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!