28 March 2007

Message for blog-site visitors

Thank you for visiting this blog-site.

En bloc / Collective Sales hits close to home (pun fully intended) for all private property owners.

I have created this blog-site to share my thoughts and whatever little I know about this topic ... some of the inherent gaps and pitfalls that Dissenters to an en bloc / collective sale may want to be mindful of, especially if you are in the midst of one or under imminent threat.

I welcome you to share your views.

If you AGREE with my suggestions or you have BETTER IDEAS, post your comments and share with us your sentiments (your affirmation would also encourage me in this quest and create greater awareness of our common woes).

If you DISAGREE, feel free to post your comments too. We all have different needs and therefore we come from different angles. I trust that we can AGREE TO DISAGREE AMICABLY. No need to be rude or crass and if you must be sarcastic, then at least be witty about it!

We each have varying needs as Tenants, Investor-Owners, Owner-Occupants or merely as Concerned Citizens with a social consciousness. Surely, we can create "space" (pun again fully intended) for each other in a civil society, eh?

27 March 2007

Sales proceeds formula; Distribution

Update on 6 Jan 2007:
As eloquently argued in a Straits Times Forum Letter published on 5 Jan 2008, there is another school of thought that postulates distribution of collective sales proceeds should be based only on area because "condo units are sold by area and not by share value" and "especially when the INTRINSIC VALUE of each square foot is computed as an aggregate of area, premium for high floor level, unit design, open view and so on". The writer went on to say that share value "is a guide for conservancy charges calculation".

Based on the statutes, I believe the Forum letter writer's statement about share value being a guide for conservancy changes calculation is erroneous! The Land Titles (Strata) Act, Section 13(1) states that "... the common property shall be held by the subsidiary proprietors as tenants-in-common proportional to their respective share value and for the same term and tenure as their respective lots are held by them" and "The Registrar on issuing a subsidiary strata certificate of title for a lot shall certify therein the subsidiary proprietor's share in the common property, but no subsidiary strata certificate of title shall be issued for the common property". Similarly, the Building Maintenance and Strata Management Act of 2004, Section 62(1) states that "the share value of a lot as shown in a schedule of strata units shall determine — ... (b) the quantum of the undivided share of the subsidiary proprietor of that lot in the common property comprised in that strata title plan". These statutory provisions underpin my explanation on "share values" in the subject-topic page of this blog.

As for the "INTRINSIC VALUE" mentioned by the Forum letter writer, I believe this "intrinsic value" comprises two elements:

(A) Core Value - based on the strata-title-area of the unit owned by the subsidiary proprietors which is factual and is categorically stated on the title document (ie, the Subsidiary Certificate of Title); and

(B) Consumption Value - based on the state of affairs affecting each unit at the point of purchase and "consumed" (ie, enjoyed) by the occupants during the tenure of their residency at that unit.

The Core Value of strata-title-area MUST necessarily be a key component for apportionment not only because it is factual and objective but because it underpins the very basis of the collective sale in terms of the land footprint.

The Consumption Value is a facetious basis and is worthless because a collective sale results in wholesale demolition/ redevelopment of the estate (unless it is a conservation project involving en bloc A&A (Alteration and Amendment) works). Hence, any open vistas or preferred sun-facings, etc, are no longer relevant in a collective sale. Also, at the point of purchase at, say, the soft launch, the top floor unit at Level 10 may have a great lakeview but at the point of collective sale, that same unit may now be overlooking a neighbouring estate's garbage centre or is now overshadowed by a new condo at an adjoining site of 35 storeys! What is a good design generally at one point in time may be not so great design at the point of collective sale as real estate/demographic trends change over time. The Consumption Value of each unit remains pertinent only in an individual sale-and-purchase (eg, in a resale transaction), but certainly NOT in a collective sale!

IN ADDITION TO THIS BLOG PAGE, SEE MY OTHER COMMENTS on Apportionment Method, Para B-4.3 (scroll to picture of South Korean flag) and Para C-4.2 (scroll to picture of thorny hedgehog) UNDER "AFTER THE 2007 LAW, WHAT'S NEXT" IN THIS BLOG SITE.


Update on 13 Jun 2007 and post-Oct 2007:
These days, even the price of condensed milk cannot hold for 12 months. Yet our present en bloc law keeps the Collective Sale Agreement alive on life support for up to 12 months by which time the Reserve Price and condensed milk price would both be totally irrelevant. This is yet another aberration under the law - what can I say???

Add to that 12-month period, the likely ADDITIONAL 6-12 months for completion of the collective sale going through Strata Title Board's approval process if owner consensus did not hit 100%. This means owners could potentially wait for up to 2 years or more before they get the bulk of the collective sales proceeds to commit for a replacement unit. In any case, you should NOT sign the Collective Sale Agreement if you are against such sale - SEE MY OTHER COMMENTS on The Position of the Dissenter UNDER "SHARE VALUES; SALES COMMITTEE" IN THIS BLOG SITE.

As en bloc frenzies typically occur during property market upturns, by the time you (particularly as an Owner-Occupier with only one property to your name) lay your hands on the bulk of the actual collective sales proceeds some 12-42 months (!!!) from the time you were committed to the Reserve Price for such sale (firstly, the collective sale process under the law could take up to 24 months and, secondly, the cash settlement process could take another 6-24 months from the time that the Sales Committee binds you to a sale and purchase transaction with a Developer-Buyer, depending on how smooth or litigious the enforced collective sale process goes so long as you do not have 100%), you don't need a fortune teller to tell you that your sorry future is the stark reality of being a Squatter, Refugee, Downgrader or Downsizer for possibly the rest of your life! ... unless MinLaw changes the present law ...

For Owner-Occupiers with only one property to their name and who therefore need to buy a replacement unit - More surprises are in store as you will soon realize the maze and the web of financing intricacies and hurdles that you have to navigate around/under/over/through. Some hurdles are simply insurmountable because of bridging issues, time lags, banking constraints, CPF operational procedures, etc.

Sooooo ... unless you happen to have "petty cash" of a million bucks or so ready at hand for the 20% deposit for a new private residential property ... and are quite prepared to possibly end up with two properties if the en bloc should fail for some reason ... you would NOT be able to lock-in your market risk exposure by buying a replacement unit at the time the Sales Committee locked-in the en bloc deal on your behalf with the Developer-Buyer. By the time you lay your trembling hands on the bulk of the collective sales proceeds within the abovementioned 12-42 month window, who knows what the property market will be at that future time??? Que sera, sera, whatever will be, will be - are we some pathetic born losers or what??? Those Owner-Occupiers who happy-happy signed the Collective Sales Agreement WITHOUT sussing-out the ins-and-outs of the financial trail may be in for a rude shock ... by which time, the 5-day "cooling-off period" allowed under the amended law for you to back-out of a signed agreement would have long passed ... and you are stuck, stark naked in the face of a red-hot property market ripe for en bloc orgies!


Update on 30 May 2007:
This page should be read in conjunction with MY OTHER COMMENTS UNDER "SHARE VALUES; SALES COMMITTEE".

A rocket scientist it does NOT take to derive a mathematical basis of apportionment.

1. Objective versus subjective basis - At the time of purchase, you pay for every sq cm of space. Every month, you pay for every share value as approved by the Commissioner of Buildings (COB). Every cent you pay is based on facts and law – all very objective. Now, based on a collective sale forced down your throat if you are amongst the dissenters, you are obliged to accept the apportionment based solely on share value or some dreamed-up weightage decided by the self-appointed unregulated Sales Committee as at present or possibly by the Majority Owners in future. Suddenly your privately-owned property has been communalized and how much you’d get after the collective sale is now decided subjectively?

2. Mathematical formula for distribution of collective sales proceeds - As Singapore prides herself on transparency and certainty in our laws and policies, I’d like to propose that the Gahmen should mandate a mathematically-based apportionment method involving (A) ratios as a 1st cut and (B) precise strata-title area and share values as a 2nd cut.

(a) Ratio: A surveyor's report would establish the ratio of common property (say, 10,000 sq m) vis-a-vis aggregate strata-title area of all units in the estate (say, 30,000 sq m) to derive a ratio of, say, 1:3. The total collective sales proceeds (say, $100mn) should then be divided into 4 portions (1 + 3).

(b) Share value: One portion (ie, $25mn) should be divided by the total number of share-values to derive the value of each share-value and each owner should then get the precise dollar amount for each share-value that he holds.

(c) Strata title area: The remaining three portions (ie, $75mn) should likewise be divided by the aggregate strata-title area to derive the value of each strata-title sq m and each owner should then get the precise dollar amount for each sq m that he owns.

Similar ratio principles could be applied to mixed-development estates where market valuation, share values and unit sizes are all factored-in in the apportionment method based on the professional opinions of independent real estate appraisors and quantity surveyors.

3. Owner-occupiers who are time-disadvantaged after heeding Gahmen policies - In Singapore, we already have many forms of affirmative discriminatory policies (eg, household income must be below a certain amount to qualify for HDB public flats, quantum of CPF withdrawals is lower for subsequent property purchases, tax perks for women to have children at a younger age, more Edusave funds, New Shares or Progress Package payments for those who have sacrificed or served our country or who are disadvantaged, such as NSmen, senior citizens, poorer financial status, etc). They serve to temper or balance out inherent inequities in the larger communal interests and to cultivate certain societal mores.

En bloc sales typically escalate only when the property market is bullish and property prices are on the uptrend. Right after a collective sale, these owner-occupiers have to buy a replacement roof at that point in time (unlike investor-owners who can wait out the property boom cycle). Assuming that all units are identical in size and all owners receive an equal amount of collective sales proceeds, it looks fair-and-square on the surface BUT the same dollar amount received by an owner-occupier is of significantly reduced time-value compared to the same dollar amount in the hands of an investor-owner. Hence, owner-occupiers who have only one property are seriously time-disadvantaged even though they have faithfully heeded the policies of our Gahmen and Central Provident Fund (CPF) Board to NOT over-commit in real estate investments. The Gahmen must find some way to redress this inherent inequity in the apportionment or distribution of collective sales proceeds ... just as they have devised so many ingenious ways to re-distribute the puffed-up government coffers after the 7% GST hike to the disadvantaged!

Those of us who heeded Gahmen policies are now being punished ruthlessly in the property market if the en bloc succeeds. If I didn't listen to the Gahmen and went ahead with at least two property purchases, then I need not fret endlessly about this en bloc fever, worrying over something so basic as a decent roof over my head in this so-called First World Global City! Maybe the Gahmen is sending us another message, eh? Without a mandatory unit exchange, the owner-occupiers will end up as Squatter, Refugee, Downgrader, Downsizer. SEE MY OTHER COMMENTS UNDER "ONE-FOR-ONE EXCHANGE" IN THIS BLOG-SITE.

4. Decency in humanity values: Beggar-Thy-Neighbour (BTN)? - In contrast: The investor-owners and other owners who have additional properties or other standby accommodation alternatives are cashing-out their property investment by forcing this group of owner-occupiers to surrender their only roof - all because they want to gain the so-called "premium" from a collective sale. Let's NOT forget that there is nothing to stop these investor-occupiers and other owners from selling their apartments individually if they need the cashflow or want to relocate due to changed family circumstances or other personal reasons. What more when you hear accounts of Management Corporation members who withhold expenditure for essential maintenance, deliberately allowing the estate to deteriorate as part of the pressure tactics, neighbours indulging in rumour-mongering, devising scare tactics a la "Ah Long" style, giving dirty looks or passing spiteful comments in distinctly loud overtones ... [Actually, in our inimitable Hokkien-Malay-English patois, BTN also stands for “Buay Tahan Neighbour” – whichever angle you are coming from … majority consenter or minority dissenter … we just hate each other’s guts in our own neighbourly fashion, don’t we)?

Essentially, it is a "Beggar Thy Neighbour" mentality translated into ugly action - and yet many of us are purportedly of some major religious faith, each striving to live by our declared values - be it Buddhism, Christianity, Islam or Hinduism. At another level of humanity, may I respectfully appeal to each of us that - en bloc fever or not AND regardless of whatever agnostic/ atheistic/ religious belief - this calls for a pause to do some introspective reflection ...

26 March 2007

One-for-one "exchange"

UPDATE on 6 Jan 2008:
Flurry of letters published in Today newspaper ... I am no clairvoyant when I posited in Mar 2007 (that's when I started this blog) that Owner-Occupiers with only 1 residential property would end up as Squatter, Refugee, Downgrader or Downsizer after an en bloc sale!

In the Today newspaper (27 Dec 2007 edition), there was an "I say" commentary by Lucy Huang recounting her pathetic plight as an En Bloc REFUGEE as she and her husband have already been hit by two en bloc sales. In looking for a replacement unit in the not-brand-new private residential estates, Lucy Huang was told that these replacement possibilities are likely en bloc potentials! Hence, she may be hit for the 3rd time! Lucy Huang also mentioned the option of renting but that would put her at the mercy of lessors who may keep upping rentals or take rental unit out from the market (effectively, she will be reduced to a SQUATTER during tenancy).

In response to Lucy Huang's piteous plight, there were two Voices Letters published in Today newspaper (28 Dec 2007 edition) on how to break the vicious refugee/squatter cycle.

===> One letter suggested that Lucy Huang should buy a brand-new (a) private apartment that has just obtained Temporary Occupation Permit or (b) HDB public flat under the Design-Build-Sell-Scheme. On the one hand, human territorial instincts tend to gravitate back to same neighbourhood vicinity (even evidenced in next-generational's preferences in selecting their matrimonial abode) but on the other hand, collective sales proceeds are far, far short of the replacement cost of a brand-new unit around the neighbourhood unless one opts to DOWNSIZE significantly (eg, by 50% usually)! To buy a HDB public housing flat (DBSS or otherwise) or a private apartment way out in the suburbs after a so-called "en bloc windfall" from selling (or being forced to sell) a Private Condo or HUDC/Executive Condo is a DOWNGRADE, however you dress it up!

===> Another letter said that Singapore should follow the lead of South Korea's en bloc laws that mandate a 1-4-1 EXCHANGE to break this vicious cycle of being a Squatter, Refugee, Downgrader or Downsizer. You will notice from this blog that I have been expounding this idea of 1-4-1 exchange option since I started this blog in Mar 2007 and I learned of South Korea's en bloc laws in this respect only in Aug 2007.

In Lucy Huang's rejoinder (Today newspaper, 2 Jan 2008 edition), she lamented about where to stay in the meantime. This is a VERY REAL problem indeed! And solutions???

In response (Today newspaper, 4 Jan 2008 edition), it was suggested that Lucy Huang's concerns about "where to stay in the meantime" could be overcome if the Gahmen and Developer-Buyers play their part in a tripartite effort. Surely, solutions are NOT beyond the imagination of the Gahmen as evidenced by the Gahmen's immediate and innovative responses to the recent office space squeeze. So why did the well suddenly run dry on this en bloc issue??? We know of "selective amnesia" ... perhaps, there is also "selective abdication"! Wicked, eh?

Anyway, here are some ideas for consideration:

- HDB flat rental priority could be ranked high for en bloc exchangers, or the ethnic quota for HDB flats could be waived for temporary accommodation of such exchangers with resale back to HDB upon TOP of en bloc redevelopment. All HDB rules and regulations for qualifying criteria should be suspended for Owner-Occupiers with only one residential property in Singapore who are caught in an en bloc sale.

- REDAS (Real Estate Developers' Association of Singapore) members could pool resources from their massive en bloc purchases under the Remaking of Singapore within this decade or two. Not all of these purchases are meant for immediate redevelopment. Those designated as part of the Developer-Buyers’ longer-term land banks could serve as temporary accommodation for en bloc exchangers whose sites were slotted for immediate demolition/construction. Units owned by Investor-Owners of these longer-term land banks would be made available upon expiry of the vacant possession period under the Collective Sale Agreement for such temporary accommodation of en bloc exchangers. As a quid pro quo, the Gahmen could waive property tax on such temporary sites.

- Developer-Buyer’s compensation for temporary displacement could be used by en bloc exchangers to source for alternative accommodation within a 3 km radius. The displacement compensation should be based on industry rental benchmark for private residential property of the immediately preceding calendar quarter within such radial distance.

- Given Singapore's teeny size, this en bloc phenomenon is a permanent hallmark. The Gahmen could consider designating a few newly built HDB blocks in the 4 corners of Singapore for rotational rental to qualifying Owner-Occupiers during an en bloc frenzy who would qualify for top priority or service apartments for short-stay travellers (eg, tourist families, small-scale foreign entrepreneurs doing market studies or starting up new businesses, professionals on short project contracts) during an en bloc doldrums.

If you have any brilliant flashes of inspiration to add other possible solutions, I welcome you to share them and contribute comments to this blog ... c'mmon ... tease those grey cells, stand on your head or do whatever works for you ...

1. Precedent set by HDB - Our Housing & Development Board (HDB) has set a laudable precedent called SERS (Selective En Bloc Scheme) that alleviates to some degree the displacement suffered by existing owners in such an en bloc redevelopment.

2. Tapping on original owners' land use potential - For private properties under collective sale, it should be recognized that the buyer/developer is tapping on the land use potential belonging to the original unit owners. The original unit owners had the foresight to invest in their respective properties at the point of purchase which the developer is capitalizing upon at the point of collective sale. SEE MY OTHER COMMENTS UNDER "MAJORITY VS MINORITY VS INDIVIDUAL" IN THIS BLOG-SITE.

3. One-4-one "exchange" - Hence, developer-buyers should be mandated by law to offer a same-size, same-level replacement unit at the redeveloped estate or within a 1-km radius of same or higher quality to Owner-Occupiers with ONLY 1 RESIDENTIAL property at the point of completion of the collective / en bloc sale as one of the “settlement consideration” options in addition to outright cash.

This argument is particularly cogent for properties because "Property" means 3 things: location, Location, LOCATION!!! Also, the stakes are very high for owner-occupiers with ONLY 1 property because they are losing the roof over their heads UNLIKE (a) owner-occupiers with MORE THAN 1 property and (b) investor-owners who force through the en bloc in a cavalier manner because they already have another roof elsewhere.

The status of "Owner-occupier with ONLY 1 residential property at the point of completion of the collective sale" can be factually established by running checks through the records of the Singapore Land Registry (SLA) and the Housing & Development Board (HDB). Hence, if Mr and Mrs A own Apartment 1 which is under en bloc and Mrs A owns Apartment 2 in another estate under a single name or jointly with her daughter Ms A, then Mr and Mrs A do NOT qualify as Owner-Occupier with ONLY 1 residential property at that point in time.

4. Completion and financial risks in an "exchange" - If Singapore can have a Housing Developers (Control and Licensing) Act to cap the risks of buying properties under construction, we should have an equivalent statute to cap the completion risks faced by collective sale owners who are SACRIFICING their private property rights in the larger interests of urban renewal and land use efficiency.

5. Business flexibility required by developer-buyer - No doubt, the developer-buyer needs business flexibility to build units of a design layout and size which would be saleable in today's market. This can be preserved by stipulating upfront conditions for the redeveloped units to be within a certain range of sizes. As construction costs are clearly defined under the Housing Deveopers (Control and Licensing) Act, these figures can be established by the auditor. The development charge paid to the Gahmen is also very transparent.

(a) Where the replacement unit is BIGGER, then the en bloc owner who opted for "exchange" should pay for the differential area at the collective sale price plus construction cost.

(b) If the replacement unit is SMALLER, then such en bloc owner should be paid for the differential space at the first soft launch price less 20% discount.

(c) Upper and lower caps could be set as ADDITIONAL SAFEGUARDS to prevent abuses (say, a differential of plus/minus 30%) so that (i) an en bloc owner with an original small unit of 100 sq m cannot opt to buy a unit of 200 sq m at the redeveloped estate at such preferential price OR (ii) an en bloc owner with a original penthouse unit of 250 sq m can opt to have two units of 100 sq m each and be paid for the 50 sq m shortage based on the upfront formula.

This proposal in the SPIRIT of the law is configured on the basis that the impact of this law is disproportionately huge on owner-occupiers with ONLY 1 residential property and the land use potential belongs to the en bloc owner who also bears (a) the disruption of moving house, (b) the expense of alternative accommodation during the construction period and (c) the vagaries of the property market (although the risks are evened out over the long term for Owner-Occupiers).

Based on the LETTER of the law, there may be no basis to differentiate between the different types of strata-title owners except for the varying (i) unit numbers, (ii) unit size and (iii) share-values. But laws are formulated not for TECHNICALITIES but for EQUITY. Clearly, the impact of the law as it presently stands is vastly different for the different categories of owners.

6. Prohibition against developers building-up land banks - Where developers want to build up their land bank for market cyclical reasons, they should look to Government Land Sales (GLS) and not boot people from their homes. Hence, when the Strata Title Board issues the order for collective sale, it must regulate and set - as one of the conditions for such order - a narrow range of target dates for issuance of Temporary Occupation Permit which would necessarily entail prompt redevelopment. It is NOT the job of regulators to time the inevitable ups and downs of market cycles. It is NOT in the political interest of the Gahmen to facilitate developers' speculation at the expense of citizens' private property rights. It is NOT in the social interest of our nation to "commoditize" residential properties, thus negating the concept of a "home". Sadly, the present legislative gaps are doing exactly that, distorting supply and demand. Going back to basics, the job of the legislators is to ensure that the framework and the laws are robust and equitable in the course of arriving at the greater vision. SEE MY OTHER COMMENTS UNDER "ESTATE MAINTENANCE" IN THIS BLOG-SITE.

7. Change of land use - Where it is a land use change (eg, residential use to hotel or commercial or white site usage), this option would be naturally redundant as the collective sales proceeds would be at a vast premium to facilitate an equivalent/upgraded replacement unit for the collective sale unit owner.

8. Alternatives: Squatter, Refugee, Downgrader, Downsizer - (A) Without a mandatory unit replacement and (B) because the collective sales proceeds will NEVER buy an owner-occupier a new replacement unit within the same vicinity at the point of a successful collective sale, what is the dire predicament of an owner-occupier with only one property to his name??? He could DOWNGRADE or DOWNSIZE. Or he could SQUAT with relatives until the next property market downturn or he come evolve to become a REFUGEE as he buys a replacement unit in an estate of equivalent age which means that he may be subject to yet another en bloc within the next couple of years.

The owner-occupier with only 1 residential property is between the Devil and the Deep Blue Sea, jumping from the Frying Pan into the Fire - what "windfall"??? More like "deep discount"!!! SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" IN THIS BLOG-SITE about the time-value of the dollar amount received as collective sales proceeds.

9. Other benefits: Soft and hard factors - In addition to (a) preserving the original owners’ investment (ie, for owner-occupiers who do NOT need to cash-out immediately and who want a replacement roof in the same vicinity), (b) allowing the owner-occupiers with more than 1 property and investor-owners to grab the $$$, (c) giving the developer-buyers a shot at making very decent profits as redevelopments in prime/popular locations are more saleable even at fatter margins and (d) enabling the Gahmen to renew our urban landscape with more efficient land use, this will also contribute towards a heightened sense of community and bonding in our nascent nationhood as Singapore hits our 42nd National Day on 9 August 2007. After all, we are human beings and territorial/turf issues are very much enmeshed with our sense of time and place.

Estate maintenance; Time-bar to next en bloc attempt

1. Adverse impact on estate maintenance and urban landscape - Estate maintenance of a development with en bloc potential/risk is a Catch-22 issue. In Singapore's high-density high-rise living - if regulations are not sufficiently robust, high-class slums (in itself an oxymoron!) can evolve willy-nilly in our so-called Global City.

The never-ending cycle of collective sales directly and adversely impacts on estate maintenance which in turn translates into asset valuation at a micro level and building standards/urban quality at a macro level.

2. Time-bar for next en bloc attempt relative to estate age - The Gahmen should have a scaled time-bar for next CSA attempts relative to the estate's age (ie, shorter time-bar for older estates). Example: After a failed CSA attempt, impose a 5-year time-bar against the next CSA for estates between 30-50 years from Temporary Occupation Permit (TOP), a 2-year time-bar for estates above 50 years.

If owners have an assurance that this CSA cycle has a timeline (and not go into infinity), then the quality standard of buildings in Singapore will be upkept and maintained properly. As it stands at present, even ESSENTIAL maintenance of common property is being sorely neglected during and post-CSA attempts either as a pressure tactic to coerce dissenters into signing the CSA or as a cost-saving measure in case of an eventual CSA success. This may drag on for years as CSA attempts go into INFINITY. This likelihood of neglect in upkeep/maintenance hits the internal strata-title area too. With Singapore's high-density living, what your neighbours do (or FAIL to do) can affect lots of other owners and their properties.

Example: Due to a never-ending cycle of CSA attempts, I may choose to ignore water seepage or air-conditioning leakage so long as they don't obviously affect my neighbours and there are no complaints which my neighbours can enforce against me under the present regulations. But such internal dampness over a sustained time period may lead to termites to start invading my apartment (which risk I may not be cognizant of until it is too late) and once the termites infest one apartment, it will infest others in no time.

On the other hand, if buildings are well-maintained, it will be a WIN-WIN for tenants/owner-occupiers (enjoy well-maintained property and common facilities), landlords/investor-owners (better rental returns based on lower capital outlay) and city planners (higher urban quality in our cityscape).

3. Definition of en bloc failure - If a CSA attempt fails to garner the 90% / 80% majority within a specified time frame (which should be kept short as the facts are known and time is of the essence for both the condo owners and the developer buyer, say, 3 months from the start of Expression of Interest) or, if such consensus was obtained but the Strata Title Board declines to issue an order for collective sale (say, 2 months from the date of application to STB for a collective sale order), then that CSA attempt should be deemed as "failed".

4. Adverse impact on tenants, investor-owners as landlords and owner-occupiers - As it stands right now, this spate of collective sales will hit hard on:

(a) Tenants who won't be able to find a decently maintained place to rent at affordable rates. Double-whammy effect: SUPPLY of apartments of 10-20 years old is drastically shrunk; DEMAND for new units is forced up as owner-occupiers from successful en blocs need replacements and investor-owners who buy high will naturally rent-out-high.

I am no statistician nor a clairvoyant but I reckon that the Gahmen's efforts to keep Singapore as an affordable place to do business will (NOT may) be negated as rentals rocket.

Not only rentals will go up but the monthly management fees and utilities costs will rocket too, especially with the all-glass facades so typical of the new condos in this millennium (tilting open at 30 degrees and minimizing cross-draft ventilation). These whole-wall window panels will be kept sparklingly clean by professional window cleaners dangling outside from gondolas. Little wonder that for the new condos now under construction, developers in the big estates are already quoting management fees in the range of $600-$800 per month (perhaps hitting 4-figures one of these days as labour costs continue to climb) because window-cleaning is part of building maintenance nowadays.

Cost-of-Living Index will also shoot up mainly because of the multiplier effect of high housing costs (not to mention GST hike) unless there are compensating dips in other components. Although our Gahmen ostensibly doesn't meddle with market forces, this 90% / 80% majority for CSAs is in fact facilitating the distortion of Supply and Demand - way to go, eh???

(b) Investor-owners who may not find ready tenants if the en bloc fails as no tenant will want to become a refugee in case the next CSA attempt succeeds and who wants to live in a dump in the meantime?

(c) Owner-occupiers who are reduced to Squatter, Refugee, Downgrader or Downsizer if the en bloc succeeds. Similar to the abovementioned predicament of tenants, owner-occupiers will also have to bear higher $600-800 monthly management fees and heftier utilities bills if they buy a new replacement property in the better condo developments. SEE MY OTHER COMMENTS UNDER "ONE-FOR-ONE EXCHANGE" IN THIS BLOG-SITE.

Share values; Sales Committee

Update on 30 May 2007, 23 July 2007 and post-Oct 2007:
This page should be read in conjunction with MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA; DISTRIBUTION".

THE CURRENT "EN BLOC SCAM": How hundreds of thousands of dollars are being "short-changed" in the distribution of collective sales proceeds?

(i) As explained in paras 1-7 below of my original posting on 26 March 2007, the self-appointed unregulated Sales Committee and the Majority Small-Unit Owners are able to fully exploit the laxity of the present law by deciding on a distribution formula such that the big-unit owners are getting either the same amount of sales proceeds or a mere 15-30% more even though the unit sizes vary significantly.

(ii) Real-life example of what's typically happening:
Enbloc offer for a duplex of 1,600 sq ft - $2.6mn *
Enbloc offer for a studio in same estate of 800 sq ft - $1.9mn
[* This $2.6mn offer was an increased offer from the original offeror to match another unsolicited competitive offer. Within a fortnight of this increase, the marketing agent upped it by another million bucks - $3.6mn! This was just before the surprise announcement on 18 July 2007 by the Ministry of National Development about the effective 40% Development Charge/ Differential Premium hike which is traditionally expected around September.]

The duplex is almost 100% bigger than the studio. Due to the legacy created by the Commissioner of Buildings where an apartment of 101 sq m has the SAME SHARE VALUE as another unit of 199 sq m (ie, nearly double the size) because they are within the "100 sq m interval" bandwidth, all varying-size units have same share value except for the studio units which are one share value lower.

If the duplex is hypothetically split into two equal studio units - the 1st unit of 800 sq ft is worth $1.9mn as per enbloc offer, but the 2nd unit of the same size is worth only a shocking $0.7mn (about one-third the value of the 1st unit)!

If based purely on floor area, the duplex owner is short-changed by $1.2mn - not quite loose change, is it? If the distribution formula is based on my proposed mathematical formula (SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA; DISTRIBUTION"), the short-change would probably range from $600k-$800k, depending on the ratio of common property to aggregate strata title area - not exactly pocket money to be sneezed at, eh?

(iii) The above example is for an estate where the Sales Committee adopted a seemingly "fairer" distribution formula which is based on "50% weighted share value and 50% weighted strata title area". It's 50-50 simply because that presents the least line of argument in precedent cases (not because of technical appraisal standards). There are other estates where the Sales Committee brazenly adopted a distribution formula which is entirely based on share values despite the huge disparity in strata title floor area. In these cases, the "short-change" is even more exaggerated!

(iv) Typically in most condo estates, the number of studio/small units far outnumber the penthouses/big units. Therefore, the en bloc votes cast by the owners of penthouses/big units based on share values at present (even if additionally based on unit numbers in future for purely residential estates) are INHERENTLY SKEWED AGAINST THESE OWNERS even before voting begins! In fact, there's a DOUBLE WHAMMY for estates in prime/central districts because the number of Investor-Owners also far outnumber Owner-Occupiers whose votes are also rendered meaningless despite having a higher vested interest in preserving their "home" in the condo estate.

Ahh ... now you know part of the reason for the rah-rah Majority Consent! Can you blame Greed? Can you lambast Dishonesty? It's all legal, man! "No law" is also "law" - in line with Daoism philosophy, eh?

Under the law as it stood prior to 4 Oct 2007, the 80% (or 90%) or more majority consensus required to force through an en bloc / collective sale is based purely on "share values" [MinLaw's initial proposal to ADD one more criterion: 80% (or 90%) of "number of units" was changed to 80% (or 90%) of "total area of all lots (excluding the area of any accessory lot)" with effect from 4 Oct 2007 but this change addresses the predicament of ONLY A SMALL NUMBER of mixed developments of commercial/residential units].

Example of "share value" application: Say, an estate has 100 units and is 10 years or more from the date of issuance of Temporary Occupation Permit (TOP - the date you can move into the premises). 80 units (being smaller) have three share values each (80 x 3 = 240) and 20 units (being larger or penthouse types) have 5 share values each (20 x 5 = 100). Aggregate share values for entire estate = 240 + 100 = 340. If the owners who hold 272 share values (80% of 340 = 272) vote for/sign the collective sale agreement, then this estate would have achieved 80% majority consensus to force through an en bloc / collective sale subject to issuance of a collective sale order by the Strata Titles Board (STB). No example of "total area" application is given because that is simple mathematics.

Under the amended Land Titles (Strata) Act that came into effect on 4 Oct 2007 - Once the 80% (or 90%) mark is hit for BOTH criteria (ie, share values and total area), there is requisite "Majority Consent" to apply to the Strata Titles Boards for a collective sale order which would then compel ALL owners (including Minority Dissenters) to sell upon issuance of such order unless overturned by High Court or Court of Appeal. In this legislative amendment, there was also a clarification about the 10-year age peg to Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC), as the case may be (this 10-year age peg in turn determines whether the requisite "Majority Consent" is 80% (or 90%)). The TOP or CSC issuance is now clarified to correlate to "any building (not being any common property)" to overcome the stickler if an estate upgrades by building, say, a clubhouse on its grounds in Year 15 of the estate's life but such clubhouse would be under a new TOP certificate.

THE POSITION OF THE DISSENTER: Even if you REFUSE TO SIGN the collective sale agreement, you will be forced to sell AND you will still be entitled to receive the collective sales proceeds on the basis of the apportionment method decided by the Sales Committee (pls scroll down to paras 4-8 below) [MinLaw is proposing to switch it to Majority Owners but this does NOT address the inherent vote-skewering whether by ownership profile or unit size composition]. If you are not willing to sell, DO NOT SIGN the collective sale agreement because once you sign, you lose your right to object and appeal to the Strata Title Board. If you think that the collective sale is a foregone conclusion and you might as well sign in order to get the pay-out faster so that you can buy a replacement unit sooner, that's a fallacy - because so long as there is one owner who didn't sign, that one owner could appeal to the Strata Titles Board and the due process would still apply (as it should) except that now you are GAGGED because you signed. Make your en bloc vote count - you know that this PAP Gahmen "manages" by studying statistics (nothing wrong with that so long as it is not done in a void, eh?). IF YOU SUCCUMB AND SIGN the collective sales agreement, it means a resounding "yes" in statistical terms REGARDLESS of what you said at the EGM or Sales Committee meetings and what you lamented to your friends and relatives about really not wanting to sell. Say what you mean and don't be mean when you say it! IF YOU DISSENT, DO NOT SIGN - it's that simple. Stand up and be counted as a "No"!

Once the requisite 80% (90%) have signed the collective sale agreement, there are only 2 parties who can stop or amend the deal:

(a) STB if they refuse to issue the collective sale order (there are specific laws setting out the grounds for such STB refusal and STB's powers are therefore limited - SEE MY OTHER COMMENTS UNDER "CONSTITUTION; GAHMEN POLICIES" IN THIS BLOG-SITE); and

(b) The High Court/Court of Appeal if STB's collective sale order is challenged and/or other issues are contested and the High Court/Court of Appeal ruling is ultimately in favour of the plaintiff (the party who sued).

1. What are share values - Share values are approved by the Commissioner of Buildings (COB). Share values are important because they determine not only your voting power on whether to go-ahead with the en bloc / collective sale, or the method of distribution of the collective sales proceeds, etc but also the amount of monthly management fees you pay because they represent your share of ownership in the common property. In collective / en bloc sales, share values are quite commonly used (partly or wholly) as the basis of apportionment or distribution of the sales proceeds.

2. How share values are calculated - The number of share values for your residential property is based on your unit's strata title area. In turn, the varying strata-title areas are categorized into different band-widths.

3. Legacy problem for en bloc sales - Historically, these band-widths were very wide at intervals of 100 sq m. It was only in Apr 2005 that COB narrowed them to 50 sq m. However, this means that we have a legacy problem created by COB in the first place. An example of the adverse impact of the older broad band-widths is the case of Madam Chow Ai Wah of Eng Lok Mansions (near The Botanicals) where apartments are of varying sizes but the apportionment method was based solely on share values. Say, if Unit A is 60 sq m and Unit B is 99 sq m (ie, 65% larger in size and probably 50% more expensive at the point of purchase even if we assume that both units are bought at the same time), both units would bear the same share values based on the old band-widths. The composition mix of unit sizes in most estates is such that the smaller units outnumber the larger units or penthouses.

4. Sales Committee's basis of distribution of collective sales proceeds - As there is no legislative provision governing the Sales Committee, a SELF-APPOINTED UNREGULATED Sales Committee (still largely self-appointed in effect although somewhat better regulated after the legislative amendments with effect from 4 Oct 2007 - SEE MY OTHER COMMENTS UNDER "AFTER THE 2007 LAW ... WHAT'S NEXT" ON THIS BLOG-SITE - para C-4.1 at picture of little red flower ("little red dot"), para C-4.4 past picture of soaring seagull and para D-4 at picture of hands gripping prison bars) of a collective sale could apportion sales proceeds based on such Committee's totally arbitrary formulae/weightages pegged to share values (in some cases, the valuer will pop some 50-50 weightage because that is the easiest idea to sell and it offers the least argument). Although the Minister for Law indicated in the 2 Mar 2007 parliamentary speech that apportionment method would likely be determined by the Majority Owners after the forthcoming legislative review, it remains a subjective basis. It is a no-brainer resolution where the composition mix of an estate (be it ownership profile OR unit size composition) may skewer the vote even before voting begins. As Singaporeans can bash each other up over a Hello Kitty toy or a few cents of petrol discount, what will they NOT do for a dollar difference running into 4- or 5-figures???

5. Contrast between (a) purchase and (b) collective sale - At the point of purchase, the share-values are determined on an OBJECTIVE BASIS. Hence, it is unconscionable that at the point of a collective sale forced upon you, the apportionment method (where share values may form part or all of the formula) of the sales proceeds is determined on a SUBJECTIVE BASIS, dependent on the whims and/or scruples of the Sales Committee or the majority owners.

SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" ON THIS BLOG-SITE for my proposed mathematical apportionment method for collective sales proceeds.

6. Sales Committee framework - At present, the Sales Committee framework is unregulated. Anyone can form a Sales Committee. The composition, constitution, member qualification, quorum, voting power, meeting procedures, representation, dissolution of the Sales Committee are totally unregulated (somewhat better regulated after the legislative amendments with effect from 4 Oct 2007). This is also in stark contrast to the Management Corporation and Management Council which are both heavily regulated by the Building Maintenance and Strata Management Act, right down to the minute details. SEE MY OTHER COMMENTS UNDER "IMPACT VERSUS REGULATION" IN THIS BLOG-SITE.

The Sales Committee might as well be a "Committee of One" because - naturally - only like-minded owners will be invited to join (or nominate each other for election/appointment under the legislative amendments that came into effect on 4 Oct 2007). Hence, the present legislative requirement for a Sales Committee in a collective sale is facetious because the very rationale of requiring a committee structure is defeated.

7. Pre-loaded dice in Sales Committee voting power - The composition mix of unit sizes may already skewer the vote in favour of the small unit owners. Also, the occupancy / ownership profile of some condos is such that tenants (and hence investor-occupiers) outnumber owner-occupiers because they are in popular rental districts, bearing in mind that the vested interests of investor-owners versus owner-occupiers are inherently widely divergent. Adding to this pre-load is the legacy problem of the old broad band-widths for share values. SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" IN THIS BLOG-SITE.

Even if the Sales Committee and the Majority Owners are fair-minded people and they ensure that the composition of the Sales Committee is representative of the estate's ownership profile, the voting power remains nonetheless skewered.

Example: If an estate has, say, 100 units, out of which 70 are tenanted. If such an estate has varying apartment sizes, typically the small units may number 80 and larger units or penthouses may make up the remaining 20 units. If the Sales Committee comprises, say 7 persons, even if 2 members are owner-occupiers (ie, 28% of Sales Com are owner-occupiers) owning a large unit and 1 more member is a penthouse owner, the 3 of them (ie, 43% of Sales Com, thus over-representing the big units numerically) would still be out-voted even before voting begins! Even with a weighted vote, they would remain out-voted.

Hence, it may be too simplistic to just look at upfront 90% / 80% majority consensus as the voting may have been skewered if you probe further down the layers.

8. Other influences of Sales Committee - The appointment of marketing agent, quantity surveyor, valuation appraisor, lawyer or other specialists involved in the intricacies of a collective sale is decided by the all-powerful Sales Committee. At the bottomline, business is still business, yes?

9. Dissolution of Sales Committee - Once the results of the Expression of Interest is out and the consensus is less than the 90% / 80%, shouldn't the Sales Committee be auto-dissolved? As it stands at the moment, the Sales Committee continues even after the failure to garner the requisite majority. And to what purpose, one wonders, because surely we do not need the disturbing uncertainty of an en bloc to be prolonged - like a Damocles Sword hanging over our heads?

The Damocles Sword continues to dangle even after the legislative amendments that came into effect on 4 Oct 2007 ... Although the Sales Committee could now be dissolved:

(A) by ordinary resolution at a general meeting of the Management Corporation subject to meeting all the necessary hurdles of requisitioning such a meeting (made more difficult in residential estates where there is already a loose terrorist-like consortium of en bloc flippers who usually swoop in with a minimal voting clout), or

(B) upon termination or expiry of the Collective Sale Agreement (which usually runs for 12 long months),

the same Sales Committee could re-morph the next day after dissolution, especially if some Owners are driven to desperation in a dire need for cash (eg, flippers who do not have deep pockets for real estate investment, or due to business failure/cashflow problems, or retirees running low on savings or wanting a big fling before they go, or movers wanting to get out of the location/country, etc).

So back to the "not-so-merry-go-round" we spin as more en bloc yarns are spun! Yeh, as the Yankees would call it ... It's all a spin!

25 March 2007

30-year en bloc time-bar

UPDATE on 26 Apr 2007:
Following Indonesia's sand ban and granite chip control, the Gahmen's new buzzword is "Sustainable Construction".

I'd like to propose the flip-side of this coin: "Sustainable DE-Construction"!

Home ownership in Singapore: 90.9% in 2006 (Dept of Statistics).
Singaporeans in HDB flats: 86% in 2006 (Ministry of National Development).
After discounting PRs in HDB flats and those in landed properties, it may be a fair estimate that strata-title private residential estates probably account for 8% of Singapore's residential housing.

With the last decade's en bloc frenzy and this millennium's frenetic en bloc pace, I would suspect that a fair portion of this 8% aggregate have been or will be redeveloped after successful collective sales. Therefore, it is high time that the Ministry of National Development must work hand-in-hand with the Ministry of Law on "Sustainable DE-Construction" and seriously consider imposing a time bar of 30 years from TOP (Temporary Occupation Permit) against collective / en bloc sales for private strata-title residential properties.

If this 30-year time-bar is adopted in this 2007 legislative review, it would effectively mean that residential estates that obtained TOP on or after 1977 would NOT be available for collective sales in 2007 but in 2008, those apartments that got TOP in 1977 would become available for collective sales.

MACRO SOCIO-ECONOMIC BENEFITS of this proposal - In addition to all the other equally cogent justifications set out in paragraphs 1-6 below, this 30-year en bloc time-bar mechanism will:

(i) calibrate the supply of developed land relative to the land released by the Gahmen in Government Land Sales, thus improving the accuracy of the Gahmen's target land supply;

(ii) temper the supply of apartments available for rental to the foreign talent/migrant influx, thus minimizing demand/supply distortions and keeping rental rates and Cost of Living Index on a more even keel;

(iii) reduce the immediate demand for sand and granite chips as there will be a curtailed supply of private strata-title land for redevelopment under collective sales; and

(iv) buy time for more incisive studies on "Sustainable LIVING" in glass-and-steel structures in our Tropics which will only get hotter with global warming (surely the Gahmen is not just interested in solving the Developers' one-time problem of higher construction cost without caring about the Citizens' ongoing problem of higher utilities bill if we need more air-conditioning to cool down the heat trapped in our new glasshouses with windows shut tight when we are at work/school, thus negating any cross-ventilation designs and further accelerating global warming).

1. Existing law: 10-year time-frame - The present law says "less than 10 years" and "10 years or more" . Ten years! This would be hilariously funny if it wasn't so tragic. Technically, collective sale is possible on Day 1 of issuance of TOP (Temporary Occupation Permit)! Bizarre, eh?

2. Context - How long did your fridge last? Mine is still frightfully cold after 13 years! Man, we are talking about bricks and mortar here. And we are talking about an asset ranging from at least half a million bucks to nearly $3mn - depending on size and location!

3. Proposed 30-year en bloc time bar - Given our finite-resource Planet Earth, shouldn't the Gahmen legislate a minimum time bar against collective sales for the first 30 years from TOP? To put things in context, even a JTC factory lease is commonly 30 years + 30 years. That's for a factory - What more of our "apartment homes" with presumably legal freehold/99-year leasehold "air space"?

The first Collective Sale Agreement (CSA) attempt on my estate was four years from TOP - even the central air-conditioning system provided by the developer to me was still under warranty! There were two apartment buildings in District 9 that met their demise at a tender age (viz, a 10-storey apartment block called Devon-something near the junction of Killiney Road/Devonshire Road was demolished some 6-7 years after TOP and it is now part of the construction site for the upcoming One Devonshire condo; another block of about that height called Saint Thomas View at Saint Thomas Walk is about 11 years old and is now under demolition).

4. Other countries - One lawyer commented at a talk given at my town club said that Singapore is the only country in the world with this kind of en bloc / collective sale legislation based on a specified percentage of majority consensus for PRIVATE properties. Not surprising to me as Singapore usually aspires to be the First in something or other, eh? Recently, I gathered from another source that Hongkong is also contemplating urban renewal legislation but the earliest date for a building to be considered for such enforced collective sale is 40 years from TOP equivalent.

5. Other perspectives - Let's look at this issue from various perspectives:

(a) Mega Picture: The Gahmen has announced a target population of 6.5mn people within the next 40-50 years (up by a whopping 45% from the 4.483mn as of 2006). The Singapore Tourism Board's target tourist arrivals for 2007 (just one year) is 10.2mn visitors.

(b) Helicopter View: Pre-1960s, Singapore’s area was 581.5 sq km. After nearly 50 years, we are 699.4 sq km as of 2005 (geez wheez, we are 20% bigger!). Unless Mother Nature and/or God (sorry lah, even the PAP in their angelic white is not in this league) cause tsunamis to shift our neighbours' coastline further away, or seismic movements to shrink their land mass or meltdown from global warming to submerge the nearby lands, this 699.4 sq km plus another 3-7% is about it. Anything more will probably trigger "Close Encounters of the Fourth Kind"!

(c) Roof-top View or more accurately, your kitchen window view): Bearing in mind the above Mega Pic and Chopper View - if you peer out from your kitchen window, you may see salivating developers/ housing agents/ neighbours hovering around and hoping to force you into a collective sale with various bits of legislation and policies and regulatory gaps whereever convenient in order to facilitate this forcing as the Unseen Hand. Hey, come to think of it ... since Singapore can have an ANTI-SPAM LEGISLATION, shouldn't there be similar protection of home owners from incessant cold calls and other forms of harrassment from marketing agents/developers? We can't even live in peace in our own homes every time the property market goes into a spasmodic en bloc frenzy!

6. Other implications - I am also advocating a minimum 30-year time bar from the date of issuance of TOP because:

(a) Land use efficiency: Given the pressures of urban renewal, shouldn't the Gahmen first review the area set aside for Good Class Bungalows? These will continue to be the most inefficient use of land even as they tear down bungalows to squeeze in a few semi-Ds. No doubt, it would represent a loss of part of our architectural heritage but at least it is on willing-buyer-willing-seller basis and affects only one property owner. Likewise for golf courses - get real, man! Our 699.4 sq km is already pushing the boundaries to the limit before we hit (nah - more likely - get hit with) "Close Encounters of the Fourth Kind" with our neighbours. On this teeny red dot, access to a golf course in Singapore is an ultimate luxury - and rightly so! If I have to lose my home, you can stop playing golf in Singapore unless you are of ultra-high-net-worth or you just trundle your golf cart up north or down south. It's almost obscene when you put things in context. Where GCBs and golf courses are concerned, we have optimal correlation of Minimum Impact-Maximum Benefit.

(b) Environmental impact: Now that Indonesia has banned sand exports and controlled granite supply, it may be timely for the Gahmen to consider the environmental impact of such a feverish pace of CSAs.

This Land Titles (Strata) Act has unwittingly created a senseless contradiction. We harp on Asian values, of which frugality is one. Yet this piece of legislation fosters wanton wastage as gleaming marble floors of less than 10 years (or even of 35 years if well-maintained) go under the wrecker's ball. Expensive double-glazed full-height glass panes get smashed to smithereens. Window frames in perfect condition are left mangled in the demolition rubble. Did you know that to make just one metric tonne of aluminium for our window frames, it takes an obscene amount of energy and causes greenhouse gas emissions of 991 kg of carbon dioxide equivalents?

Whilst we can source for alternative building materials and go hi-tech with intelligent building designs and surround our whole apartment with planter boxes, our tropical climate (which will only get hotter and drier with progressive global warming) unfortunately doesn't lend itself to all-glass-and-metal buildings as these will be more energy-intensive with more powerful air-conditioning needs and lots of planter box watering. Before the advent of air-conditioners, the maharajahs of India built really thick concrete/stone walls to keep cool in their searing summer heat. Even the rural poor in China continue to live in caves to protect themselves from weather extremes. Unlike those in Dubai, we have no oil! Unlike those in Malaysia, the Philippines or Vietnam, we also have no fields to grow oil palms, sugar cane or maize for our bio-fuels!

(c) Architectural legacy: We have already razed a huge part of our architectural heritage from colonial and pre-war days. We are now razing even our modern Singapore architectural legacy. Ever noticed the design differences in apartments built in the 60s, 70s, 80s, and 90s? Even the window grille designs are different from each decade. Our architectural legacy speaks to us - in terms of cultural influences, climatic environment, social values, political events (eg, why apartments built a year or so after the 2007 Indonesian sand-ban have so little concrete structures)!

On the one hand, our Gahmen spends a lot on museums, parks and the arts. On the other hand, it unwittingly destroys our Living Heritage (be it buildings which are our homes, the flora and fauna in little pockets of natural forest, the homegrown artistic talents).

Do we want to see a model of our National Library monument in some exhibition? [Up to now, I still can't believe that we tore down a piece of Singapore history for a short dinky tunnel that saves possibly up to 12 minutes' travelling time in a worst-possible traffic jam ... unless it provides some strategic underground alternative to the nearby Istana that we can only guess at.]

Do we only want to see photos of apartments built in the 60s or 80s? Do we want to just walk in a manicured park? Do we want to visit the Raffles Museum to be sure that we will see what a stuffed-up Buffy Fish Owl looks like instead of keeping alive the habitat where you are likely to chance upon this rare bird as one of Life's unexpected and unplanned pleasures?

Majority vs minority vs individual

1. What majority? - Labels of "majority" versus "minority" are misplaced.

2. Eminent domain/police power? - These collective sales are not the result of exercising "eminent domain" to serve larger public interests of, say, infrastructural projects or slum clearance. Nor are there structural weaknesses or public health/safety issues afflicting these private properties, thus invoking "police power".

3. Collective greed? - We are talking about Private Property that we bought at prevailing market prices with our hard-earned money WITHOUT government subsidy and WITHOUT dipping into taxpayer's money. There is NOTHING to prevent an owner from selling his property individually. Are we living on some communal farm like some Jewish kibbutz all of a sudden when it comes to collective sale?

All because of collective greed (facilitated by legislation, convenient regulatory gaps and suitable ambiguity), hankering after the so-called "premium" from a collective sale as opposed to an individual sale even if it means forcing dissenters into selling their private property. If collective greed is the driving force, then it is IRRELEVANT whether it's 21% minority or 1% dissent - it is PRIVATE property nonetheless!

4. Urban renewal and land use efficiency - I don't refute these larger societal needs of urban renewal and greater land use efficiency. Hence, it is ONLY on this basis that the concept of "majority over minority" gains some credence. However, there must be a FINE BALANCE between societal needs and individual rights.

Let's NOT forget that we probably plundered our CPF retirement savings, and/or hocked ourselves up to our eyeballs to buy our property and worked our butt off to service and repay the bank loan and build-up our CPF retirement savings. In stark contrast to investor-owners who force others to sell in the greed for collective sale premium whilst they keep a roof over their own heads, we owner-occupiers are immediately time-disadvantaged because we would need to buy a replacement roof upon a successful enbloc despite feverishly hot prices.

If we have to subordinate our individual PRIVATE PROPERTY rights at the price of losing something so basic as the roof over our heads and possibly compromising our long-term financial security in terms of CPF retirement savings as a "SACRIFICE" for the larger community needs, then it is only EQUITABLE to address the following issues:

(a) One-for-one "exchange": That's why I am advocating a mandatory property exchange as one of the settlement options with ancillary regulatory support. SEE MY OTHER COMMENTS UNDER "ONE-FOR-ONE EXCHANGE" IN THIS BLOG-SITE. To be a Squatter, Refugee, Downgrader or Downsizer in spite of being in the so-called privileged class of a private property owner isn't exactly the standard definition of a First World Global City!

(b) Mathematical basis for distribution of collective sales proceeds: That's why I have suggested a mathematical formula to be mandated under law, especially in view of the legacy problem created by the previous broad band-widths of strata title area for share values, the varying composition mix of unit sizes and the different estates' occupancy / ownership profiles. SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" IN THIS BLOG-SITE.

(c) Degraded time-value of the dollar amount received as collective sales proceeds: That's why I have highlighted this inherent inequity that the Gahmen needs to seriously redress. SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" IN THIS BLOG-SITE.

(d) Skewered voting power: That's why I have highlighted the composition of unit sizes and the estate's occupancy / ownership profile which may inherently skewer the voting power of the Sales Committee and/or the Majority Owners even before voting begins! SEE MY OTHER COMMENTS UNDER "SHARE VALUES; SALES COMMITTEE" IN THIS BLOG-SITE.

(e) Retrospective effect of the 1999 legislative amendment: Whether the retrospective effect is witting or unwitting, I'd like to give the benefit of doubt to the Gahmen. However, it does NOT change the fact that this legislative amendment amounts to such retrospection because there are inherently two legs to a property purchase (ie, Acquisition and Disposal). This law was gazetted and came into effect on 11 Oct 1999 but it has changed the fundamental basis of purchases made PRIOR TO 1999 because the collective sale would no longer be based on 100% consensus applicable AT the time of purchase but on 90% / 80% consensus promulgated AFTER the time of purchase. SEE MY OTHER COMMENTS UNDER "CONSTITUTION; GAHMEN POLICIES" IN THIS BLOG-SITE.

5. Personal financial planning / retirement savings in CPF - Real estate is likely the most chunky element in our investment portfolio. Each investor has different risk appetite profile, cashflow need, time horizon, etc. As there is nothing to stop my neighbours from selling their respective units individually based on their personal financial planning needs, why are these neighbours lumping my investment with theirs by forcing me into a collective sale?

How can CPF policies allow such sizeable withdrawals from Ordinary Accounts to buy an asset where (a) the disposal and sales price is outside of my control, (b) the depreciation is likely accelerated due to withholding of maintenance given that the en bloc cycle goes into infinity and (c) asset-churning is the most likely result as I need to buy a replacement unit and possibly sell+buy repeatedly if I evolve to be a Refugee after each collective sale? SEE MY OTHER COMMENTS UNDER "CONSTITUTION; GAHMEN POLICIES" IN THIS BLOG-SITE.

Impact versus Regulation

What is even more galling is that after passing this "innovative" piece of legislation in 1997, the Gahmen have conveniently left a huge void on everything else related to it.

1. To sell the entire estate - There is NO regulation or legislation to govern the Sales Committee who dictates the terms of such collective sale and the apportionment method of sales proceeds that are binding on ALL owners. SEE MY OTHER COMMENTS UNDER "SHARE VALUES; SALES COMMITTEE" IN THIS BLOG-SITE. In the event of a dispute or disagreement and even if the dissenting owner goes for review by the Strata Title Board (STB), so what? STB is bound by the existing guidelines (or lack thereof) and isn't it a case of fait accompli by then? In form, we have a recourse but in substance, it counts for little or almost nothing. As they say, "the devil is in the details".

2. To repair a broken lock in the estate – In stark contrast, there is an entire statute under the Building Maintenance and Strata Management Act to regulate the Management Corporation and the Management Council down to the last minute detail.

Constitution; Gahmen policies

UPDATE post-Oct 2007: ____________________________________________________

1. Constitutional or not? - Is it even constitutional, I wonder? I hope I won't be hauled up for treason or something for merely asking. I seek your indulgence as I am a newbie at blogging.

Perhaps, it is only in this little red dot where a legislative amendment to the Land Titles (Strata) Act (LTSA) could be passed in 1999 with such equanimity by a Parliament of 82:2 mandating collective sale of Privately-Owned property based on 90% share-value and total-area majority if your estate is less than 10 years old from the date of issuance of TOP (Temporary Occupation Permit) or CSC (Certificate of Statutory Completion), for any building (not being common property), whichever is later (for 80% majority if 10 years or older, subject to approval by the Strata Titles Board (STB) who would NOT issue the collective sale order ONLY on the grounds of (a) financial loss and/or (b) lack of good faith.

2. Financial loss - Under the LTSA, "financial loss" is defined as follows: "if the proceeds of sale for his lot, after any deduction allowed by STB, are less than the price he paid for". Essentially, if you paid $1mn in Year 1 as the purchase price for your property and you are now getting exactly $1mn in, say, Year 15 as the collective sales proceeds AFTER the "deductions allowed by STB" - Presto, there is NO financial loss. As to what "deductions" are "allowed by STB", there is - Ooops - a deafening silence! For nearly over a decade since 1999, we have been (and still are) on this incredible "Journey of Discovery" as to which deductions are allowed and which are not. We are a tad slow, aren't we? Yet, this little red dot is supposed to be very "on", right?

Interest already paid to the bank (which over the common 15/20-year loan tenure may well comprise 50% of your aggregate acquisition cost for this property) is NOT allowed as a deduction - that's confirmed. If the collective sales proceeds are insufficient to redeem any mortgage or charge on the property, it would count as financial loss.

3. Have your cake and eat it too: not you, my dear; CPF of course - However, with the CPF change of policy in Sep 2002 reversing the priority sequence of CPF charge and bank mortgage, the bank mortgage would rank FIRST and the CPF charge would come SECOND if you took up a property financing or refinanced an existing bank loan after Sep 2002. Again, wittingly or unwittingly, this change of CPF policy in fact facilitates collective sales. Why? Because CPF will release its charge on your property even though the net sales proceeds after discharging the bank mortgage are INSUFFICIENT to cover the withdrawn CPF principal and/or the interest that would otherwise have accrued on the amount withdrawn. You see, CPF does NOT require members to top-up. That's what Mr Yeo Loo Keng and his wife, Cheryl Lim, of Waterfront View realised when they recently lost the collective sale appeal. In contrast: Under the old ranking, CPF would NOT release their 1st-ranking charge against the property UNLESS the withdrawn principal and interest that would otherwise have accrued on the amount withdrawn are setttled first and only then will the balance be available to pay off the outstandings owed to the bank. Hence, I reckon if the couple at Waterfront View did NOT refinance their bank loan after Sep 2002, they would have succeeded in using "financial loss" as a basis to defeat the collective sale.

Therefore, this CPF change of policy in Sep 2002 would reduce the incidence of owners successfully citing “financial loss” to STB as a basis to fob off enforced collective sales. Too bad if you now end up with less for your eventual retirement. Remember, CPF Board has always been telling you to take charge of your retirement financial planning - now, have you been naughty or what?

However, IF your net sales proceeds after discharging the bank mortgage COVERS the withdrawn CPF principal and/or the interest that would otherwise have accrued on the amount withdrawn, CPF now requires you to REFUND all or part of these amounts into your CPF account before releasing the remaining cash dregs (if any) to you. That is only prudent of course because your CPF is part of your retirement savings.

Why do I say CPF will have its cake AND eat it too? Just basing on this Sep 2002 policy - do you notice the difference between the two "cakes"??? If you are short after paying the bank, tough luck if your retirement savings are now less. BUT if you have extra after paying the bank, CPF will now ensure that you refund back to your CPF A/c to preserve your retirement savings in case you squander it away. It looks inconsistent technically. But it is prudent in the overall spirit.

4. Good faith - Under the Act, the "good faith" element is correlated ONLY to the following factors: sales price, distribution/apportionment basis for the collective sale proceeds and the relationship (if any) between the developer-buyer and any of the collective sale owners. When taken within the context of a self-appointed unregulated Sales Committee where the sales price and distribution formula are decided without objective mathematical foundations at ad hoc Sales Committee meetings with possibly skewered representation and voting power, it is - to me - kind of "fait accompli" by the time the requisite Extraordinary General Meeting (EGM) is convened in connection with procuring STB's collective sale order - there is a time lag which distinctly works against dissenters despite the protection of more stringent requirements inherent in an EGM. SEE MY OTHER COMMENTS UNDER (a) "SALES PROCEEDS FORMULA; DISTRIBUTION" and (b) "SHARE VALUES; SALES COMMITTEE" IN THIS BLOG-SITE.

5. NMP Simon Tay - Back in late 1998, NMP Associate Prof Simon Tay spoke out strenuously in Parliament against this legislative amendment but to no avail. He voted against it but was of course outvoted. Several other MPs also had their reservations, especially in respect of the tender 10-year criterion for real estate.

I am in the course of trying to extract Prof Tay's parliamentary speeches from the Singapore Parliament Reports (as soon as I can find the time to do so). Then I will try to figure out a way to post or extract it on this blog-site (a raw newbie, remember?). If anyone has the pedigree to speak on the various facets of this 1999 legislative amendment, it would be Prof Tay (LLM from Harvard and LLB from NUS), Faculty of Law of the National University of Singapore (NUS), especially given his research interest in the "Governance" arena.

6. Lay-person's view - To me as a lay-person, a property transaction inherently has two legs: First, an acquisition, and then eventually, a disposal. Laws in Singapore do NOT have retrospective effect. Therefore, should an owner who BOUGHT (viz, 1st leg) a private property PRIOR TO the enactment of this law be forced to SELL subsequently (viz, 2nd leg) under a collective sale by a 90% / 80% majority promulgated only IN 1999 under the legislative amendment? And without even so much as an OPTION TO OPT-IN (ie, accepting the retrospective effect of this law because maybe his apartment is already quite run down at 40 or 50 years old and he wants to facilitate en bloc interest from developer-buyers)? SEE MY OTHER COMMENTS UNDER "MAJORITY VS MINORITY VS INDIVIDUAL" IN THIS BLOG-SITE.

7. CPF investments - Again, context is important. The Central Provident Fund (CPF) Board has been exhorting us to be prudent in our use of CPF monies, to take charge of our financial planning as CPF savings are our retirement nest eggs. More so than in any other country, home ownership has been and continues to be an integral cornerstone of Singapore's social policy with deep political implications.

CPF Board has a whole matrix of policies to discourage speculation, preserve principal capital and minimize investment expenses. Even for unit trust investments (the scale of which is generally a fraction of real estate investment in private property) using CPF monies, the CPF Board distinguishes between funds which could be bought with monies from Ordinary A/c, Special A/c or Supplementary Retirement Scheme, depending on the asset volatility, expense ratio, fund performance, etc. There are also legislative requirements to discourage frequent asset-switching as investors and financial advisers are obliged to declare if the switches are done at the behest of financial advisers who - as INTERMEDIARIES - have a vested interest in earning sales commission arising from each switch.

Traditionally, in the use of CPF for the purchase of residential property, the policies for second/multiple property purchases (on the basis that it would be for investor-ownership) are invariably MORE STRINGENT than for single property purchases (on the assumption that it would be for owner-occupation). CPF Board and the Monetary Authority of Singapore (MAS) as the central bank acting in concert would previously tweak the quantum of financing and/or cash deposit, etc, evolving to the present policy requirements for (a) the cash component of the Minimum Sum to be first set aside and (b) a lower percentage of Valuation Limit for investor-owners.

8. Collective sale law vis-a-vis other Gahmen policies - 85% of Singaporeans live in very decent PUBLIC housing flats built by the Housing & Development Board (HDB), a statutory board under the Ministry of National Development. Hence, the remaining 15% who live in PRIVATE housing - which is expensive real estate by world standards due to this island's land-scarcity - is considered "so-called privileged". However, the cumulative effect of this 1999 legislative amendment and all other nicely dovetailed policies would turn us (owners of only ONE private property) into Squatters, Refugees, Downgraders, Downsizers ... so much for our Founding Father's 1984 vision of Singapore to be the "SWITZERLAND OF THE EAST" by 1999 ... sigh! Time flies, doesn't it? What a Classic Irony, eh? 1999 also happens to be the date that this fundamental change in private property law came into effect! SEE MY OTHER COMMENTS UNDER "ONE-FOR-ONE EXCHANGE" IN THIS BLOG-SITE.

It is now 2007 and thanks to the 1999 LTSA amendments, my prudent investment in a single PRIVATE property now EXPOSES me to:

(a) the spectre of an asset disposal at a time and price beyond my control (any investment guru will confirm it sucks - who in their right mind will invest in such an asset?);

(b) the certainty of an accelerated rate of asset depreciation or deterioration with the inevitable lack of maintenance (whether of individual units or common property) as collective sales go into an infinity cycle and pressure tactics are applied by the consenters or frugality measures are adopted as a precautionary measure;

(c) the possibility of churning my investments as I sell-and-buy, dipping into my CPF account to pay hefty legal fees and stamp duties, benefitting only the INTERMEDIARIES of lawyers and Gahmen many times over if I evolve to be a REFUGEE;

(d) the likelihood of compromising my accumulation of retirement savings if I choose NOT to be a Perforced DOWNGRADER or DOWNSIZER, COMPOUNDED by the change of CPF policy in Sep 2002 reversing the ranking of bank mortgage;

(e) the risk of a lower-quality asset IN ADDITION to losing a roof over my head and thus ending up as a SQUATTER although I should derive cold comfort that I am not likely to be left "roofless" because ...

(i) in Jul 2006 CPF has relaxed the Minimum Lease Period from 60 to 30 years so that I can use my CPF savings for my next downgraded short-lease property (so better don't exercise and eat healthily because I may outlive my lease tenure OR if I get really sick and need to liquidate my asset to pay for medical expenses, the short-lease asset is not even marketable, eh?) - viz, moving from freehold property to 30-year lease, and

(ii) in Mar 2007 HDB has helpfully relaxed the Minimum Occupation Period for sub-letting the entire HDB flat so that I will have more rental options - viz, from owning private property to renting HDB flat.
Wah lau, suddenly all these stat boards are so "coordinated"!

I say the above half-seriously of course in a bizarre worst-case scenario but - based on investment principles - it really sucks! And Singaporeans are "prudently investing" our CPF savings in increasingly more pricey apartments!

In fact, the people who benefit the most from the LTSA amendment and CPF policies are those who are investor-owners as they reap a windfall by forcing everybody else to sell (instead of just selling their own unit based on their own investment/cashflow or relocation needs) whilst they continue to keep a roof over their own heads.

There is another interesting development that may have fuelled to some degree the en bloc fever. In Jul 2005 CPF changed their policy to allow non-related singles to use CPF for purportedly their "first and only" property purchase if they have not used CPF monies or have refunded such CPF monies previously used (ie, "currently not using CPF for any existing property"). Even married persons are getting into the act by partnering with parents/siblings in various permutations. Hence, the CPF figure of "only 3% of members using CPF to finance properties have two or more properties" may BELIE a larger reality because CPF Board has confirmed that this piece of statistic is sliced based on the member using CPF savings for both/all properties.

MORAL OF THE STORY: Maybe I shouldn't heed Gahmen exhortations in future, ugh?

9. Whiter-than-white -
As our Parliament has a 82:2 composition, it is all the more important for the People's Action Party (PAP) to ensure a “whiter-than-white” approach to legislation and policies. Nice pun, eh, given PAP's all-white attire as party colours? Lest I be misunderstood - let me state categorically that I fully agree with the top marks accorded by international rating agencies (PERC, BERI, etc) to our Gahmen for its "whiteness".

Nonetheless, it cannot be “anything goes just because we say so”. So what even if the 1999 LTSA amendment was debated, gazetted and published? As Dr Martin Luther King, Jr, said: “There are two types of laws: JUST and UNJUST”. The PAP can be technically right in substance and yet wrong in spirit (in contrast to what I said earlier about CPF Board having its cake and eating it where the Board may be off-mark technically but spot-on in spirit).

Perhaps, the following example will help me in elaborating on this point:

Consider these two FAQs that I downloaded from CPF website:

Q1: If I buy my property under RPS in September 2002, will I be affected when the Valuation Limit is gradually reduced to 120%?

A1: No, the CPF Withdrawal Limit applicable at the time of purchase will apply throughout the loan repayment period. Therefore, in your case, the amount of CPF that you can use for your property is 150%, subject to AHWL. This Limit will not change even if you refinance your loan subsequently.

Q2: I bought my property under RPS before 1 September 2002. What happens if I refinance my housing loan which was also taken before 1 September 2002? Will the new housing rules - the revised CPF Withdrawal Limit and financier's first charge on the property apply to me?

A2: When you refinance your housing loan (i.e. there is a new contract between your bank and you), your new CPF Withdrawal Limit will be capped at x% of Valuation Limit, subject to sufficient AHWL. The x% of Valuation Limit corresponds to the date you re-finance your loan (determined by the date you sign the contract with your bank - please refer to Table A below for schedule of x%). When you sell the property, the sale proceeds will first be used to pay off your housing loan, followed by the CPF principal amount and accrued interest. [Table A showing various time periods and withdrawal limits.]

In both cases, it involves (i) loan refinancing and (ii) CPF Withdrawal Limit. For property bought IN Sep 2002, the “CPF Withdrawal Limit applicable at the time of purchase will apply” and “this limit will not change even if you refinance your loan subsequently”. However, for property bought PRIOR TO Sep 2002, the “new CPF Withdrawal Limit will be capped at x% of Valuation Limit” and “the x% of Valuation Limit corresponds to the date you refinance your loan” because CPF says in this 2nd case that “when you refinance your housing loan (ie, there is a new contract between your bank and you)”. But, hang on ... when you refinance your loan in the 1st case, there is no new contract between your bank and you???

Somehow, the logic escapes me but the intent is not lost on me (ie, CPF is credibly fostering prudence in real estate investments). But it goes to prove my point that “anything goes just because we say so”.

Hence, my plea that (A) this 1999 LTSA amendment cannot be rammed-down the throat of buyers who entered into sales and purchase agreements for private properties pre-1999 WITHOUT so much as an option to opt-in and (B) even with the provision of majority consensus, there must be many more buttons and levers by way of legislation, policy or regulation (eg, 30-year time bar for new buildings, calibrated time-bar to next en bloc attempt, exchange units, mathematical apportionment, re-calibrated compensation, etc) to balance the needs of the individual against the larger societal demands, prevent abuses and distortions and ensure equity and justice.