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

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