IN-BETWEEN: Why en blocs are NOT right for Majority Consenters nor Minority Dissenters?

Having focussed on the SOURCE (ie, the en bloc legislation) in the 6 Aug 2008 posting below, let's now turn the spotlight on the IN-BETWEEN. Minority sues Majority, and vice-versa. Developer-buyer sues some Majority or threatens to sue all Majority. Majority sues Developer-buyer. Sue Strata Titles Boards (STB)? Sue Singapore Land Authority? Who’s next? Sue Sale Committee? Sue marketing agent, lawyer?

Why? When Singapore is not even litigious as a society? In fact, we are reputed to be a law-abiding people! By and large, we are even a sticky bunch when it comes to contracts - nothing more, nothing less, by-the-book type. So why???
Answer:

En bloc “windfall” is
300% “shortfall”!

In a recent Straits Times Forum discussion thread, someone succinctly encapsulated it as:
They promise you Utopia during en bloc but you end up in Ethiopia after en bloc!
Yeeha, this says it all, man!

Hindsight is a precise science.

In Straits Times (16 Jun 2007) poll of 40 owners, half expected to downgrade after their estates’ en bloc in locations ranging Sophia Court, Nathanville, The Orange Grove to Minton Rise, Waterfront View because they “have to pay around twice the sum they got from their en bloc sale” for a similar size apartment.

D9: Hilton Towers redeveloped into The Lumos. Business Times (5 Jul 2007) said Developer could “recoup its entire initial investment in its exclusive The Lumos condo by selling just two pent­houses and a few mid-sized units”. En bloc owner got $1088psf but he’d pay $3000psf for comparable-size unit on 2nd floor – 176% difference in the 7 months between receipt of en bloc proceeds and earliest booking in redevelopment. By paying off owners of 72,800 sq ft aggre­gate strata area, land-value was unlocked to create 125,735 sq ft – 73% inventory windfall for Developer on top of 176% price hike!

D16: Waterfront View carved into three plots; one-third already yields 60% of en bloc strata area in new Waterfront Waves. New Paper (4 Feb 2008) recounted plight of Waterfront View en bloc owners who wanted to move back to redevelopment. One is hoping for market downturn to buy 2-bedder at half the size of his old 1,600 sq ft unit for almost $700k (en bloc price $660k). Another bit the bullet with 4-bedder of 1,600 sq ft at $1.27mn (double $630k en bloc sum).

A distinct pattern evolves in the en bloc aftermath as the mantra repeats itself ad nauseum, whether downtown or in the suburbia: From developer-buyer’s perspective:
1-4-2 (buy one; get one free);1-4-4 effectively (if both sold at double price - as is likely because en blocs bubble only when market heats up)
From en bloc owner’s perspective:1-4-½ divided by 2 (twice the price; half the size; quarter the value - en bloc land is shared with double the number of owners after redevelopment)Bear in mind that construction cost is 20-25% of total cost of new development (Straits Times, 24 Mar 2008). However, Q4 construction costs have risen another 20-25% in 2007 compared with 2006 for mid-market condos targetted at HDB upgraders (Business Times, 24 Jul 2008) which in turn translates into 55% or more profit margin shrinkage for this band of developers whereas the profit margin impact is much less at 25% or so for prime market developers (Business Times, 7 Aug 2008). This ill-timed spike is not only due to the global rise in raw material costs and fall-out from regional spats on resource exports but also partly due to government policies being behind the curve. When the corporates are adversely affected, the Gahmen would respond with alacrity - that's great! It was impressive that the Gahmen reacted 3 times within 8 months (Nov 2007, Feb 2008 and Jul 2008) by deferring public sector projects aggregating S$4.7bn to 2010 to ease Developers' construction woes. In sharp contrast, it took the Gahmen nearly a decade before they responded to citizens' en bloc woes by reviewing the Land Titles (Strata) Act (the legislative hole in respect of en bloc vote for mixed residential-cum-commercial estates was extant from Day 1 and it was this hole that kick-started the amendment review) - that's dismal. How I wish the Gahmen would respond with half that alacrity to citizens' woes? Sigh ... but never mind, each of us will have a chance to tell the Gahmen what we really think at the next General Election!

Anyway, back to the point ... with Developers reaping as much as "1-4-4" whilst Owners get raped with "1-4-½ divided by 2", the obscenity is multiplied by the en bloc exponential increase in 2006/07:

Year - Sites - Value (bn)
2007 - 109 - $13.3
2006 - 79 - $ 8.2
1999 - 39 - $ 2.5 (majority consent is legislated)1996 - 36 - $ 1.7 (total consent)
The sense of being aggrieved persists beyond one generation because property ownership is emotive and punches twice below the belt, being part of:

(a) retirement planning (real estate is a store of value/inflationary hedge);

(b) estate planning now deprived from being bequeathed.

Despite being aggrieved, most would concede that Government is “being right” in asserting the greater interest of Urban Renewal.

Is “Being Right” = “Doing Right”? Let’s dissect the “Dào Lǐ“ ( 道 理 ) ("rationale") as applied to the sense and sensibilities of en blocs. "Dào Lǐ“ is more than “rationale”! Its etymology traces back to "Dào" (denoting "the Way" under Daoism) and "Lǐ" (denoting "Logic”).


Urban Renewal (National Cause) through En Bloc/SERS
= Being right

Result of En Bloc: (Personal Sacrifice) as Squatter, Refugee, Downgrader, Downsizer
= NOT doing right

Although this distinction of "being right" versus "doing or NOT doing right" was made in my mega 4-part Nov 2007 blog posting ("After the 2007 law, what's next???"), this point merits re-emphasis. After heeding government exhortations to be prudent and not over-commit in real estate investment, an Owner-Occupier with one residential property would face a daunting prospect. In the en bloc aftermath of “twice the price; half the size; quarter the value”, you simply can’t afford a new replacement unit in same vicinity.

As a reputable property marketing agency was recently quoted in the press as saying:
Property is all about LOCATION and TIMING.

Location is turf issue because it embeds your sense of time/place and defines your community. Location also determines investment value at a first cut.

Timing inherently means that the en bloc process must be a quickie one-nite stand (decide go/no-go and if you go, then you need to get in and out quickly so as to collect the money and buy a replacement unit - whether as a roof over your head or as an asset replacement). It is madness to drag things out over a 24-42 month courtship for divorce (up to 24 months is mandated by law) which only guarantees Displacement, NOT Replacement, in a moving market!

Hence, the present en bloc business model is so, so, so out-of-whack! The current long gestation period serves the interests of everybody BUT the Owners!

Let's draw a correlation between Sovereign Wealth Funds buying into MNCs and Developers buying into en bloc land.

- It only takes about a week for Temasek Holdings and the Government of Singapore Investment Corporation to decide and plonk billions of dollars for stakes in Barclays, Citicorp, Merrill Lynch, UBS. Why? Because as potential buyers, they did their homework in advance and they kept their finger on the pulse all the time. [Whether that purchase is well-timed or not, it is another matter because the first decision hurdle is whether to buy or not to buy.]

- So it is beyond comprehension why our legislation provides for a SECOND period of up to 12 months for the Sale Committee essentially to find an en bloc Developer-buyer and finalise the deal!!! The law already provides for a FIRST period of up to 12 months for the Sale Committee to collect the requisite 80% (90%) signatures for the Collective Sale Agreement (CSA) and apply to STB for a collective sale order. Surely, as market players, potential Developer-buyers would have gotten wind of the CSA signature collection during the first time-period of up to 12 months? All pertinent facts about the present estate and the redevelopment potential are available in public records and/or ascertainable for Developer-buyers to do their homework in advance.

Maybe the en bloc window of "12+12 = 24 months" was NOT the intention of Parliament when this piece of legislation was first enacted in 1999? Maybe Order 2004 is NOT in order (elaboration is set out in my 6 Aug 2008 blog posting entitled The SOURCE and Themis)? Maybe, maybe, maybe ... as in Hans Christian Andersen's fable, we need a child to say "but he hasn't got anything on" just as the Emperor regally struts by amidst our en bloc blitz and glitz!
With legal suits flying all over town ..., with seemingly law-abiding citizens resorting to hooliganism, vandalism and criminal acts ..., “being right” is turning out all gloriously wrong!

Greek mythology: The SOURCE and Themis

Whether en bloc is a phenomenon or a disease, we need to identify the cause. Without a proper understanding of the cause, neither curative nor palliative measures would be effective. Thus far, the focus has been on consequences of en bloc. Let’s shift focus to the SOURCE of en bloc.

En bloc is created by law. Hence, the source is the law. Can the law be finetuned to minimize the degeneration and divisiveness of our society in en bloc battles? Or better yet, cement our sense of community in forging our nascent nationhood by building upon our sense of time and space? Can it be more balanced to temper the brutal after-effects? Does the law foster our collective aspirations to upgrade? Or are collective sales hastening our downward regression, particularly for privatised ex-HUDC owners who will likely revert to public housing?

The icon for Law and Justice is Themis from the Greek pantheon. You will find her at the main roof gable in the front of the Old Supreme Court Building, blindfolded, holding a sword in one hand and an equally balanced scale in the other. These are very powerful symbols. Why blindfolded? Why a sword? Why a scale? Why is the scale balanced? They speak of a sobering message. They personify a rigorous standard to be upheld.

Does this piece of legislation called the "Land Titles (Strata) Act" (LTSA) answer Themis' call? Or do we care?

LTSA was tightened in Oct 2007 after nearly a decade since Oct 1999 introduction of 80% majority consent (90% if estate is > 10 years old). For so long as Government continues regulatory forbearance in the substantive essence of this law, the disquiet will continue.
STRUCTURAL ISSUES/CURRENT PRACTICES pre-load dice against owners:

1. Price of milk. The price of milk cannot hold for 12 months. How long is Reserve Price (RP) valid for? LTSA has window of up to 12 months, starting from 1st signature of Collec­tive Sale Agreement (CSA) until application to Strata Titles Boards (STB) for collective sale order. A RP carrot, say $1bn, is dangled to induce signature. Once 80% sign, Order 2004 seemingly opens a second window of up to 12 months to find Developer-buyer and apply to STB.
12+12 = A whopping 24 months? Geez, get real, man!

Private sale at own decision takes 3 months to collect money. Collective sale with 80% agreement under full 12+12 windows could take 30 months or more to get $$$ after minimum provision for STB process/sale completion! Doesn’t time-lag increase the risk of price mismatch, making replacement an improbability? Slow-braise or fast-boil, even a 12-month window in moving-market context is untenable. 12+12 is bizarre! Is the law disproportionate and/or misinter­preted?

Sure, Sale Committee could continually up RP. Depending on its skills/desperation quotient, it may choose not to, having secured 80% consent. Is a RP increase of 10% tricky if market is already 20% higher?

2. All that froth. What is even more breathtaking is marketing agents’ rah-rah over en bloc premium. A $1bn RP carrot translates into, say, 80% premium com­pared to private sale – so they enthuse! Seduced by such “windfall” representation made in the presence of lawyers (!!!), you sign. Lo and behold, no lawyer has ever reflected this representation with a marked-to-market CSA clause! Does this pivotal omission by ethical legal professionals whip up froth only to milk owners dry?

As a society, we chose NOT to allow a structure of ambulance-chasing lawyers where lawyers are paid based on a percentage of the judgement award. Yet when this law tampers with natural market forces by (i) obliging Minority Dissenters to sell their homes against their will and (ii) allowing Majority Consenters to sell what doesn't belong to them, then why doesn't the law counter-balance the unrelenting market exploitation of "no sale, no fee" for en bloc lawyers? When a layperson appoints a lawyer to issue a Letter of Demand for a small dispute, it is common practice to require an upfront retainer fee. Yet when a bunch of laypersons appoint a lawyer under the auspices of a Sale Committee for a deal running into hundreds of millions (or billions) of dollars, not a single cent is paid by the people who are so keen to sell other people's property as each of them subsequently signs the Collective Sale Agreement to beyond the tipping point! Sheesh!!!

3. Cost of a cuppa. Before fixing the selling price of a cuppa, you need to know how much it costs to make it, right? In en bloc, how do you establish the equivalent of “how much it costs to make a cuppa”? Many components: (a) residual land value, (b) comparative values from recent private/en bloc neighbour­hood sales, (c) development baseline/ceiling, (d) storey-height limit, (e) develop­ment charges/differential premium, (f) outline planning permit, (g) infrastructural/policy announcements. Establishing these facts incurs 5-figure fees. Who pays if no 80% signature or no developer is interested?

How to overcome dilemma? Pre-Oct 2007, LTSA was STB-centric because it calls for valuation not more than 3 months before STB application. Post-Oct 2007, it is Sale Committee-centric as valuation is required upon close of public tender. When will the law become Owner-centric?

How to set RP without valuation/key facts that could significantly affect land value? When selling other people’s homes (up to 20% against their will), is it kosher to hold-up a finger in the air to set RP without (i) marking-to-market the frothy premium in legal contract and (ii) legislating a reaffirmation mecha­nism by 80% on final terms/RP fixed up to 24 months ago before awarding to Developer-buyer?

4. Dividing pie. How to divide RP in estates with varying unit sizes/share values? Based on strata area only? Share values? 50:50 or 90:10 area/share-value weightage? LTSA is silent despite double-whammy effect because penthouse/big units are usually outvoted even before voting begins!

Deafening silence continues with no sign of industry guidelines despite Sep 2007’s parliamentary comment.

Hence, the field remains clear for marketing agent to carve the pie along the line of least resistance. As the Michael Douglas character in "Wall Street" movie pronounced so definitively: "Greed is Good", the marketing agent appeals to Greed to find the Line of Least Resistance which invariably overlaps with the Line of Most Exploitation where the most number of owners would gain at the expense of the smaller number, never mind whether it is justifiable or equitable. Who cares???

Thus, it is no surprise that 50:50 weightage is commonly bandied around by marketing agent as the "industry standard recommended by the Singapore Institute of Surveyors and Valuers (SISV) and endorsed by Strata Titles Boards (STB) from past cases" (really???). This is how the marketing agent baits an apportionment method that will tempt 80% to bite without independent valuer’s apportionment advice.

To compound matters, LTSA requires valuation report only UPON tender-close (ie, AFTER RP was set, AFTER lawyer drafted CSA document, AFTER 80% (90%) owners signed CSA in the presence of lawyer, AFTER marketing agent advertised tender in a blitz). Is it reasonable to expect the lone valuer to clean-up milk (i) spilled by marketing agent and (ii) lapped-up by 80% Majority, bearing in mind the small business community in the en bloc arena? Singaporeans have fist-fights over Hello Kitty toy! What more when the diffe­rence between various apportionment methods runs into 6-figures?

If the en bloc unravels, both marketing agent and lawyer will walk away with zero fees but saddled with costs running into hundreds of thousands of dollars or more. Knowing this full well, will a lone valuer unravel the en bloc deal cooked-up and freeze-dried by the marketing agent and lawyer by changing or denouncing the apportionment method UPON close of tender? Who’s kidding whom? Anyway, the valuer has an escape valve because valuation is more an art than a science!

5. One collective pie or many individual cakes? What’s the difference when Developer buys an estate because:
(A) the law allows 80% to force 20% to sell (single collective sale) versus
(B) each owner signing separate contract (multiple private sales)?

“Collective sale” must mean identical basis of sale - yes or no? Surprise! CSA allows Majority to re-divide pie such that Owner X gets, say, 7% more to overcome LTSA’s hurdle of “financial loss”. Selective pay-outs under CSA from Developer’s contingency fund (no doubt, these will not disappear but will instead be re-calibrated to avoid latent cluster bombs after the recent Tampines Court failed en bloc). Extra payment under private treaty with gag order on recipient. All these efforts are above-board! Only imagination limits the marketing agent and concert parties, eh?

Many ways to skin a cat when marketing agent is desperate for last few signatures to cross 80% trigger. In the dark alley of en bloc shadows where faeces may be smeared on your front door if it is not already super-glued to the door frame ... and paint stripping chemicals may be sloshed on your family car, how to prove extra money was promised to tip over the cliff? How to prove private sale of #01 was for Owner to (i) get $150k above en bloc price and (ii) collect proceeds in 3 months? All under-table.

Have your cake and eat it too!!! Force 20% to sell by paying MORE to (i) SOME of the Majority Consenters OR (ii) SOME of the Minority Dissenters? Under LTSA, there are 3 main goal posts that would kill an en bloc sale: (a) Financial Loss (based on a convoluted formula far removed from economic/investment principles), (b) Shortfall that would prevent redemption of mortgage/charge and (c) Lack of Good Faith (within the narrow confines of the statutory definition to the exclusion of common law). Yet these goal posts could be removed or relocated by EXTRA payment to SOME owners!

The concept of "First Amongst Equals" applies to en bloc owners too - apparently! Should Majority Consenters get their apportionment of en bloc sales proceeds under the Collective Sale Agreement whilst (i) Minority Dissenters who suffer the convoluted definition of "Financial Loss" get EXTRA CRUMBS from the Developer-buyer to overcome that statutory hurdle and (ii) all remaining Minority Dissenters who are neither "Financial Loss"/"Shortfall" cases also negotiate individually for some ADDITIONAL PEANUTS from the Developer-buyer to cover, say, the en bloc expenses. Perhaps, these other Minority Dissenters may well have a basis because the extra payment to the "Financial Loss" Minority Dissenters would no longer bind these other Minority Dissenters to the apportionment formula in the Collective Sale Agreement???

These may be crumbs and peanuts. Some crumbs are bigger than whole cookies. Not all nuts are of the same size. Whether these crumbs and peanuts are given above-board or under-the-table, there is yet another legislative skewing under the new law! Sigh ... what else is new, eh? Even where the STB exercises its discretion to increase the en bloc pay-out for an objecting Minority Dissenter by the higher of S$2000 or 0.25% of sales proceeds (contributed by all owners), the Sale Committee could reject STB's collective sale order! If the Sale Committee is empowered by law to scuttle STB's order because one owner got extra payment of $2000 from each unit, then does it change the equation if that one owner got the same aggregate amount (or even higher amount) from the Developer-buyer instead?

Now, this monkey is scratching its head – would LTSA's limited definition of "Lack of Good Faith" be upheld if ONLY one unit in the condo was owned by the CEO of Developer-buyer? Wanna place your bet??? I'd say probably not if that unit owner-CEO didn't sit on the Sale Committee or the decision to proceed with en bloc purchase was made by the Developer-buyer's Business Development Division, etc. Sigh ... why have any goal posts in LTSA once the requisite majority consent level is hit? Why be coy, eh? At least, the law should provide clarity that we are being sold down the river! We could then drown blissfully with our Wide Eyes Shut!

Whitewash black without the slightest tinge of grey – undermine statu­tory prohibition? STB-ordered en bloc is a “statutory” sale (very POWERFUL because this law abrogates the private property rights of up to 20% Minority Dissenters) – no longer a “contractual” sale!!! Doesn't this distinction count? Can “contract” circumvent statute” without blinking? A single collective sale OR a disguised collection of individual sales? Befuddling indeed to my little limited brain!
6. One-to-Many Orgy. Agent-principal structure works best in one-to-one relation­ship, even within a multitude of exclusive agencies, where agent/expert knows principal well.

In en bloc, it is the opposite. Agent-principal structure is one-to-many relationship. Sale Committee comprises part-time volunteers who may not be experts in realty, finance, law, economics. Sale Committee cannot know 200 owners’ driving motiva­tion. Compounding it, Committee-Owner commu­nication channel is limited to 4-5 EOGMs by law. Can’t LTSA designate Sale Commit­tee as mere coordinators without all-powerful “agency” rights in CSA to bind Majority-principals?

This bunch of part-time volunteers is committing to a multi-million or billion dollar en bloc deal ON YOUR BEHALF when they don't know you from Adam and you don't know them from Eve! This reality alone should hoist Red Flags all over your estate. Doesn't it? Under the amended LTSA, there may be varying interpretations of the word "consider" that could potentially open a new can of worms if the en bloc sale is eventually via private treaty after the public tender attempt(s). Since we are onto Greek mythology with Themis and all, I hope our lawmakers have not unwittingly lined-up Pandora around the corner. Well, hope is all that I can do because Hope was the only thing left inside the box when Pandora closed it in the nick of time.

7. Yes-Yes; No-Yes. When you sign CSA, you get one-time 5-day “cooling-off period” to change your mind. It helps but precious little with above pre-loading.

After CSA signing: With 12+12 windows and contentions, it may drag past 36 months before you collect money. If you can’t wait, you must sell your apartment to pro-en bloc buyer - it's no longer free market forces at play because you now have one arm tied behind your back in trying to sell your unit. If offered different prices, you can’t sell to the higher-price bidder who will decline en bloc. Your unit is locked as “yes-vote” until CSA expiry/termination even when you/your new buyer sells. If you decline CSA, scam opportu­nities abound to twist your “no-vote” into “guaranteed-yes” by selling to flipper/nominee consenter. Is the arm of law longer on “yes” side?
Just as in Greek mythology where Themis is blindfolded as she holds an equally balanced scale, the arm of the law must not be longer on the side of en bloc consent versus en bloc dissent. Themis is blindfolded, facing straight ahead - she is not blind; nor is she turning a blind eye or turning her head more towards one direction! That much I note of Themis. As a starting point, are our laws just for justice to prevail? Otherwise, would it mean that justice would be dispensed under unjust laws?

Then what would we end up with?
Just injustice OR unjust justice???
Am I a moron? Perhaps. Or do we have systemic oxymorons?
Shouldn't and doesn't our society aspire towards
Just Justice?

Unless there are legislative provisions similar to that in Hongkong that preempts speculative/serial en bloc flipping (eg, ownership tenure of less than 5 years is deemed en bloc dissent), there should be legislative prohibition against deeming en bloc consent from the predecessor owners’ consent prior to application to STB for collective sale order. Such legislative "deeming" is unseemly lol! Real estate is long-term commitment. Despite that, MinLaw rejected parliamentary suggestion that an owner of less than two-year ownership tenure cannot be Sale Committee nominee. Hence, LTSA doesn’t preempt Sale Committee from being dominated by flippers who target estates as a loose terrorist-cell consortium to drive EOGMs in a bid to buy/sell quickly (ie, not necessarily at highest price). Adding salt to wound, LTSA skews resale market towards en bloc by contractual distortion of market forces. Willy-nilly - whatever the Gahmen exhorts on a good day - a confluence of these factors only serve to commoditize "homes" beyond financial trading and right smack into the realm of property speculation and asset bubbles! Way to go, eh?

8. After the implosion. When things go awry, you need evidence to sue. Dissenters typically suffer info black-out except mandatory EOGMs/notices. Consenters too may be misinformed. Can “qualified privi­lege” be claimed for legal advice relied upon in en bloc? LTSA is silent on whether lawyer represents Consenters, Sale Committee or all Owners. But LTSA is loud and crystal-clear in forcing Dissenters to contribute towards legal fees once STB issues order! If “qualified privilege” can be claimed – whether under substantive law or contract – doesn’t this add stinging salt to festering wound when Dissenters are obliged to pay for the very same legal advice that they are denied access to in their quest for justice?

After tightening procedures in First, Second and Third Schedules, LTSA empowers STB to disregard breaches if they don’t compromise anybody’s interests. LTSA amendments also eliminated publication of owner names, making it more difficult to prove misdemeanors now.

Why is burden of proof of “misconduct” on Dissenters? Why not shift onus of proof of “proper conduct” to beyond three Sale Committee members to include their advisors and the counter-party Developer in joint Statutory Declarations? Where such declarations and testimonies given in witness box/affidavits under oath are false, doesn’t it serve public interest to investigate possible perjury? As en bloc expropriates private property, it must not only be white but also seen to be white!
After all this Starbucks (megabucks) talk about milk, froth, pies and cakes ...
With worry lines on his face, the barista serves up a cuppa to the barrister! Kopi-O in all its ominously dark glory! Till we meet in court - so bids the barrister to the barista as he gulps down the cuppa before rushing off for the next en bloc legal battle in his 2nd Porshe!

The above is distilled from some of the points made in my mega 4-part Nov 2007 blog entry ("After the 2007 law, what's next???") under Part D - Tips on what to do and what NOT to do in a new en bloc sale. "Problems" - there always will be. What's more constructive would be "Solutions" - part of my proposals are re-summarized in my 7 Aug 2008 blog entry entitled "So, what's the alternative in the END?"
http://singaporeenbloc.blogspot.com/2008/08/so-whats-alternative-in-end.html

En bloc topics

The en bloc topics are categorized according to "subject matter" which you can find on the right-hand column of this blog. Scroll down ... past the cartoon of a "wailing house" and you will see them.

In the Straits Times Inactive Forum Page of 8 Jan 2008, reference was made to this blog in the discussion of "apportionment" or "distribution" of collective sales proceeds.
http://www.straitstimes.com/ST%2BForum/Online%2BStory/STIStory_193746.html

To get more details about this and other related topics, click on the following subject heading in the right-hand column:
"Sales proceeds formula; Distribution" and
"Share values; Sales Committee".

The tide is up ... happy surfing!

You matter!

Yes ... YOU ...... only you can make a difference!
How, you ask??? In many ways ...

(1) By clicking on a discussion thread in REACH Forum (formerly Feedback Unit):
http://app.reach.gov.sg/reach/YourSay/YourDiscussionCorner/tabid/117/ptid/414/page/2147483647/threadid/652/forumtype/posts/Default.aspx

(2) By participating in this survey by a NUS undergrad:
http://www.scribd.com/doc/963382/Celeste-Han-Enbloc-Survey

Survey participation criterion:
Open to all who have experienced, or are experiencing en bloc sale attempts.

Survey deadline:
15 Jan 2008

This is a VERY SHORT survey (takes about 5 mins). Do fill it up and e-mail it DIRECTLY to the NUS undergrad (Celeste Han) at chanhy85@hotmail.com

This request arose from Dr Minority who received an e-mail from an NUS undergraduate, Celeste Han, doing her Honours dissertation with the Dept of Real Estate Management. Her research is on en bloc sales and she needs your help with a survey that she is conducting, specifically on the reserve price and perceptions of it. According to her, the research objectives for the dissertation are:

(a) to identify the key motivations that lead people to agree or disagree to an enbloc sale; and

(b) to study how sellers in enbloc sales forge their reserve price.

The more facts and findings we put out in the market, the better informed we all will be. In turn, this will facilitate sound decision-making by each of us as private property owners, by industry players, by the Gahmen.

An ocean is made up of many, many droplets of water. Every drop counts! Don't evaporate just because others want you to! Should you be steamed for speaking your mind? In Singapore, people tend to look at "WHO" is saying it or "HOW" it is being said or "WHEN" it is being said, as opposed to "WHAT" is being said.

Personally, I think this only makes for a weaker society over the long term if politicians, civil servants, intelligentsia, academia, industry leaders, media, etc, are decibelised by "who", "how" or "when" instead of sieving out the gems of reality or kernels of validity in "what" is being said. A "gem" is a gem, regardless of who/how/when. Surely, one need not be Al Gore to utter An Inconvenient Truth that will be somewhat heeded by those who are entrusted (and paid very handsomely in some cases) to serve the country??? Shouldn't such "gems" or "kernels" be used to finetune, revamp or reverse laws, regulations or policies to better serve the MAJORITY AND MINORITY without risk of discrimination or disadvantage? We all have a place here in this Life. Can we be more inclusive (rather than exclusive ... or dismissive ... or even divisive - as in the case of this en bloc phenomenon)?

If a seamstress says something in Singapore today, do you think people will listen? In the winter of 1955, in Montgomery, Alabama in the USA, a seamstress spoke. Rosa Parks said: "The only tired I was, was tired of giving in".

Read about it on CNN.com
http://www.cnn.com/2005/US/10/25/parks.obit/index.html
... the bus boycott that ensued,
... almost a year later in 1956, the US Supreme Court ruled that segregated bus service was unconstitutional,
... what one American politician said in 2005: "It was so unbelievable that this woman - this one woman - had the courage to take a seat and refuse to get up and give it up to a white gentleman. By sitting down, she was standing up for all Americans."

Rosa Parks died on 24 Oct 2005 but Rosa Parks' spirit of quiet strength lives on ... inspiring us as human beings ... moving us to make a difference ... and be counted!

Who knows? There may be a rainbow after many drops of rain into the ocean we maketh ...
[PS: There are recent UPDATES on the subject-topic pages on this blog to ensure continuing accuracy of facts following the 4 Oct 2007 legislative amendments - viz, the blog pages on Constitution, Sales Proceeds Distribution, Share Values.]

In the coming year of 2008 ...

POSER FOR POLITICIANS:
En blocs should push everybody up.
Read on ... in my Nov 2007 blog update ...
difference between Gahmen "being right" versus "doing right" ....
and difference between Singapore's and South Korea's en bloc laws.
Singapore is NOT the only country that needs urban renewal!
"Uniquely Singapore" is in fact NOT that unique!

En blocs should NOT pull everybody down! ... ending up as Squatter, Refugee, Downgrader or Downsizer after an en bloc.

En blocs should NOT push up ONLY SELECTIVE PARTIES! ... viz, Gahmen who load up public coffers from hefty development charges and multi-transaction stamp duties from incessant en bloc cycles every 15-20 years, Developer-Buyers who get prime land unlocked and handed to them on a silver platter, marketing agents/lawyers who earn fat commissions, and crass en bloc flippers who speculate wildly at other people's expense. QUESTION:
In the face of (i) sub-prime mortgage woes in the US spinning off into credit crunch on both sides of the North Atlantic and investment jitters which surfaced globally only in 2H 2007 and (ii) anticipated global economic slowdown in 2008 in varying degrees, why are predatory marketing agents and Developer-Buyers still lurking and sniffing around our private residental estates? No doubt, these predators are more subdued but they are no less determined!

ANSWER:
These marketing agents and Developer-Buyers in the real estate industry may know something that we ordinary folks don't!!!

FACTS:
Singapore's five-year Master Plan 2003 is coming up for review in 2008. What goodies and/or nasty surprises are in the upcoming Master Plan 2008 is for the Gahmen to know ... and for the rest of us to "guess" until around 2H 2008!

Pursuant to URA's announcement in Nov 2003 , the new definition of Development Baseline will come into effect on 1 Jan 2008 (ie, 4+ years later). Instead of computing the Development Baseline by taking the highest value from (i) Master Plan 1958, (ii) Master Plan 1980 or (iii) approved development, the new definition will be pegged only to the last one (ie, value of approved development). Based on the current Master Plan, this change only affects 1,700 land plots (2%) - mostly in the city area - but it corrects an existing anomaly by levelling the playing field and collects more Development Charges for the Gahmen.

Within this change, however, there is an embedded goodie to mitigate the impact for those estates whose approved development is lower than Master Plans 1958 or 1980 because that portion of the historical values of 1958 or 1980, not exceeding that in the current Master Plan 2003, will be offset from the new computed DC payment by way of a Development Charge EXEMPTION within the allowed use and intensity of such current Master Plan. Figure 1 in Question 5 of the following link illustrates the answer most graphically:
http://www.ura.gov.sg/dc/baseline/baselineQnA.pdf

In Jul 2007, the Gahmen sprang a surprise hike by revising the Development Charge rate from 50% of appreciation in land value to 70%. As part of the semi-annual review cycles, the Gahmen further hiked the actual Development Charge rates in Sep 2007.

Looking from the Gahmen's perspective, there are three chess pieces to shuffle around:

(a) Development Charge which they have moved in Jul and Sep 2007;

(b) Development Baseline which they will be playing in Jan 2008;

(c) Development Ceiling parameterized by plot ratios and storey height controls which they may OR may not tinker with in Master Plan 2008 underpinned by 55 Development Guide Plans within Concept Plan 2001 (NOTE: Concept Plan 2001, drawn up for the next 40-50 years, was based on 5.5mn population in 2001, not the latest announcement in Feb/Mar 2007 of 6.5mn "target" population!).

Here are some summary points largely distilled from my 4-part Nov 2007 blog update:

1. The underpinning rationale for en bloc sales. The concept of “ Dào Lǐ “ (道 理) ("rationale" in Mandarin) comprising of – " Dào " which denotes "the Way" under the Chinese philosophy of Daoism and " Lǐ " which denotes "Logic" – as applied to the sense and sensibilities of enforced en bloc sales.

Urban Renewal
through En Bloc or SERS
= Being right

Result of En Bloc:
Squatter, Refugee,
Downgrader or Downsizer
= NOT doing right

Cash or 1-4-1 Exchange Option
(through serious increase of plot density ratio and
incentive scheme for plot amalgamation)
= Doing right
(leave the choice to "Qualifying Owners" as to whether we'd want to
cash-out now OR cash-out in the near/distant future
OR keep our rebuilt homes in the same locale)

2. The defining difference between Singapore's and South Korea's en bloc laws (and comparison between Singapore and Hongkong). Like Singapore, the city of Seoul also needs urban renewal. Interestingly, South Korea's en bloc laws mandate 1-4-1 exchange as the first option. In South Korea, if an owner wants cash instead, the onus of proof is on that owner to justify it.

MinLaw learned of this South Korean en bloc law just before the amendment bill went for the 2nd/3rd parliamentary reading in Sep 2007. Whatever "practical difficulties" there may be in 1-4-1 exchange option (as per Law Minister Prof S Jayakumar), they are NOT exclusive only to Singapore. If the South Koreans can do it, why can't we? The South Korean law makers have exhibited a Sense of Rectitude TO DO RIGHT by their people through such "Hapdong Redevelopment" (the etymology of this Hanguel phrase of "Hapdong" traces back to the Chinese word for "Cooperation, Partnership" - now, that's the spirit of it all, won't you say?). Surely, our Singapore Gahmen who - as per MM Lee Kuan Yew - "shares the trials and tribulations of our populace" will NOT lose out to their South Korean counterpart, right? One can hope, eh???

Our closest economic rival, Hongkong (already much more congested than Singapore) has even more intense urban renewal needs! Like Singapore, Hongkong announced in Jun 2007 increased population target by 40% from their present 7mn to 10mn in the coming decades! With its laissez-faire colonial legacy and despite being part of Communist China's "one-country-two-systems" framework - Hongkong (similar to South Korea) has a complex set of ordinance, rules and regulations to "manage" and "govern" urban renewal. Singapore's amended en bloc law pales in comparison! Check out HK's URA link added to the list in the right-hand column of this blog (other new links: NMP Siew Kum Hong's blog, MinLaw's responses to the Public Consultation exercise, other en bloc estates).

3. Tripartite effort. An en bloc sale is a truly ingenious way to achieve PUBLIC URBAN RENEWAL at PRIVATE COST - this is a NATIONAL CAUSE as it is part of the mammoth task of Re-Making Singapore in the Third Millennium. Hence, is it too much to expect that it would be a TRIPARTITE EFFORT involving:

- INDIVIDUAL CITIZENS who SACRIFICE (in the case of Minority Dissenters, they are obliged by law to sacrifice) their homes/real estate investment assets bought with PRIVATE FUNDS (viz, WITHOUT a single cent of public funding/subsidy);

- CORPORATE CITIZENS who must therefore shoulder some SOCIAL RESPONSIBILITY as they merrily reap the benefit from such individual citizens' sacrifice, thereby unlocking current land value for Developer-Buyer companies and consequently swelling their corporate profits;

- GAHMEN who must correspondingly make some DIRECT CONTRIBUTION by substantive increases of plot density ratio, imaginative incentive schemes to not only facilitate but also motivate (!!!) meaningful and attractive 1-4-1 exchange options with a good rate of acceptance by qualifying owners (eg, through Development Charge rebates, additional bonus Gross Floor Area for plot amalgamation, etc), thus DOING RIGHT by her people, inculcating a sense of community as part of our NATIONAL VALUES and NOT messing up the long-term financial/retirement plan of citizens who bought private residential property with a huge chunk of their CPF/private savings and who may NOT want to liquidate their real estate asset at same time as (1) the 80% (90%) majority of flipping serial en bloccers and opportunistic owners of smaller-size units (facilitated in no measure by the authorities with their hands-off laissez-faire policies in respect of apportionment of collective sales proceeds), (2) cash-strapped frantic businessmen, (3) cash-poor frightened retirees and (4) a motley bunch of frazzled owners who are worn-out/"sotong"/"kiasee" (patois for "clueless" and "afraid-to-lose-out", respectively)? The Four F words - Flipping, Frantic, Frightened and Frazzled! Prim and proper F words!

The Gahmen has already taken the lead with HDB's 50-storey public housing project at The Pinnacle @ Duxton. And private residential redevelopments at recent en bloc sites are still averaging 25-30 storeys (other than the 54 storeys of super-luxury apartments at The Orchard Residences)??? Geez ... do keep in mind the Gahmen's "target" population of 6.5mn people in the next 40-50 years (announced in Feb/Mar 2007, this is a 45% increase from our present 4.5mn) and 17mn tourist arrival target by 2015 (a ten-year target announced in Jan 2005; Singapore just hit 10mn tourist arrival in Dec 2007)! Based on 2006 statistics, Singapore's population density (ie, excluding tourists!) stands at 6,369 persons per sq km (presumably yet another feather in our cap for being the 2nd most densely populated country in the world ... in comparison, Hongkong has 38 persons more per sq km)! If you are already feeling squashed with our present 4.5mn population, you don't need a terribly vivid imagination to envisage how you'd feel when our population hits 6.5mn target in the coming decades ... not forgetting the growing obesity trend and the shrinking room sizes in new developments! In other words, there will be more of us growing old ... and fat together ... in smaller rooms!!! Daunting Singapore Dream, eh? Yeh, it already is starting to haunt me.

As the amended Land Titles (Strata) Act now stands, it is ONLY the individual citizens who are being led to the sacrificial altar ...

... willingly as a Majority Consenter who die-die-must-sell for immediate cashflow/liquidity needs or purely exploitative reasons,

... half-willingly as part of the consenting herd on the basis that if-you-can't-beat-them-you-might-as-well-join-them, or

... unwillingly as a Minority Dissenter who die-die-don't-want-to-sell for personal reasons of rootedness or sense of community or capital preservation as part of their long-term financial/ retirement planning!

Just as 20% of the Singapore electorate who are NOT living in HDB estates may cock their heads at the priority basis for HDB Lift Upgrading Programme, so too will 80% of the Singapore electorate who are living in HDB estates commiserate with us. Singapore is very small ... ripples have a way of enlargement, more potent at the centre and less distinct at the outer circles but nonetheless there. Yet, some wonder why Singaporeans are " the most dissatisfied people" despite enjoying "the highest per capita income in Asia, short of Japan"!

4. Red flags. In Part C of my Nov 2007 blog update (scroll down to past Green Froggy), the issues of the amended en bloc laws are discussed in terms of what's there and what's missing. In Part D of my Nov 2007 blog update (scroll down to the Hanging Orang Utan), there are "tips" on what to do and what NOT to do under the amended en bloc laws. Work within the law but outside of the box!

To tamp down the speculative level, the Gahmen (finally) withdrew the Deferred Payment Scheme on 26 Oct 2007 after a near-decade since it was first introduced and after the property market run-up for more than a year from 2Q 2006! What does the market do? Well, market will do what it does best ... outsmart and outwit the Gahmen! These days, Developers offer Interest Absorption Scheme! Without going too much into the technicalities of financial risk weightages and loan structures, the bottomline remains that home buyers only pay 20% of purchase price upfront and start paying interest and principal installments upon issuance of Temporary Occupation Permit. DPS or IAS ... To the flippers, it's "half cati, eight taels" in the East and "eight ounces or half pound" in the West. Mark Twain was dead wrong - East and West did meet on this score!

If you can't get bank financing for your 4th real estate investment purchase, there are ways to get round it if you know how!

Do NOT be tempted into "penny wise, pound foolish" situations. Under the amended law, MinLaw tried to accord Owners with more protection in en bloc sales by requiring lawyers to take on more duties. Guess what ... some lawyers are very wary that if they slip up real bad in handling an en bloc deal, they may be sued for hundreds of millions or a billion dollars or more. Compared to marketing agents, a lot more is at stake for lawyers because they may be disbarred and/or made bankrupt. No amount of professional indemnity insurance can cover a law firm for such quantum! So under the guise of cost-savings for the Owners, they get the Developer-Buyer to bear the legal fees. Ahh ... effectively the "financial contract" is now between the Developer-Buyer and the lawyer. Errr ... but the "representational contract" is between the Owners and the lawyer! To whom do you think the lawyer owes a duty of care in such an en bloc sale? This is quite a novel "conflict of interest" situation that skirts round the present prohibition of the same lawyer representing both the buyer and the seller ... one wonders what the Law Society will do, ugh?

Ditto for marketing agent's commissions.

In en bloc sales, it's the flip side of Caveat Emptor (Buyer Beware) ...
it is very much a case of SELLERS BEWARE!!!

Although the en bloc laws have been amended, MinLaw's Study Group has NOT been disbanded. No less than the Minister for Law has made the promise that MinLaw, together with the other agencies, "will monitor very closely the operation of these new provisions" and "if it is necessary to make further amendments", MinLaw will have "no hesitation" to do so. MinLaw's e-mail contact is in my Nov 2007 blog update - keep talking to MinLaw! Maybe ... just maybe ... we MAY have an occasion to celebrate a champagne toast with MinLaw in the not too distant future!

Drawing from the lessons of Citibank and Goldman Sachs in the sub-prime mortgage debacle in the US quoted from the Harvard Business in my Nov 2007 blog update (scroll to above the Soaring Seagull), I repeat my prayer for Singapore to have enough "courageous and thoughtful leaders" (the likes of Frank C Blankfein of Goldman Sachs) who will stoutly shoulder their "core leadership responsibility" and "doesn't keep dancing just because everyone else does"! If I may quote Shakespeare: "Virtue is bold, and goodness never fearful"! And not forgetting AWSJ's quote of a University of Pennsylvania professor who was commenting on the credit crisis in the US that "reputation matters until you get to some serious pain" and that "it matters if the stakes are low" but "somewhere between US$25mn and US$1bn, it shifts".

[PS: Two recent cases of Minority Dissenters winning at Strata Titles Board tribunal hearings can be found at the end of my Nov 2007 blog.]