firms and property agents involved in the proceedings take it on themselves to fulfil the moral obligations to minority owners, some moral duties do need to be enforced by law, in the case of legislation which compels children to look after their parents. The Strata Titles Board should be given the teeth to deal with those who fall short of such ethical standards.

While the rule of majority is far from perfect, it is a sound and efficient principle, even if it means that some people have to be forced out of their homes. What is equally apparent — but glaringly missing — are greater attention to and legal protection for displaced minority owners.

Source: Today, 25 April 2007

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