09 February 2009

Purpose of "purposive" - Gillman Heights verdict

On this Yuan Xiao Jie (first full moon of the first lunar month) of this Chinese New Year of the Ox, the Appellate Court ruled against the Minority Dissenters of Gillman Heights with Appellate Court costs borne by the respective litigants and 50% of the High Court costs borne by the Minority Dissenters.

This group of Minority Dissenters stood united in their valiant bid to save their homes as they dug into their pockets which are not deep by general standards to challenge the very law itself, pitting themselves against the big-boy developer-buyers and the all-mighty lawmaking food chain in this David versus Goliath clash. In the end, the Minority Dissenters lost. Another estate bites the dust.

1. Background. Gillman Heights was completed in 1984 - that was when the first occupants moved in. It was a HUDC estate at that time and was governed by rules and regulations akin to that of public housing administered by the Housing & Development Board (HDB). Gillman Heights - together with another HUDC estate known as Pine Grove - were the pioneers in privatizing their estate in 1995/96. In the process of privatization, Gillman Heights owners carried out some essential works to fall within the qualifying criteria and also some upgrading works a few years later. The CSC for Gillman Heights was issued only in 2002. In the en bloc process, Gillman Heights achieved about 87% majority consent, contracted to sell to a developer-buyer at $548mn and applied to the Strata Titles Boards (STB) for a collective sale order in 2007.

2. Points of contention and ruling at Appellate Court level. The Gillman Heights Minority Dissenters challenged:

(a) Whether the 1999 Land Titles (Strata) Act (LTSA) (ie, prior to the specific amendments in 2007 relating to privatised ex-HUDC estates) applied to Gillman Heights which was a HUDC estate before it was privatised; and

(b) If the 1999 LTSA applied, then whether the date of issuance of Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) would apply to Gillman Heights who obtained their CSC only in 2002 (although physical completion of this estate was in 1984) and therefore would require 90% consent level for an estate of less than the 10-year-old cut-off point (instead of 80% consent level for an estate that is 10 years or more in age).

Three years (!!!) after the Collective Sale Agreement was signed by the first of the Majority Consenters on 18 Feb 2006, the Appellate Court ruled on 9 Feb 2009 that the "purposive" element of LTSA prevailed in terms of the estate's physical age and the availability-for-en-bloc clock started ticking from the date of completion of Gillman Heights in 1984. In fairness, the Appellate Court acknowledged that Minority Dissenters' points about the 1999 LTSA and the 2007 amendments with specific provisions for ex-HUDC developments but the Appellate Court attributed these to "faulty or inappropriate drafting" in the 1999 LTSA. Hence, the parliamentary intention underpinning this piece of legislation could not be frustrated by a literal interpretation of the law.

3. "Purposive" purpose. Laws are in black-and-white. Every word, every comma counts. Or does it?

In this connection, let me share a little New Zealand joke. New Zealand's national symbol is the Kiwi bird. Hence, New Zealanders are also called Kiwis. Through the ages, the Kiwi bird has evolved to its present-day flightless state. This bird eats ground vegetation (eg, underground roots, little plant shoots, fallen leaves) and it also predates on worms, eels, amphibians, crayfishes, etc.

In New Zealand, they say the following:

(a) About the bird -
A Kiwi eats shoots and leaves.

(b) About some New Zealander men -
A Kiwi eats, shoots and leaves.

Add a comma between "eats" and "shoots" and the sentence transforms into a manifestation of the Darwinian Theory of Evolution:

- of self-preservation (eg, by eating),

- of procreation (ie, by seminal shooting), and

- of survival of the fittest (viz, by beating a quick exit and leaving to find another lady bird for more seminal shots to increase their gene pool)!

What is the purpose of eating shoots and leaves? We need not fly to New Zealand to ask this flightless bird as it could be found on the tin cover of a popular shoe polish brand.

What is the purpose of putting a comma between "eats" and "shoots"? We could ask a teacher of English language. Or we could ask Singapore legal practitioners who usually have a mastery over the English language on how they would interpret this comma - whether as a lawyer in explaining these words, or as a draftsman in drafting the sentence or as a judicial member in reading the final sentence. But, of course, there is this thing about being "purposive", eh?

4. Purpose of "purposive". I am probably getting my left foot entangled with my right hand by flipping "purpose" and "purposive" from the previous paragraph sub-heading. But I would like to put into context the purpose of being "purposive".

From parliamentary debates and public comments by ministers and civil servants in enacting LTSA, the purpose of en blocs is for urban renewal and higher land-use intensity in respect of private strata-title developments. Singapore is so teeny. We have stacked upwards, tunnelled downwards, filled-up and topped-up to the north, south, east and west. With the latest population target of 6.5mn people on 700-odd sq km, what more could we do to create space for all of us to work, play, live and shit in inverse order of priority?

In the process of achieving our national agenda of urban renewal and increasing land-use intensity, the land value of these strata-title developments would be unlocked as a natural consequence. Here's a thorny question - UNLOCKED FOR WHOM???
4.1 Unlocking land value for corporate developer-buyers. Was it our Gahmen's intention to unlock land value for the corporate developer-buyers?

So that corporate developers could demolish a 15-storey block to build 36-storeys in prime and/or popular residential districts which would NOT otherwise be so easily available for redevelopment??? So that corporate developers could replace 200,000 sq ft of aggregate "strata-title area" with 600,000 sq ft of "net saleable area" - out of which 100,000 sq ft is for the air-space in your double-storey living/dining room, balconies in every bedroom, bay windows on three sides of your bathroom, and planter boxes in every conceivable nook which spun-off an entire sub-industry of planter-box converter specialists??? [Home-buyers - beware of this thingee called "net saleable area" as this definition morphs over time in true Darwinian spirit by courtesy of our statutory boards/government agencies!] Isn't a doubling of storey height or a tripling of net saleable area more than enough to ensure commercial viability of en bloc redevelopment for corporate developers? Bear in mind that the prime/popular locations of en bloc sites already significantly increase the marketability of the redevelopment - try peddling an en bloc redevelopment in the Katong area versus a new project in Sengkang district built on land bought under the Government Land Sale!

If the answer to Q4.1 (unlocking land value for corporate developer-buyers) is "yes", I'd say that it is a naughty (if not nutty) answer to this knotty question. Why? Because it is the citizens with Identity Cards (not the corporations with Business Registration Certificates) who voted in these Members of Parliament to form a Government - dare I even breathe - "of the people, by the people and for the people". Ooops, sorry, we are Singapore, on the other side of Planet Earth - what am I thinking about?

4.2 Unlocking land value for existing owners (predominantly Singaporeans). Or should there be a purpose of "purposiveness" in devising this en bloc legislation such that our Gahmen should re-calibrate this law to unlock land value for existing subsidiary proprietors? Let's not forget that these were the owners who (i) had the acumen to buy into such prime/popular locations years ago, (ii) used their hard-earned private savings and Central Provident Fund balances for the purchase and paid a huge premium over public housing rates in the process and (iii) prudently applied inflation-hedging as part of their retirement financial planning in the hope of indexing their likely capital gains to inflation over a reasonable time horizon at the point of actualization (ie, upon their retirement or when they really need to monetize their property asset in future to send their children for overseas education, to pay for a major surgery, to embark on a new enterpreneurial venture, etc).

This is just talking the language of our hard-nosed and hard-headed Gahmen about urban renewal and higher land-use intensity which naturally unlocks land value! This does NOT address the realm of community ties, or our sense of time and place, or our nascent rootedness, or our basic right to reside where we choose, or the sanctity of private property rights - and NOT be forced by our neighbours to sell our homes and NOT giving our neighbours to sell what doesn't belong to them in the first place ... even within the context of communal sharing of air-space and common facilities in strata-title developments! Not that any of the aforementioned are any less important to us as human beings!

Has our model of Progressive Corporatism gone too far for far too long? Is it time to go back to the basics of Neo-Communitarianism - of Doing Right, in Serving the People (not just the Corporates), and to Seek Balance and Curb Excesses. Is the answer to Q4.2 (unlocking land value for existing owners) a "yes" possibly? Or have we missed the forest for the trees?
How to unlock land value for existing owners? By following South Korea's urban renewal model with some modifications (viz, by mandating an ADDITIONAL OPTION for 1-4-1 EN BLOC EXCHANGE based on factual SAME size, SAME floor level and SAME orientation considerations within a narrow band of pre-defined alternatives and variances in order to give some wriggle room to developer-buyer and existing owners in the redevelopment). For more elaboration, please refer to my 5 blog entries dated:
- 26 Mar 2007 (One-for-one "exchange"),
- 2 Apr 2007 (Ministry of Law Public Consultation),
- 19 Nov 2007 (After the 2007 law, what's next),
- 24 Dec 2007 (In the coming year of 2008), and
- 7 Aug 2008 (So what's the alternative in the END).

5. Market's ups and downs; Life's twists and turns.
Let's bear in mind that the Gillman Heights en bloc sale was crystallized PRIOR to the property prices softening in 3Q 2007 and the market's initial meltdown in 2008.
After the Appellate Court delivered this verdict against the Minority Dissenters, one of them very astutely put her finger on a very pertinent point - She said that she will be getting $498 psf from this en bloc sale. In the mid-2007 frenzy, she recounted that a 5-room HDB flat in Mei Ling Street was going for $746 psf in the resale market. Even in today's market nose-dive, a 5-room HDB flat in Bukit Merah is selling at $600 psf as per her most recent check of the HDB web-site for resale flats.

The conventional wisdom is that there is a so-called "en bloc windfall", thus enabling home owners to monetize their property asset at a premium! Well, it all depends on how one defines "premium", eh? It looks like a rose, it pricks like a stalk of rose but does it smell like a rose? Amazing that even ministers sing this monetization tune! These ministers are so out-of-touch with ground realities that they even sing off-key with such gusto - it's really mind-blowing!

"What en bloc windfall?" she hooted. "I still lose money even after I downgrade from a privatized condo to public housing!" she lamented.

Effectively, this Minority Dissenter will be paid $498 psf from the en bloc sale that was ostensibly transacted at a market peak by the Sale Committee who sold the family home for her. In view of the Appellate Court verdict and assuming that legal completion of the en bloc sale goes through eventually, she would need a replacement roof for her family.

Scenario 1: If this Minority Dissenter had bought a replacement unit when the en bloc sale was crystallized for fear of the market ramping even higher (because en bloc activity usually takes place only when the property market is hot), she'd have paid $746 psf (ie, $248 extra for each sq ft) even AFTER downgrading from a privatized estate at Gillman Heights to public housing in Mei Ling Street.

Scenario 2: But this Minority Dissenter decided to take a market risk and NOT buy a replacement unit in the mid-2007 frenzy for fear that the en bloc sale may get scuttled/aborted (eg, if STB or the Courts ruled in favour of the Minority Dissenters or if the developer-buyer backs out of the transaction in the end by paying a forfeiture penalty). If the en bloc sale was scuttled/aborted, she could potentially end up with the unintended financial burden of owning two properties. But as events transpired for Gillman Heights en bloc, she got "lucky" in a way in taking this risk because the property market had crashed since then. Who would have known during the mid-2007 frenzy whether the property market was going up or down??? But even in today's downward market spiral, she'd still have to fork-out $600 psf (ie, $102 extra for each sq ft) for downgrading to public housing in Bukit Merah.

She continued to rant: "Like this, how to do retirement financial planning? You tell me lah?"
Who can give her an answer? Even with her "good luck" of selling high and buying low, she is still losing money in the immediate term! She will also be downgrading her property asset from a privatised condo in a choice location to a public housing flat in a less prime vicinity. Real estate is the most valuable and most substantive asset in her family's entire portfolio. Hence, over the long term, she and her husband will lose the multiplier benefit of a better-classed real estate asset for actualization in the future when her husband eventually retires!

What can I say? I can only agree with the assessment of this Gillman Heights Minority Dissenter that she is essentially "cooked" by this court verdict. Her sentiments were echoed by her co-litigants. Indeed, they have lost more than the court battle. My heart goes out to the Minority Dissenters ... some put up a brave front and psyched themselves to make the best out of the worst, some felt a sense of vindication that the highest court on our land acknowledged that there was "faulty or inappropriate drafting" of the law even as it ruled against them, some walked away with a dull ache of loss with tears welling up, some struggled to come to terms with the harsh reality - there was a mix of varying degrees of resentment, anxiety, resignation to fate, fear, sadness, disgust, anger. For many of us, en blocs affect our family homes and - by extension - our memories, our hopes, our dreams and our aspirations. So, you bet, it is EMOTIVE. As it should! For we are human beings after all. But, hey, one never knows, eh? Life's twists and turns are such that maybe, maybe, maybe ... "Man Proposes, God Disposes", as they say ... God may not necessarily heed what the three good Judges Proposed!


Anonymous said...

The news say the minority were happy with the result.

I think it's because they realised it's a good deal after all :-)

The Pariah said...

Dear Anonymous:

Unfortunately, the news media got the comment technically correct but contextually wrong for this case - in my opinion, anyway!

The Minority Dissenter quoted by The Straits Times was making the point that if the collective sale order for Gillman Heights was issued, say, in 3Q 2007, they would be much more severely out-of-pocket in buying a replacement unit at that time (ie, at property market frenzy peak).

Hence, compared to the collective sale order being issued now in 1Q 2009 after the Appellate Court's verdict following the precipitous property market crash, their en bloc shortfall is much less.

BUT EVEN IN TODAY'S MARKET DOLDRUMS, IT IS STILL A SHORTFALL (just a smaller shortfall, if that offers some consolation) - that is the comparative context of the quoted Minority Dissenter's "HAPPINESS", relatively speaking.

As pointed out by one of the other Minority Dissenters in her comparative prices with HDB 5-room replacement flat, there is still a $102 PER SQ FOOT shortfall for downgrading from privatised HUDC to HDB public housing! However, this point was not reported by the reporters who received this en bloc shortfall comparison. That's why I quoted this comment in my blog entry.

In reporting the news, the press media invariably picks and chooses from the array of comments given to it - to fit the angle that they are reporting. That's the reality of media spin!

It was too bad that the Minority Dissenter quoted by The Straits Times did not pad-out the context of the press comments. So the "flavour" was a tad off.

Thank you for creating this opportunity to air THE TWO SIDES OF THE SAME COIN, dear Anonymous!