En bloc sale of private strata title property in Singapore

Private strata title property (residential/commercial)
SERS is a collective sale scheme applicable to PUBLIC HOUSING in Singapore invoked under the Land Acquisition Act, as mentioned above. For PRIVATE NON-LANDED PROPERTY (viz, strata title property), collective sale (commonly known as en bloc sale) is invoked under another piece of legislation called the passed in October 1999 and amended in October 2007.
The Land Titles (Strata) Act was seminal when it was passed in 1999. Reason: It introduced the concept of majoritarianism where the majority could vote to sell the entire estate, thus forcing the remaining minority to sell their family home and/or place of business (be it a shop or office if the estate is a commercial development or a mixed-use development).
"Majority" is defined as 80% of owners by share value and - since the October 2007 legislative amendment - by strata title area; 90% if the development is less than ten years old from the date of issuance of Temporary Occupation Permit (or the predecessor Temporary Occupation Licence). "Minority" is therefore the remaining 20% by share value and by strata title area (or 10%, depending on the cut-off point of 10-year estate age).
This seminal change took nearly two years to become law as it went through a process of review by an ad hoc Select Committee set up via parliamentary motion.
[] Land Titles (Strata) Act, Cap 158, Part VA, Sections 84A through 84G and First through Fourth Schedules

SINPariah (talk) 08:59, 30 March 2009 (UTC)
Raison d'être of en bloc law and the consequences
During the Second Reading of this Bill on 19 July 1998, the Minister of State for Law said:
QUOTE :
I had informed this House on 19th November last year that Government would be amending the law to make it easier for en-bloc sales to take place. The current position is that a single owner, for whatever reason, can oppose and thwart the sale. Government has received many appeals and feedback from frustrated owners whose desires to sell their flats or condominiums en-bloc have been so thwarted. As a result, these buildings cannot take advantage of enhanced plot ratios to realise their full development potential, which would have created many more housing units in PRIME 999-year leasehold or freehold AREAS FOR SINGAPOREANS. A SECONDARY BENEFIT is that these developments, especially the older ones, could have been REJUVENATED through the en-bloc process.
END QUOTE.
As it is now 2009, it means that this law has been in existence for nearly a decade. After this law came into effect, there have been two bouts of en bloc frenzies:
1999 - 39 sites sold for S$2.5bn
2006/07 - 188 sites sold for S$21.5bn
Hindsight is a precise science. With nearly a decade under the belt, it would be timely to do a reality check and assess if the words spoken in Parliament have come true.
(a) Poll conducted by a major English newspaper in Singapore, The Straits Times, and published on 16 June 2007 cited respondents' findings in the en bloc aftermath that replacement units were at "twice the price; half the size". Anecdotal accounts corroborate these poll findings.
(b) Official statistics from Jones Lang La Salle Research and the Urban Redevelopment Authority (URA) published in Business Times on 27 March 2008 showed the percentage of foreigners’ non-landed private residential purchases shot up from 16% in 2000 to 29.1% in 2007 - more than 80% increase in the 7 years after this seminal piece of legislation came into effect!
Another chart in the same Business Times report showed that - within the same 2000-2007 time span - Singaporeans’ share of non-landed private residential purchases consistently declined in all geographic regions. In contrast, foreigners’ share doubled or trebled in the range of 114%-200%. If Permanent Residents are aggregated with foreigners, the NON-Singaporean share also increased substantially from 61% (Rest of Central Region) to 95% (Core Central Region - CCR). Just within the CCR, foreigners' purchases more than doubled from 11% in 2000 to 26% in 2007 (if purchases by PRs are aggregated with foreigners, it is the same pattern of doubling from 21% in 2000 to 41% in 2007).
Singapore is the 2nd most densely populated city nation in the world with 6,336 persons per sq km. Prime/popular residential districts would already be highly built-up. Therefore, over the 2000-2007 period since the seminal law was passed in October 1999, this trend of STATISTICAL PURCHASE DISPLACEMENT BY FOREIGNERS in CCR (viz, prime residential districts of 9, 10 and 11 except for the new residential enclaves created in Marina Bay/Sentosa) is likely a direct consequence of en bloc sales facilitated by such en bloc law.
Therefore, it would appear that the words said in Parliament in 1998 advocating the primary benefit of passing this law to create "many more housing units in PRIME ... AREAS FOR SINGAPOREANS" has NOT been actualized.
To date, available statistics are not sensitised to distinguish condo purchases by extant private property owners vis-a-vis upgraders from Housing & Development Board (HDB) public housing.
[To put the above into context, Singapore's housing pattern follows the Pareto Distribution of 80-20 (80 in HDB public housing and 20 in private residences). Land scarcity in Singapore and socio-political factors have resulted in most Singaporeans owning HDB flats. Even with the massive global economic crash, Singapore slipped one notch - In 2008, Singapore is now the 9th most expensive city in the world under the Knight Frank Prime International Residential Index (Piri). On the one hand, existing condo owners are typically sold out of their homes in en bloc sales during an UPTURN in the property market which sparks en bloc interest from developer-buyers. On the other hand, whilst there is a natural social aspiration to own private residential property, condo purchases by HDB upgraders become more affordable and are therefore more dominant during a DOWNTURN in the property market. Hence, especially in CCR (viz, the "prime areas" referred to in Parliament), the harsh reality of "twice the price; half the size" (a) is further magnified if one is so UNlucky to be ensnared in the "sell-low-buy-high" trap and (b) remains miserably entrenched if one is so lucky to market-time into the "sell-high-buy-low" fortune.]
SINPariah (talk) 08:59, 30 March 2009 (UTC)
Fractious fractures pre- and post- 2007 legislative amendments
It is even more troubling when in the midst of the 2006/07 en bloc frenzy, litigation suits were flying all over town - Minority dissenters sued majority consenters and vice-versa, developer-buyer threatened to sue majority consenters, even the rulings of the Strata Titles Board were challenged in court. Again, to put things into context, Singapore is not known to be particularly litigious as a society. But the Strata Titles Boards found itself jammed-up with a huge backlog of cases as their tribunal members drawn from industry and each paid an honorarium to mediate and adjudicate within a defined framework under the Land Titles (Strata) Act. The backlog was so bad at one time that it could take nearly six months from the date of application for collective sale order to even reach the first stage of a tribunal hearing!
Even AFTER the law was amended in 2007 purportedly to improve its transparency, ugly spats continued to rage. Owners challenged each other even in convening the Extraordinary General Ordinary Meetings (EOGMs) to attempt an en bloc sale. Bodyguards were employed to be in attendance at such meetings to protect the en bloc lawyer/marketing agent and to keep order. EOGMs degenerated into shouting matches at times. Anonymous spite mail were surreptitiously dropped into mail boxes or selectively removed from certain mail boxes and brawls would erupt over access to such mail boxes. This well-to-do social class who can afford to own private condos in the 9th most expensive city in the world threw all caution and civility to the wind! As reported in the press, some even resorted to criminal acts of splashing corrosive acids on cars parked in the estate, tampering with letter box key holes, applying super-glue to the slit between the main door and the frame jamb. Neighbours installed spy cameras to record such criminal acts and secretly taped marketing presentations and EOGM proceedings as evidence of misrepresentations. Fully intending this pun, the cracks (not just between door and frame jamb) showed up in this segment of the Singapore social fabric!
Despite the slew of litigations, less than a handful of estates in the past decade managed to defeat en bloc sales at tribunal and/or judicial levels. What are the likely causes?
SINPariah (talk) 08:59, 30 March 2009 (UTC)
Unjust law and the alternative of 1-4-1 exchange
The law is skewed towards sale to unlock land value for corporate developer-buyers to redevelop and thus achieve the national agenda of urban renewal and higher land-use intensity (cited in Parliament as "SECONDARY BENEFIT" when this piece of seminal legisation went through the Second Reading in 1998. Bearing in mind that en bloc interest is sparked only upon a property market upturn, it is noteworthy that - in such a moving market (likely frenzied) - the law provides a whopping window of up to 12+12 = 24 months to:
(a) procure the requisite 80% (90%) majority consent in a collective sale agreement,
(b) such majority consent to be based on (i) a reserve price established upfront and (ii) an apportionment formula to split the collective sale proceeds to units of varying sizes and share values to induce signature of collective sale agreement (both WITHOUT the advice of an independent valuer),
(c) find a developer-buyer through public tender or auction, failing which, by private treaty WITHOUT re-affirmation by majority consenters despite the property market being in a constant state of flux within this 24-month period,
(d) procure a valuation report from an independent valuer on the value of the development as at the date of the close of public tender or auction (AFTER the fate has been sealed with the requisite majority consenters having signed the collective sale agreement, the five-day cooling-off period has long passed and all subsequent resales are binding on successors-in-title),
(e) sign a sale and purchase agreement with the developer-buyer, and
(f) apply to the Strata Titles Boards for a collective sale order.
Refer to The First Schedule of the Land Titles (Strata) Act, Cap 158.
Although Singapore adopts TRI-PARTITISM in many socio-economic aspects (eg, in resolving labour disputes), it is dismally lacking in this area of en bloc sales. The national agenda of urban renewal and higher land-use intensity is achieved at the expense of existing condo owners when the law is skewed. This legislative skewing exacerbates the ALREADY UNLEVEL PLAYING FIELD between:
(i) The plurality of owners, each with their own personal reasons to sell/not sell and who probably buy only one or two condos in their entire lifetime and thus are clueless about Residual Land Valuation methodology or the implications of Development Baseline or the consequences of not obtaining an Outline Planning Permit;
vis-a-vis
(ii) The singularity of corporate developer-buyers who are knowledgeable and skilled industry players to whom marketing agents, lawyers and valuers are beholden for repeat business in future project developments.
There is NO PUBLIC EDUCATION about the pitfalls and business modality of en bloc sales by any of the government agencies despite the fact that en bloc sales result in substantial Development Charges, Differential Lease Premiums, stamp duties on both legs of the sale transaction and replacement purchase transaction and other fees being generated for government coffers. Even earlier suggestions by lawyers involved in en bloc sales to develop a Best Practices and Code of Conduct were not taken up by the authorities.
The Investment Proposals given to the potential developer-buyers are vastly different from the En Bloc Sale Proposals given to existing owners. Instead of disclosing to owners the Residual Land Valuation methodology presented in the Investment Proposals, the marketing agents spin and hype about "en bloc windfall" and "en bloc premium" - both of which are correlated to the individual units whereas Residual Land Valuation is correlated to the land for the entire estate! If one bought the unit at $1mn several years ago and one is being offered $2mn in an en bloc sale, that constitutes a "100% en bloc windfall". If one can only sell the unit at $1.5mn in an individual sale but will be collecting $2mn in an en bloc sale, that is a "$0.5mn en bloc premium". Many owners fell for such en bloc sales pitch. These owners only realise that they have sold substantially under-value when they are invited by the developer-buyer to the soft launch of the redevelopment within a few months after they have vacated their old condo. Anecdotal accounts were reported in the press when en bloc owners discovered that their $2mn en bloc pay-out could only buy a replacement unit in the redevelopment of half the old size or even smaller!
Hence, is it accurate to attribute en bloc sales to the "will of the majority" and "market forces" pursuant to the 80% (90%) majority consent garnered in the numerous estates that went en bloc in the 2006/07 frenzy?
Although the Singapore government has been apprised of the SOUTH KOREAN MODEL of urban renewal under the Hapdong Redevelopment Scheme since August 2007, the authorities to date have NOT been receptive to proposals for one ADDITIONAL option in en bloc sale other than cash settlement (viz, one-for-one exchange on the basis of same-size, same-level and same-orientation). In stark contrast, South Korea's model mandates 1-4-1 exchange as the primary mode of settlement (cash settlement being the secondary mode). Hence, South Korea's urban renewal is achieved within a more Confucianist framework of RECTITUDE IN GOVERNANCE with a higher degree of equity towards existing owners. Similarly, a Singapore specialist en bloc lawyer has also gone on public record to advocate 1-4-1 exchange for bona fide owners.
The government's status quo position holds even in the face of statistical evidence that the raison d'être of this law (viz, "creating more housing units in prime areas for Singaporeans" said in Parliament in 1998) has NOT come to fruition at all. Given the raison d'être of this law, one could reasonably conclude that the Singapore government has dismally missed its target altogether in passing this seminal law ... unless there is another unstated agenda that is outside public knowledge.
Corporate social responsibility on the part of corporate developer-buyers is grossly absent despite the typical doubling or trebling of net saleable area after demolition of an en bloc estate.
SINPariah (talk) 08:59, 30 March 2009 (UTC)
Contradiction and confusion
Over the past decade, a careful tracking of ministerial comments and judicial grounds of decision reveals a galore of contradiction and confusion. It was most refreshing that an academic review in the Singapore Academy of Law Journal commented on the "purposive approach" applied to en bloc legal suits.
An example at MINISTERIAL LEVEL:
In the midst of the en bloc frenzy, the Minister for National Development, Mah Bow Tan, was interviewed and he gave this off-the-cuff answer (Sunday Times, 17 June 2007): “If you can’t buy an executive flat, buy a 5-room. If you can’t afford central area, go to the suburbs. If you can’t afford Tampines, go to Woodlands or Yishun.”
Minister Mah continued: "The FUNDAMENTAL REASON behind an en bloc redevelopment is really to make sure that older parts of Singapore have a chance to be rejuvenated and redevelop themselves" and "if we don't have this, we are going to have a static situation where things are going to run down and there is no opportunity for PEOPLE TO NATURALLY REDEVELOP".
Note that the creation of "many more housing units in prime ... areas for Singaporeans" said in Parliament in 1998 has now degenerated into a ministerial advice in 2007 that "if you can't afford central area, go to the suburbs".
Note too that the "secondary benefit" said in Parliament in 1998 has now become the "fundamental reason behind an en bloc redevelopment is ... to be rejuvenated" by the minister's reckoning in 2007.
One example at HIGH COURT LEVEL:
There are numerous similar cases; so this High Court written judgement dated 3 Mar 2009 for the Regent Court en bloc case heard on 30 Oct 2008 is fairly representative of the extent to which "purposive approach" has been applied:
QUOTE :
21 At the Second Reading of the Bill containing the provisions for collective sales at Singapore Parliamentary Debates, Official Report (31 July 1998), vol 69 at cols 601-607, the Minister of State for Law said: "I had informed this House on 19th November last year that Government would be amending the law to make it easier for en-bloc sales to take place. The current position is that a single owner, for whatever reason, can oppose and thwart the sale. Government has received many appeals and feedback from frustrated owners whose desires to sell their flats or condominiums en-bloc have been so thwarted. As a result, these buildings cannot take advantage of enhanced plot ratios to realise their full development potential, which would have created MANY MORE HOUSING UNITS IN PRIME 999-year leasehold or freehold AREAS FOR SINGAPOREANS. A SECONDARY BENEFIT is that these developments, especially the older ones, could have been REJUVENATED through the en-bloc process."
It was clear from this speech and others made in Parliament that the MAIN PURPOSE of the provisions relating to collective sale in the Act was to make it easier for collective sales to go through in order to promote BETTER UTILISATION of scarce land resources in Singapore and also URBAN REDEVELOPMENT.
END QUOTE.
Note that the "secondary benefit" said in Parliament in 1998 has now become the "main purpose" in a High Court written judgement in 2009.
[] High Court Judgement on Regent Court en bloc
Wrap-up commentary at ACADEMIA LEVEL:
NUS Business School Associate Professor Ter Kah Leng published an article in the March 2008 edition of the Singapore Academy of Law Journal entitled "A man's home is his castle - En bloc collective sales in Singapore".
QUOTE :
136 The 2007 Amendments introduced more than 30 amendments after extensive industry and public consultation and feedback. While the 1999 Amendments facilitated en bloc sales, the recent amendments seek to regulate the market more and to “minimise complaints of harassment, unfairness and lack of transparency”. This was reiterated by the LAW MINISTER in the Second Reading of the Amendment Bill 2007 when he said that the NEW LAWS are intended to provide ADDITIONAL SAFEGUARDS RATHER THAN TO FACILITATE EN BLOC SALES. Recent HIGH COURT DECISIONS appear to be AT VARIANCE WITH THIS STATEMENT. WHILE PURPOSIVE STATUTORY CONSTRUCTION IS THE PREFERRED MODERN APPROACH, IT IS TIMELY TO HEED JUDICIAL WARNINGS THAT THIS SHOULD NOT IGNORE THE SCOPE AND INTENT OF THE GOVERNING STATUTORY PROVISION NOR AMOUNT TO A JUDICIAL REWRITING OF LEGISLATION. PURPOSIVE STATUTORY INTERPRETATION SHOULD NOT BE CARRIED TOO FAR.
END QUOTE.
Note the professorial advice that "purpose statutory interpretation should not be carried too far".
SINPariah (talk) 08:59, 30 March 2009 (UTC)

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