En-Bloc Sales FAQ

1. What is the meaning of selling en-bloc?

It means all the owners of separate units in an apartment, condominium or even an office building, collectively sell their properties.

2. How can an en-bloc sale be conducted?

Commonly either by way of private treaty or tender.

3. What are the legal documents in an en-bloc sale?

There are two mainly two legal documents – the Collective Sale Agreement and the Sale and Purchase Agreement. However, if the property is sold by tender, then the latter would take the form of a Tender Document.

4. What are the main steps involved in an en-bloc sale process?

Phase 1: Pre-Sale Preparation (1 months or more depending on the complexicity and number of owners involved in the Sale) – it includes the signing of the Collective Sale Agreement

Phase 2: Public Tender Stage (1 month) – Development is up for Public Tender, and await developers to submit their bidsPhase 3: Post Tender (1 month) – Evaluation of bids and negotiations with developers if necessaryPhase 4: Legal Completion (3 months) – if there is less than 100% consensus, an application for an order to sell to the Strata Title Board is required.

5. On the average, how long does the en-bloc sale process take?

Generally, it takes about 9 to 12 months.

6. What are some of the principal terms in the Collective Sale Agreement?

Reserve price – the minimum price that owners agree to sellMethod of apportionment of sale proceedsThe validity period of the Collective Sale AgreementDate to deliver vacant possession, and how much is to be retained by the developer till vacant possession is deliveredThe last day for all existing tenancies, -Owners are to inform their tenants with regards to the last day if the existing tenancies expiry dates are beyond the last day.The Indemnities for the Sale Committee and between owners-The Sale Committee’s authority to sign plans for submission by the purchasers to the relevant authority.

7. What happens to the deposit paid for an en-bloc sale when only the majority owners have agreed to sell?

During this time, the developer purchase is on condition that an order to sell is given by the Strata Title Board. The deposit paid usually is held by the Vendor’s lawyer as stakeholder.

8. What is required by the Strata Titles Board to approve an en-bloc sale?

For developments that are less than 10 years old – the subsidiary proprietors with not less than 90% of share values must agree to sellFor developments of 10 years or less – the subsidiary proprietors with not less than 80% of share values must agree to sell

The “Age” is taken from date of issue of the latest Temporary Occupation Permit (TOP) or, if no TOP is issued, then the date of the latest Certificate of Statutory Completion is used.

The agreement to sell must be in writing under a Sale and Purchase Agreement, which specifies the proposed method of distribution of the sale proceedsNot more than 3 persons must be appointed by the majority to act jointly as their authorised representatives

Majority need to give an undertaking to pay the costs of the Strata Titles BoardMajority need to consider the collective sale at an extraordinary meetingAdvertise the particulars of the application in four languages in the local newspaper

Send a copy of the proposed application to all subsidiary proprietors, mortgagors, CPF Board (if CPF fund are used for the purchased) and the placement of a copy under the main door of every unit

The application should include copies of the advertisement in the four languages, the Sale and Purchase Agreement, a statutory declaration by the purchase on his relationship, if any, to the subsidiary proprietors, minutes of the EGM, and valuation reports on each type of the apartment and method of distribution

Affix a copy of the notice in the 4 official languages to a conspicuous part of each building

9. What actually happens before the approval of an en-bloc sale?

The Strata Titles Board will make an order for sale if it is satisfied that:-

* the sale was done in good faith.* the sale was conducted fairly, the Board will consider all the facts of the sale-such as the sale price, the distribution of the sale proceeds, and the relationship between the purchaser and any of the owners.

10. What are some examples of en-bloc sale not done in good faith?

An example is where owners of larger units agree on a certain method of apportionment which favours them and try to force the minority to agree to it. Other questionable methods include collusion between the majority owners and the developer; and sellers being coerced into a joint venture with the developer.

11. Under what other circumstances would a collective sale would not be successful?

If the minority owners are likely to suffer a financial loss as a result of the sale going through, the Strata Titles Board may not allow the sale.

If the apportionment amount is not able to discharge the outstanding mortgage.

12. What are the methods used to apportion the sale proceeds?

The Singapore Institute of Surveyors recommends the following methods:-

Share value Method: the apportionment for each unit is proportionate to its unit’s share value in relation to the total share value for the development.

An average of the strata floor area and the share value method – the apportionment is according to the unit’s strata floor area in relation to the total strata floor area. The figures derived from the share value Method and floor area method are then averaged by taking 50% of each method.

General valuation – a value is estimated for each typical unit. This valuation is on an individual market basis, ignoring collective sale potential, floor level, facing etc.. The valuation of each typical type of unit would vary according to the floor area of each unit on the basis that the larger the unit, the lower the value per square foot. The apportionment for each unit would then be in proportion to that unit’s value in relation to the total value for the whole development.

The combination of general valuation and share value Method – a value is estimated for a typical unit of each type as in (c), and the total value is computed. This total value is then deducted from the sale price, and the balance is distributed to each unit according to each unit’s share value as a proportion of the total share value for the development.

Advice provided in this column is not meant as a substitute for comprehensive professional advice.

Source : IEA

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