CONTINUATION: Part 1 of this blog posting ended with Minister Lim Swee Say's anecdote in Parliament asserting that "we are like the little frog, we are deaf to all these criticisms".
So it is only apt that Part 2 of this blog posting starts with an old Chinese saying: "官字有兩個口" (the Chinese character for 'government official' 官 has two mouths 口).
For those of you who have read my previous blog posting about my pet mutant 3-hump camel (by now, further mutated into 3.5-hump), you can probably conjure up this image of a mutant frog with two deaf ears over-compensated by two mouths instead, eh? http://singaporeenbloc.blogspot.com/2009/10/horse-dumbstruck-by-mutant-three-hump.html
Anyway ... now let's get to the Parliament sitting on 18 May 2010 where the Land Titles (Strata) Act ("LTSA") 2010 amendments were passed.
Questions to be borne in mind as you read this long blog posting because you may want to find your own answers as Lady Gaga is too stumped to go "Aha":
Q1: Is LTSA a just law or an unjust law?
Q2: Whilst LTSA is legal, is it legitimate?
Q3: Have MinLaw failed to honour LTSA's primary objective of "for Singaporeans" in contravention of the spirit of "dictum meum pactum" (my word is my bond)?
Q4: Have MinLaw found the right answer to a wrong question by seeking balance between Pro-Sale vs Anti-Sale and miscasting en bloc battles as Majority Consenters vs Minority Dissenters? Shouldn't MinLaw balance between Pro-Owners vs Anti-Owners because of the natural and inherent conflict between Sellers as owners who want to sell high and Buyers as developers who want to buy low?
First, some parliamentary background to understand how laws are made in Singapore ...
At this sitting on 18 May 2010, Singapore Parliament comprises eighty-four Members of Parliament (MPs) (82 from the ruling party and 2 from the opposition party), nine Nominated Members of Parliament (NMPs are representatives who did not stand for General Election but were appointed by the President for 2.5-year tenure) and one Non-Constituency Member of Parliament (NCMPs are opposition candidates who stood for General Election but lost the election with the highest votes amongst such opposition losses but subject to having garnered a minimum of more than 15% of the constituency's electoral votes and provided the total number of opposition MPs and NCMPs in the House would not exceed 3 in aggregate (up to the maximum of 6 as the President may order; the bill was recently passed to increase to 9 in future). Unless the ruling party's Party Whip is lifted (which is limited to rare occasions, eg, on issues such as abortion or human organ transplant), the 82 MPs from the ruling party would be obliged to vote along party line for the bills tabled. The NMPs and NCMPs can vote for/against (or abstain from voting on)all bills except on those relating to constitutional amendments, use of public funds, no confidence motions and presidential removal.
The bill is first tabled for First Reading where it is introduced (in the case of LTSA 2010, the First Reading was on 20 Apr 2010). Usually, another month or so would elapse before the bill is then tabled for Second Reading where issues/questions are raised by members of the House and clarifications/answers are provided by the ministers (for LTSA 2010, the Second and Third Readings were on 18 May 2010). Most times, the Second Reading and Third Reading are collapsed into one session. After the Third Reading, the bill is invariably passed given that the Party Whip is rarely lifted amidst an overwhelming 82:2 parliamentary composition. After going through some internal checks for, say, breach of minority rights, it is eventually sent to the President for assent and for gazetting when it then becomes law with effect from the date cited in the gazette. In some cases, the gazetted law may come into operation only at some future date to be announced by the relevant ministry or authority.
So much for a brief outline of Singapore's law-making process above.
The opening speech by Law Minister, K Shanmugam, the questions/issues raised by MPs and NMPs and the ministerial replies thereto: http://www.scribd.com/doc/32509450/LTSA2010-ParlDebate-18May [Extracts are reproduced verbatim in the rest of the points made in this blog posting.]
Due to the length of this blog posting, here is a listing of the topic headings that have been yellow-highlighted for your easy scroll-search:
8.1 MinLaw's 1st guiding consideration: Pro-Sale vs Anti-Sale ... OR Pro-Owners vs Anti-Owners?
8.2 MinLaw's 2nd guiding consideration: We won't prescribe but, for your estate's en bloc sale, you may adopt some of these suggested measures which "ARE NOT WITHOUT MERIT" and "MAY WELL BE VERY USEFUL"
8.3 Reminder of 1998/99 Hansard "for Singaporeans" promise
8.4 Market forces (100% consent) vs Majoritianism (80% or 90% consent)
8.5 Why super-majority of 80% (90%) want to en bloc
8.6 Consequences of non-disclosure of Sale Committee members' conflict of interest
8.7 Information Booklet on en bloc process for Owners
8.8 Environmental concerns over age of en bloc estates
(a) Minister K Shanmugam's reply:
“Before I address the specific issues raised, let me reiterate the Government's thinking in deciding on what should be the safeguards prescribed in the legislation. We are guided by two main considerations.
First, we seek to balance the interests of all owners. Those who are anti-en bloc sale want to have the sale process made more difficult; those who are pro-sale want the process made easier. Our task is to decide what would be a fair regime that will make the process more transparent to protect the interest of all strata unit owners, whether they are pro-sale or anti-sale. Neither side will be totally happy with the decision of the Government. But it is a matter of judgement and we have to try and strike a fair balance. ”
(b) Lady Gaga is too stumped to even go "Aha" with this underpinning clarification.
Under Part 1 of this blog entry, I piggy-backed on National Geographic’s “Be Curious” mantra. In my opinion, the propensity and ability to ask questions are important. But asking the right questions is even more vital. One could ask the WRONG QUESTION and get the RIGHT ANSWER! Scary, eh?
Seeking balance is much lauded. It has to be because there are invariably two sides to a coin.
But why is the good minister making out en bloc sale as “PRO-SALE” versus “ANTI-SALE”? Is MinLaw asking the WRONG QUESTION? If so, is MinLaw therefore guided by the wrong considerations in seeking this all-important balance?
After all, whether as Majority Consenters or Minority Dissenters, we are all Owners. As Owners (whether we want to sell (or NOT sell at all), or sell at what price, to whom, when or under what conditions), we are in the SAME BOAT with intertwining rights, obligations and interests DESPITE the probable acrimony between Majority and Minority – at times simmering and at other times seething.
Have en bloc battles been wittingly (or unwittingly) miscast as in-fighting amongst Owners (ie, Majority against Minority) to detract or deflect Owners from the real opponent in such contests?
Q: So who is the real opponent in an en bloc sale?
A: It is the Developer.
Why the Developer? Because Buyers and Sellers have inherently and naturally opposing objectives from time immemorial.
Developers as Buyers would want to buy the estate at as low a price as possible.
Owners as Sellers would want to sell the estate at as high a price as possible. Or NOT sell at all, at whatever price, although this segment is likely the Minority of Minorities if the Gahmen's experience in public housing Selective En bloc Redevelopment Scheme (SERS) is anything to go by. Under SERS,the en bloc process is respectfully and properly "managed" despite these public housing flat owners NOT being given a chance to consent/dissent because the sale is invoked under land acquisition powers. BUT these owners are given the option of buying a brand NEW and READY-BUILT flat within the SAME neighbourhood vicinity at a PREFERENTIAL RATE on top of the public housing SUBSIDY.
Let's distill the above into equations and you can see how interesting the picture evolves:
(A) PRO-SALE ≠ PRO-OWNERS
A "Pro-Sale" stance likely accounts for why the law has so many convenient wriggle room at critical junctures and is calibrated to "die-die-must-sell", eg, by locking-in Majority Consenters at a Reserve Price that could potentially be set as far back as 12+12=24 months ago amidst a likely volatile and upward moving property market that would typically spark en bloc interest, etc, etc, etc. – as elaborated upon in the following two blog postings:
(B) PRO-SALE = PRO-DEVELOPERS
Is "Pro-Developers" what the deaf frogs mean by "government FOR the people" even when the froggies know that corporations are NOT the ones who voted them into government?
(C) ANTI-SALE = ANTI-DEVELOPERS really???
However, "Anti-Sale" sentiment is driven more by the motivation to preserve the estate, architecture, community, sense of time and being, legacy, environmental sustainability, financial wealth, retirement hedging asset, etc, which are all valid and fully deserving of respect. But, in this equational context of entity interest, how many of us genuinely believe that the Gahmen balances the equation to be "Anti-Developers", bearing in mind that this LTSA piece of legislation was incepted to (i) create more housing units in prime areas FOR SINGAPOREANS and (ii) facilitate urban rejuvenation and higher land-use intensity as part of our national agenda? Get real, eh?
(D) PRO-OWNERS = ANTI-DEVELOPERS
This equation balancing the interests of Owners vis-a-vis Developers is more natural because Sellers and Buyers have inherently conflicting objectives. More importantly, this equation gives full credence to "government FOR the people" because most owners of residential condos are individuals.
(E) ANTI-OWNERS = PRO-DEVELOPERS
Even whilst guided by the motto of "government FOR the people, this reverse equation from paragraph (D) above is valid because en bloc redevelopment must also be commercially viable for the corporate developers. Hence, the law must necessarily balance the Developers' needs to some degree in order to achieve the dual national objectives of "urban rejuvenation and higher land-use intensity" whilst NOT losing sight of the primary target to "create more housing units in prime areas for Singaporeans" (as professed by the then Minister of State for MinLaw in Parliament in 1999 when LTSA was incepted).
SUMMARY POINT: Is the Gahmen “FOR” the people in calibrating the law as a balance between PRO-SALE and ANTI-SALE? If the Gahmen is truly “FOR” the people, then they should “do right” by RE-calibrating this law as a balance between PRO-OWNERS and ANTI-OWNERS.
8.2 MinLaw’s 2nd guiding consideration: We won't prescribe but, for your estate's en bloc sale, you may adopt some of these suggested measures as they "ARE NOT WITHOUT MERIT" and "MAY WELL BE VERY USEFUL"
(a) Minister K Shanmugam's reply:
“Second, the Government is guided by the principle that we should not micro-manage the process and prescribe too many requirements as they may not be applicable to every development. Some of the measures suggested by Members ARE NOT WITHOUT MERIT. They may well be VERY USEFUL for specific developments, and OWNERS MAY WISH TO ADOPT THEM. But it does not follow that these requirements should be or can be prescribed for every en bloc sale. Doing so may introduce unnecessary rigidity and pose considerable difficulties for owners if the requirement does not make sense for their particular development. HENCE OUR STANCE IS NOT TO BE OVERLY PRESCRIPTIVE. The real point is that OWNERS ARE FREE TO ADOPT THESE MEASURES IF THEY THINK THEY ARE SUITABLE for their particular circumstances. Thus, THE ULTIMATE CHOICE IS WITH THE OWNERS THEMSELVES ON HOW THE SALE SHOULD BE CONDUCTED.” [Capitalization emphasis is by The Pariah.]
(b) Lady Gaga is too stumped to even go "Aha" with this underpinning clarification.
After they INSCRIBE the law that massively intervened with "free market forces" in PRIVATE PROPERTY OWNERSHIP RIGHTS, they are not shy to say that they should not PRESCRIBE what should be done in the "free market"! Is this shameful or shameless? Which is worse, huh?
Still, the good minister was gracious enough to acknowledge that “some of the measures suggested by Members are NOT WITHOUT MERIT. They may well be VERY USEFUL for specific developments, and OWNERS MAY WISH TO ADOPT THEM.” For that, he deserves applause for being sufficiently open-minded (in itself, that's quite a rare quality these days). So Owners take note, the good minister is essentially saying: ADOPT THESE THREE MEASURES FOR YOUR ESTATE WHEN USEFUL BUT WE WILL not PRESCRIBE IT BY LAW TO HELP YOU! Well, God helps those who help themselves, eh? Except that God doesn't play the card of Majoritianism (at least not insofar as I know).
the Unknown Unknowns of veritable Rumsfeldian Theory made popular in 2002 - "There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know."
When you don't know what you don't know, you won't and can't ask - Correct?
As you read on, keep this ONE QUESTION at the back of your mind: "Is MinLaw reasonable in their expectation of the level of knowledge and skills of home-owners as laypersons (whether as Sale Committee members, Majority Consenters or Minority Dissenters) at such early stages of an en bloc attempt?"
Sigh ... well, at least now we have it on record that MinLaw expects home owners facing en blocs likely for the FIRST TIME IN THEIR LIVES (EXCEPT for serial condo raiders and flippers) to know and ask for the following UPFRONT at the very initial phase of the en bloc process:
(i) to demand that the Property Agent discloses to Owners the Residual Land Value (RLV) with its various sensitivity permutations/analyses (best case, worst case, likely case, maximum/minimum upside or downside development potential, varying design/planning concepts, and different construction/financing cost scenarios, etc) that would be used by such Property Agent to peddle their estate to potential Developer-bidders,
(ii) to ask that Valuation Report be split into two parts (because valuations are outrageously expensive to get - then at least get the Apportionment Method professionally established upfront which is not too costly), and
(iii) to ask for a contractual requirement for Re-Affirmation by Majority Consenters just before the estate is being sold down the Singapore River in order to counter-act the legislative loophole which brazenly sanctions the "DO FIRST, TELL LATER" Syndrome by the Sale Committee – notwithstanding that the Sale Committee volunteers are usually NON-experts who are typically gutsy enough to sign multi-million or near-billion dollar deals under the Sale and Purchase Agreement with the selected Developer-buyer and thus effectively sell what does NOT belong to such Sale Committee members.
does MinLaw seriously expect such requirements to be nailed down UPFRONT in the Letter of Appointment that is drafted by the no-sale-no-fee Property Agent?
WithOUT this pre-specification, the Property Agent can subsequently claim that the "second set of books" that they will be cooking to peddle the en bloc estate to potential Developer-bidders are their proprietary investment proposals and therefore NOT available to Owners. Likewise, the Property Agent operating on no-sale-no-fee basis would naturally scrimp on expenses unless it is required by law or by industry practice. At such a preliminary stage PRIOR TO even drafting of the Collective Sale Agreement (CSA), it doesn't make sense for the Property Agent to engage a professional appraisor upfront to give a written Apportionment Method recommendation justifiable for that specific estate. Why would any Property Agent do something so incredibly stupid when this legislative gap conveniently allows such Property Agent to naturally exploit the line of least resistance to improve the chances of hitting the tipping point (ie, give full play to "Tyranny by the Majority")? Other people may be stupid but Property Agents are typically clever people (sometimes too clever, if you know what I mean)! So, are the foregoing in the interest of Owners who are the very people that MinLaw purportedly serve as public servants?
is MinLaw for real or what?
As for the ministerial concern that the Gahmen "should not micro-manage the process and prescribe too many requirements as they may not be applicable to every development", as you read the following three posers, you can't help but wonder if ...
2 Curious Cats + 2 Fat Cats = 5 Slippery Dolphins
- Which en bloc estate would be sold without establishing a basis for Apportionment Method? Answer: None. Reason: The law mandates that the Apportionment Method must be set out in the CSA. Ancillary question: How many en bloc estates have ALL-IDENTICAL three factors (ie, unit sizes, share values and market valuations) used in determining Apportionment Method? Answer: Not many. The moment there is variance between unit sizes and share values (quite common given the trend of variety of choices that developers typically offer to home-buyers in a project and the share value legacy issue created by the Commissioner of Buildings), it is ripe for exploitation under "Tyranny by the Majority". The moment it is a mixed-use development, market valuation becomes intrinsic because commercial land-use carries an inherent premium.
- Which en bloc sale would be realistically wrapped up within, say, 3 months from the date of first CSA signature to the date of application to Strata Titles Boards (STB)? Answer: None to date. If the en bloc sale process is as short as an individual resale, then it would negate the need for Re-Affirmation by Owners because the property market is unlikely to move drastically within such a short period of, say, 3 months compared to the legislated 12+12=24 month en bloc window, and bearing in mind that Owners typically would NOT know the Sale Committee volunteers from Adam (or Eve).
These three requirements hit critical milestones at the START, MID-POINT and TAIL-END of the necessarily lengthy en bloc process. Whilst they MAY NOT be applicable to "EVERY" development, they are likely to be applicable to "MOST" developments. Even if, say, an estate has all three identical factors used in determining Apportionment Method, the professional appraisor would then find it very simple to give a written report which would cost a very nominal sum. In other words, where the requirement is NOT applicable, it would be very easy to overcome it at very little cost and therefore would NOT create the rigidity and difficulties much feared by MinLaw, eh?
Surely, laws are calibrated to meet the needs that are PREVALENT and CRITICAL, as opposed to meeting the needs applicable in ALL cases, eh? So on what basis does MinLaw reckon that such additional legislative provisions would "introduce unnecessary rigidity and pose considerable difficulties"? In a parliamentary composition of 82:2, where is the rigour of parliamentary "debate" so that the most optimal laws would be forged only AFTER going through the cut-and-thrust of the Battle of Ideas by men and women with good hearts, bright minds and strong morals? Sigh ...
8.3 Reminder of 1998/99 Hansard - "for Singaporeans" promise
(a) MP Ellen Lee's parliamentary speech:
"I opine that it is timely to remind ourselves what was said in Parliament in 1998 and 1999 (as reported in Hansard Vol. 69 at Cols. 601-607 and Cols. 632-634) that the en bloc sale legislation was to, I quote, "CREATE MORE HOUSING UNITS IN PRIME 999-YEAR LEASEHOLD OR FREEHOLD AREAS FOR SINGAPOREANS" and that "a secondary benefit is that these developments, especially the older ones, could have been rejuvenated through the en bloc process". THE SECONDARY BENEFITS OF URBAN REJUVENATION AND HIGHER LAND-USE INTENSITY AS PART OF OUR NATIONAL AGENDA MAY WELL BE ACHIEVED AT PERSONAL COST TO CITIZENS, by (i) impacting their homes, and (ii) downsizing or downgrading the real estate assets that form part of their retirement nest egg. WHILST IT IS RECOGNISED THAT EN BLOC SALE OFFERS ONE MORE CHANNEL TO MONETISE THE ASSETS, WE SHOULD BEAR IN MIND THAT DEMOGRAPHIC AGE PROFILE OF OWNERS SPANS A SPECTRUM AND TOO EARLY MONETISATION FOR OWNERS BELOW THE AGE OF 70 MAY NOT BE PRUDENT, GIVEN PRESENT LIFE EXPECTANCIES OF 80 FOR MEN AND 84 FOR WOMEN." [Capitalization emphasis by The Pariah.]
(b) Minister K Shanmugam's reply:
"Ms Lee also queried whether we have achieved the objective of creating more housing units in prime areas and rejuvenating older properties through en bloc sales. Let me share some statistics with the House. Between 2005 and 2009, there were 462 en bloc transactions. Of these, almost half, or 217, are being redeveloped or have been redeveloped. These 217 developments originally had about 12,000 strata units - slightly less, 11,994. After redevelopment, the resulting new developments will have more than 26,000 strata units, more than doubling the number of strata units. Specifically, for example, the 152-unit Westpeak Condominium, sold in 2006, will be redeveloped into The Parc Condominium, with 659 units. Also sold in 2006, Le Marque and Century Ville, totaling 53 units, will be redeveloped into 278-unit Cyan Condominium."
(c) Lady Gaga is too stumped with this tangential response to even go "Aha" because a ministerial reply surely ain’t "dumb"!
Perversely and ironically, the ministerial reply assuring the House of the multi-fold increase in land-use intensity post-en bloc (one of the “secondary” national objectives underpinning LTSA inception in 1999) has raised this question: Although LTSA is legal, is it legitimate(as presently calibrated) in the face of consistent anecdotal evidence of “Double the price; Half the size” faced by en bloc owners in the aftermath?
Are non-landed property owners second-class citizens compared to landed property owners and HDB heartlanders? Do bear in mind that non-landed condo owners likely make up a significant proportion of the $48.68 billion Net Amount of Withdrawals (EXCLUDING interest that would otherwise have accrued) under Residential Properties Scheme made by 238,000-odd CPF members as at 31 Mar 2010 (not to mention the likely tripling effect when correlated to likely household size). Most condo owners/families are upper-middle or middle-class Singaporeans and NOT as savvy as MinLaw and MND make them out to be.
How else can LTSA be re-calibrated to improve its legitimacy and unlock land value for extant owners (rather than corporate developers)? Example: By piggy-backing on South Korea’s mandatory one-for-one (1-4-1) exchange for “qualifying Owners” but customizing it to suit Singapore’s context whilst ensuring commercial viability for developers (ie, as one more settlement option, pegged to SAME SIZE by Strata Title Area, SAME LEVEL and SAME ORIENTATION as per living room main window with limited ± 20% variance).
Singapore's version of a customized 1-4-1 exchange could be operationalized along these lines:
My dear Honorable Minister, it is precisely the point when land value is unlocked –
152 en bloc units yielded 659 in The Parc (334% increase)
53 en bloc units yielded 278 in Cyan (425% increase)
As stated in Part 1 of this blog posting, Property is all about Location and Timing. So how many extant en bloc owners could afford to buy back same size, same floor level with the en bloc sale proceeds collected a few months prior to soft launch of the new redevelopment even if they had wanted to? If an en bloc owner is paid $600 psf in Jan but the new project is sold at $1300 psf in Apr, what does it mean?
In any case, the key words from the 1998/99 Hansard record invoked by MP Ellen Lee were "... create more housing units in prime 999-year leasehold or freehold areas FOR SINGAPOREANS". Further, in correlation to the other point made in paragraph 8.5 below where MP Ellen Lee specifically posed if the Minister could clarify if "en bloc legislation may be unwittingly unlocking for the developer-buyers more than the homeowners", you'd reckon that MinLaw would have done their homework in preparation for this parliamentary sitting by providing the following statistics for those estates that went en bloc "in prime 999-year leasehold or freehold areas" and that have since been launched for sale as a new condo project, viz:
- Name of estate in “prime 999-year leasehold or freehold area”
- Dates: en bloc estate vacant possession and redevelopment soft launch
- Number of units
- Aggregate strata title area
- Aggregate net saleable area
- Number of en bloc units owned by Singaporeans
- Number of redeveloped units sold to (i) Singaporeans and (ii) foreigners/PRs (if not fully sold – percentage of total units sold based on the foregoing)
- Number of redeveloped units sold to en bloc owners
- Average price paid to en bloc owners for psf of strata title area
- Average price paid by new buyers for psf of strata title area (NOT net saleable area)
As any casual observer of parliamentary proceedings would have reasonably concluded, issues/questions by MPs are given to the relevant ministry PRIOR TO the sitting because TV telecasts of such parliamentary debates show ministers reading off their replies from prepared text. [Also, as stated in Part 1 of this blog posting, I have been urging MinLaw since 2007 to gather such pre- and post-en bloc statistics as part of my active citizenry on this issue.]
So why the fudgy-dodgy pussy-footing by MinLaw?
Was it because the Gahmen have FAILED to live up to their words said in Parliament in 1998/99 that the PRIMARY OBJECTIVE of LTSA was to "... create more housing units in prime 999-year leasehold or freehold areas FOR SINGAPOREANS"???
Is this transparency? Is this accountability? Is it reasonable for thinking citizens to query, to doubt, to lose faith when "dictum meum pactum" (my word is my bond) does NOT hold even when uttered in Parliament?
Not only do I question if this LTSA law is “JUST” versus “UNJUST”, I also query whether LTSA’s LEGAL provisions are “LEGITIMATE”. I ask this because of the consistent anecdotal evidence of “Double the price; Half the size” post-en bloc whilst harvesting significantly higher land-use intensity (300%-400% EXTRA, using MinLaw's cited examples) when land value is unlocked by extant owners (mostly citizens) for (i) corporate developers and (ii) foreigners who form a sizeable proportion of new owners of developments in prime/choice locations. Why are Singaporeans left worse off post-en bloc, bearing in mind the increased life expectancy and the fast-accelerating baby-boomer ageing demographic structure???
8.4 Market forces (100% consent) vs Majoritianism (80% or 90%)
(a) MP Ellen Lee's parliamentary speech:
"There are dissenting views that the Bill by mandating that the will of the requisite majority would prevail over the will of the minority, even in respect of ownership of private property, has already impinged upon the concept of free market forces which in essence should be based on 100% consent as was the case prior to October 1999 when the previous Bill was gazetted. However, free market forces cannot be given full rein in all circumstances especially when it affects larger national and communal needs. It is believed that once this can is opened, it may unleash different worms with a new set of forces that justify recalibration to counterbalance them."
(b) Minister K Shanmugam's reply:
"Ms Lee, taking the last point that she made, made a reference to unanimous consent. One can really ask whether unanimous consent is the best way to achieve the objectives of unlocking the value in the land, and giving owners a say on how the collective properties should be developed. One single person in a 200-unit development could then hold up the entire development. Does that strike one as fair? So in all these things, you try and strike a balance. ... And I do not think it is these rules or the fact that we allow these en bloc sales is necessarily contributing to the increase in property prices. That is subject to a whole variety of factors which is not appropriate to go into here. But supposing we made it very, very difficult to do en bloc, what do you think would be the impact on supply and what do you think will be impact on prices?"
(c) Lady Gaga is so flabbergasted with this off-point answer to even go "Aha" because a ministerial reply surely ain’t "dumb"!
Did MP Ellen Lee at any point suggest (i) repeal of law on 80% (90%) majoritianism and (ii) reversion back to 100% consent??? MP Ellen Lee first said that "the concept of free market forces ... in essence should be based on 100% consent". She then went on to say "free market forces CANNOT be given full rein in all circumstances especially when it affects larger national and communal needs"!!! Was there deliberate intent to obfuscate and confuse the issues at hand? Not only did we not get light nor heat but a damp squid ("sotong" in Singapore army lingo). The ministerial reply isn't even as arty-farty of 1+1 is 11 – Sheesh!
What was even more quirky was the ministerial poser that "... supposing we made it very, very difficult to do en bloc, what do you think would be the impact on supply and what do you think will be impact on prices?" Hmmmm ... to draw a parallel between en bloc sales and Government Land Sales (GLS) as both constitute land supply sources in Singapore – let's say the property market is highly exuberant, does it mean that the Gahmen will make it very, very easy for Developers or lower the bar to achieve successful bidding in GLS (perhaps by disclosing the Reserve Price as per the recent public badgering of the Ministry of National Development by REDAS President)???
Are condo owners so plainly suckers that MinLaw would even float this concept by us?
8.5 Why super-majority of 80% (90%) want to en bloc
(a) MP Ellen Lee's parliamentary speech:
"This gestation period is too long. As en bloc interest is usually sparked in an upward moving property market, there is increased likelihood that within the period of up to 24 months, the current market value may already be out-of-sync with the reserve price that was locked-in by the majority consenters via the Collective Sale Agreement. Despite these pre-loaded factors (long gestation period and upward spiralling market), the Bill does not provide for re-affirmation of majority consenters. ... Looking at the frenzy that surround en bloc transactions in the recent two years, it is clear that one of the key factors for the potential developer-buyer astronomical bidding price is the residual land value which en bloc legislation may be unwittingly unlocking for the developer-buyers more than the homeowners. I wonder if the Ministry could clarify if this perspective is correct."
(b) Minister K Shanmugam's reply:
"Ms Lee spoke about how en bloc sales are achieved at the personal costs to owners who have to sell their homes and downgrade their real assets. An en bloc sale can only take place if an overwhelming majority of owners think the sale is beneficial to them. It will be odd if more than 80% of owners vote for an en bloc sale which is disadvantageous to all of them. And the sale still has to pass the good faith test. Ms Lee also asked if the Residual Land Value of the properties which results in 'astronomical bidding price' by buyers is unlocking more value for the developer-buyers than the homeowners. If a transaction is fair, it should result in a win-win situation for the transacting parties. If buyers are prepared to pay very high prices, it must also benefit the homeowners who are selling their properties. The legislation provides that the en bloc sale must be done through an open tender. This means that the price obtained should be the best price under the prevailing market conditions. But if sellers feel that even this best price is not high enough and they are not benefiting adequately, they can choose not to sell."
(c) Lady Gaga is too stumped with this non-reply to even go "Aha" because a ministerial reply surely ain’t "dumb"!
PERENNIAL CONUNDRUM of en bloc sales: Why on earth would a super-majority of 80% (90%) of sane and sound minds consent to an en bloc sale if it is such a raw deal of "Double the price; Half the size" for Owners in the post-en bloc aftermath???
That's the nub of the ministerial challenge to MP Ellen Lee when the good minister said "... An en bloc sale can only take place if an overwhelming majority of owners think the sale is beneficial to them. It will be odd if more than 80% of owners vote for an en bloc sale which is disadvantageous to all of them."
the devil is in the details and it brings us back to the LOOPHOLES and GAPS carefully calibrated in the very law itself as per the links to two previous blog postings embedded under paragraph 8.1 where I make the point that Pro-Sale ≠ Pro-Owners.
For MinLaw to understand how "odd" that "more than 80% Owners would vote for an en bloc which is disadvantageous to all of them", MinLaw should ask themselves the following questions (putting aside the obvious driving motivation of serial condo raiders/en bloc flippers and such other Owners who are desperately strapped for cash due to business failures, debts or other misfortunes):
- Under the law, can the Reserve Price potentially be set as far back as 12 months prior to signing of the CSA? Answer: Yes.
- Under the law, can the CSA signatory back-out of the contract beyond five business days from date of signing? Answer: No.
- As valuation is acknowledged to be more an art rather a science, can the Sale Committee obtain and use a valuation report that is closer to the Reserve Price since the law does NOT require more than one valuation report for cross-validation purposes? Answer: Yes.
- Under the law, can the Sale Committee take a period of up to ANOTHER 12 months from the date of hitting the Majority Consent tipping point (if the Property Agent is an astute market watcher, the public tender would be timed to just-before-market-spike to improve the likelihood of successful purchase by Developer-buyer) to (i) hold public tender and/or enter into private treaty negotiations with a Developer-buyer, (ii) sign a Sale and Purchase Agreement to commit all Owners into such sale WITHOUT going back to the Owners and (iii) file an application to STB for a collective sale order? Answer: Yes. [This assumes that Sale Price is close to Reserve Price and Current Market Value in the valuation report subject to any contractual leeway that the no-sale-no-fee lawyer (a) may have embedded in the CSA to give even more wriggle room to the Sale Committee and (b) is not obliged to inform each CSA signatory at the EOGM or upon witnessing of signature.]
- Typically, for en bloc interest to spark, would the property market tend to be on an upward moving trend and possibly even volatile? Answer: Yes.
- Under the law, even vis-a-vis a likely volatile and upward moving property market and potentially 12+12=24 months after the Reserve Price was first set, can the Majority Consenters file an objection to STB if they have any violent objections to the Sale Committee's "DO FIRST, TELL LATER" private treaty contract with the Developer-buyer or the accuracy/basis of the valuation report or they know of certain irregularities? Answer: No.
If you as a layperson can understand it, then do you find it even ODDER (hey, if a certain minister can say "betterer", you bet this plebian can say "odder") that MinLaw has difficulty understanding it when there are scores of graduate and post-graduate civil servants (some of whom are even educated through publicly funded scholarships) working their tails off in MinLaw ostensibly "for" the people? Hmmmm ... are these frogs not only DEAF but also BLIND too??? OMG!!!
Then the minister claimed in a cavalier manner that it must "mean that the price obtained should be the best price under the prevailing market conditions. But if sellers feel that even this best price is not high enough and they are not benefiting adequately, they can choose not to sell".
Indeed, an Information Booklet would go some way to de-mystify the en bloc process for Owners. The key word here is "INFORMATION". Will such publication be of "informational" value? Or will it simply be a condensed cartoon version of LTSA that serves to "translate" legalese into plain English and NOT "educate/inform"? This may well be another exercise of Form over Substance.
To draw an analogy, one could say that a person is "slim", or "skinny", or "underweight", or "undernourished" - they each tell a different story.
Oi, why are Owners omitted? It is now on record that MinLaw will consult "the STB, the Law Society and the Singapore Institute of Surveyors and Valuers (SISV)" IF the Information Booklet is to be produced! Yet again, MinLaw has shown itself to be perversely determined to EXCLUDE the very non-landed home-owners who would be directly impacted by this law when our "Endearing Homes" (MND's tag-line) would be sold by (i) Majority Consenters willingly (or unwillingly but with no way out) and (ii) Minority Dissenters as forced to by law. Another classic example of cross-talking that I cited in Part 1 of this blog posting, eh?
MND says "Endearing Home".
MinLaw says "Dear Majority Die-Die-Must-Sell En Bloc;
Dear Minority No-Choice-Must-Evict En Bloc". Hee, hee ... I think I should switch vocation to write slogan taglines for MinLaw, eh? Gahmen set up REACH as a Feedback Unit but if and when MinLaw set out to produce an Information Booklet that is intended to help en bloc home-owners, MinLaw would consult everybody and anybody EXCEPT the Owners! Does this NON-sense make sense? Sounds like another Funny Rummy Theory of "Unknown Unknowns" except that it is more a case of "Hide Known Unknowns", if you ask me.
"For example, in 2009, arising from the public feedback on the lack of understanding over apportionment methods, we have worked with the Singapore Institute of Surveyors and Valuers (SISV) to issue a set of guidelines on general apportionment methods ...". This issue didn't arise in 2009 from public feedback! It arose on 20 Sep 2007 during parliamentary debate, as raised by the then NMP Siew Kum Hong to the then Law Minister, Prof S Jayakumar, and as reflected in: http://singaporeenbloc.blogspot.com/2007/11/whats-next.html
- NMP Siew Kum Hong said: "It seems to me a little irresponsible of the SISV to recommend methods of apportionment without also providing detailed guidelines on how to apply them in a fair and equitable manner. It is tantamount to giving a loaded gun to a soldier without also providing the necessary training and guidance in its usage. Is it then any wonder that the recommendations are frequently abused in such a manner as to effectively oppress minority owners?"
- Minister for Law Prof S Jayakumar replied: "Mr Siew Kum Hong expressed his unhappiness with the guidelines, especially the guidelines issued by SISV, on how proceeds should be apportioned or distributed. I would look into this. But let me say that we understand that the SISV is working on refining valuation guidelines which are often used when valuers are asked to determine apportionment in sale proceeds. Of course, we are not able to specify in the law a standard apportionment method because there are a multitude of factors to consider in deciding on a single method of distributing the sale proceeds, including share value, size of unit, market value, and so on. So it would be very difficult to specify one standard method that you could apply to all sizes, designs and types of developments. But I take his point about the guidelines, and we will have discussions with the SISV."
Effectively, it took SISV almost two years to issue the revised Valuation Guidelines for Collective Sales:
Whilst some words have been added here and there, the guidelines remain suitably malleable and would hardly minimize (much less preempt) "TYRANNY BY THE MAJORITY" to exploit the LINE OF LEAST RESISTANCE with the driving objective of hitting the TIPPING POINT of majority consent. This opinion is based on a joint reply by MinLaw and SISV dated 29 Dec 2007 to a ST Forum Letter: "As guidelines, they are meant to assist owners in selecting the distribution method suitable for their development. The recommended methods (based on share value, strata area, valuation or a combination of them) have been used in many successful collective sale applications made to the Strata Titles Board. However, the institute appreciates that there could be specific situations, for example, due to some unique or peculiar aspect of the development where the strict application of the guidelines may be viewed by some to be unfair. This is why there can be no single prescribed method of distribution, and THE MAJORITY OWNERS WILL HAVE TO DECIDE THE BEST METHOD THAT WILL BE ACCEPTABLE TO ALL OWNERS." [Capitalization emphasis is by The Pariah.]
Translation: MinLaw and SISV admitted that it is up to the "MAJORITY OWNERS"! See, another piece of evidence to reinforce the point that the Gahmen is PRO-SALE (and NOT PRO-OWNERS) as there is many a slip between the cup and the lip, remember? One would have thought that there would be some professional basis of apportionment pegged to land survey and appraisal methodologies that are substantiated by facts or mathematical measurements. Doesn't it make you wonder the kind of exams that valuers and surveyors take to earn their qualification credentials? Surely, it is NOT a case of holding one's wet finger in the air to determine wind direction??? Tsk, tsk ...
"ACCEPTABLE to ALL owners" must take the cake for being the "Misnomer of the Decade" – did MinLaw and SISV both conveniently forget that Minority Dissenters would be FORCED into en bloc sale, whether or not it is "ACCEPTABLE" to them as Owners??? Little wonder that it was reported on 24 June 2010 that "the position of the city-state in the latest Global Real Estate Transparency Index compiled by Jones Lang LaSalle has dropped because scores of other countries improved, while Singapore’s stayed the same". At the risk of outlining the intestines in drawing the picture of a doll, could we ask how would MinLaw's PRO-SALE "facilitation" in the en bloc arena achieve X-ray transparency?
The above is even more galling when further contextualised vis-à-vis:
- SISV and MinLaw are fully cognizant of the legacy issue involving share values created by the Commissioner of Buildings (COB) who set share value band-widths very widely at intervals of 100 sq m (viz, 1,076 sq ft – that's almost an entire apartment these days). It was only in Apr 2005 (only 5 years ago!) that COB narrowed the bandwidth interval to 50 sq m.
- Valuation is more an art than a science (and, as highlighted by MP Ellen Lee in the House: ”But the valuer is mandated by law to come on stage only after the curtain falls – ‘to provide independent valuation upon close of public tender’ and the lawyers and agents are not prohibited by law to work on no-sale-no-fee basis despite the inherent moral hazards. It is also noteworthy that these valuers, lawyers and agents have recurring business relationships with developers whereas they are likely to act only one-time for the en bloc homeowners.”).
As shared with MinLaw since 2007, I reckon there is a more mathematical-based method as annotated in: http://singaporeenbloc.blogspot.com/2007/03/sales-proceeds-formula-distribution.html
(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.
CONTEXT: (A) Bear in mind that MinLaw deemed it fit to legislate a kindergarten definition of "financial loss" in LTSA. (B) Note numerous disputes to date in STB/court commonly cite Apportionment Method as one of the more common grounds of objection but they have consistently failed to gain traction (hence, usually omitted in the Grounds of Decision except for a few cases) because of the sequence of en bloc milestones and the way LTSA is calibrated to limit STB/court powers. QUESTION: Given the foregoing context, why did MinLaw FAIL to mandate a mathematically-based and fact-based method for computing Share Value weightage and Strata Title Value weightage for Apportionment Method?
ANSWER: "Tyranny by Majority" is MinLaw's convenient ally in their PRO-SALE (ie, PRO-DEVELOPERS) POLICY. How else can MinLaw ensure that estates DIE-DIE-GET-SOLD in order to quickly achieve the SECONDARY OBJECTIVES of urban rejuvenation and higher land-use intensity (never mind about the PRIMARY OBJECTIVE of "FOR Singaporeans")? So what if TYRANNY is invoked??? After all, the super-majority voted to be tyrannical as part of DEMOCRACY! This is akin to saying, if all whites agree it's kosher to lynch blacks, why would Gumbo Dumbo and Poofy Goofy think anything is awry, eh? I reckon MinLaw have no inkling of the implications of invoking MAJORITIANISM over PRIVATE PROPERTY RIGHTS in the ABSENCE OF EMINENT DOMAIN and POLICE POWER considerations.
8.8 Environmental concerns over age of en bloc estates
(a) NMP Paulin Tay-Straughan's parliamentary speech:
"The third recommendation proposes that, in view of environmental concerns on wastage due to unnecessary construction, the age and state of repair of buildings be included as factor in the STB’s evaluation of the application for CS. Christudason and Mehta’s preliminary findings reveal that for 223 out of the 325 buildings which have gone through CS since 1999, the majority, 80 buildings were between 21-25 years of age. However, a small number of developments, 28 buildings were only 11-15 years of age at the point of going through CS. THE RESEARCHERS PROPOSED THAT SINGAPORE COULD CONSIDER THE EXAMPLE OF HONG KONG WHERE THE AGE AND STATE OF REPAIR OF A BUILDING ARE FACTORS WHICH THE TRIBUNAL MUST TAKE INTO CONSIDERATION BEFORE IT APPROVES AN APPLICATION." [Capitalization emphasis is by The Pariah.]
(b) Minister K Shanmugam's reply:
"That said, on the ground there has not been a rush to redevelop properties which are not too old. From 1999 until now, the STB had approved 160 applications for en bloc sales. Of these 160 cases, only one case involved a development less than 10 years old. It was nine years old at that time. The other 159 developments were more than 10 years old when they applied for an en bloc sale. [Ninety-nine percent were above 10 years old, 69% (about 70%) were above 20 years old; and about 34% were more than 30 years.] There are, I note, some disparities between the statistics I have just cited and those cited by Prof. Straughan from the NUS report that she quotes. I am not sure of the data source used by the NUS researchers. They may perhaps have included the developments which had obtained 100% consent from their owners to go for an en bloc sale. When there is a 100% consent, there is no need for owners to make an application to the Strata Titles Board for an en bloc sale. AND IF THERE IS UNANIMOUS CONSENT FOR AN EN BLOC, REALLY WE SHOULD BE CAREFUL ABOUT ENACTING RULES WHICH WILL PROHIBIT SALE BASED ON THE AGE OF A PROPERTY. [Capitalization emphasis is by The Pariah.]
(c) Lady Gaga is so flabbergasted with this off-point answer to even go "Aha" because a ministerial reply surely ain’t "dumb"!
What's wrong with you people, eh? The law allows it. The majority embraced it. Excuse me, this is Singapore. It is all about RULE OF LAW and DEMOCRACY – Yeh!!! Will concrete and glass stand up to protest? So why include those estates that went en bloc based on 100% consent even though perfectly good glass panels, fully operational air con units, functioning aluminium window frames and grilles and freshly repainted concrete walls all go under the wrecker's ball, eh?
If you probe this issue a little further, does it make a mockery of MND's and URA's hoo-ha about their strategic vision for the next 50 and 10 years under their grand Concept Plan and Master Plan, respectively??? To add salt to injury, for the past decades, BCA even stipulates high quality concrete with a functional obsolescence life-span of 50-60 years.
"Sustainable Development Blueprint":
We have the Inter-Ministerial Committee on Climate Change (IMCCC) set up in 2007, chaired by non other than the former Law Minister, Prof S Jayakumar under whose watch LTSA was incepted in 1999! Life is full of irony, eh? We also have the Inter-Ministerial Committee on Sustainable Development (IMCSD) set up by Prime Minister Lee Hsien Loong in Jan 2008:
In IMCSD's above letter to PM Lee on 8 Apr 2009: "SUSTAINABLE DEVELOPMENT FOR SINGAPORE IS ABOUT ACHIEVING DEVELOPMENT WHILE MINIMISING ITS IMPACT ON RESOURCES AND OUR ENVIRONMENTAL QUALITY, such that development today does not come at the expense of the quality of the living environment for current and future generations. Looking ahead, we are aware that population and economic growth could strain our domestic resources and impact our environmental quality if we are not vigilant. WE ALSO NEED TO BE ABLE TO RESPOND TO GROWING GLOBAL RESOURCE SCARCITY AND DO MORE AS A RESPONSIBLE GLOBAL CITIZEN TO COMBAT THE CHALLENGES POSED BY CLIMATE CHANGE." [Capitalization emphasis is by The Pariah.] Ugh???
Reeeeally??? But by calibrating the law to sanction en bloc demolition on the day of TOP issuance, is MinLaw essentially using Mr Market to thumb its nose at MND, URA, BCA and even the Prime Minister's Office when buildings under 30 years go en bloc?
Hongkong's more environmentally sensible en bloc model "where the age and state of repair of a building are factors which the Tribunal must take into consideration before it approves an application" was given short shrift. I get this sense of deja vu because my piggy-back on the rectitude that underpins South Korea's Hapdong Redevelopment en bloc model of 1-4-1 exchange receives similar short shrift from MinLaw. But then MinLaw who are responsible for incepting and calibrating this en bloc law to serve the national agenda of urban rejuvenation and higher land-use intensity are – "conveniently" – NOT part of IMCSD. Huh ... why are you surprised? It ties in neatly with Al Gore's documentary about global warming "An Inconvenient Truth", eh?
325 estates covered in en bloc survey (full + majority consent) comprises:
223 estates out of 325 have gone en bloc
102 estates in the process of going en bloc
223 estates that have gone en bloc comprises:
?? estates 26 years old and above
80 estates between 21-25 years old (36%)
?? estates between 16-20 years old
28 estates between 11-15 years old (13%)
?? estates 10 years old and below
SUMMARY POINT based on NUS numbers: Almost half (49%) of the en bloc estates covered by NUS survey are between the above two estate age band-widths of 11-15 and 21-25 years. Now if we add the in-between missing link for estates between 16-20 years old, this 49% can only go up. As the NUS survey was done in 2009, it means 49%-__??% of buildings with TOP issued between 1984-1998 (merely 11-25 years of age!!!) have gone en bloc DESPITE being built of concrete with functional obsolescence life-span of 50-60 years! I have no words to say – You are the best judge if it is environmentally sustainable, eh?
Extrapolating from the ministerial reply, MinLaw's en bloc statistics since 1999 when the law was incepted are –
160 estates that have gone en bloc (majority consent; excluding full consent) comprises:
34 estates more than 30 years old (21%)
70 estates more than 20 years old (44%)
55 estates more than 10 years old (34%)
1 estate less than 10 years old ( 1%)
SUMMARY POINT based on MinLaw numbers: The classic 80-20 rule of Pareto's Distribution kicked in – Estates below 30 years of age that went en bloc came up to a whopping 79%! That was based on en blocs with majority consent – What would be the percentage by including en blocs with full consent, one wonders??? How did Singapore's representatives walk the straight line at the United Nations Climate Change Conference (the Copenhagen Summit) held in Dec 2009? Singapore is getting hotter and the heat (NOT light) just wears people down, eh? Yawn ... Now, what more can Lady Gaga say but "I am KNACKERED!!!