Too many deals, too few en bloc lawyers

September 4, 2017

Lee Meixian

EN BLOC lawyers are having to turn down deals because their plates are full. Such is the renewed fervour in the residential collective sale market, a contrast from the past couple years when few deals were launched and even fewer succeeded.

Dentons Rodyk & Davidson senior partner Lee Liat Yeang says there is a shortage of en bloc lawyers in the market. "There are fewer than 10 lawyers with good relevant experience. For those with abundant experience, it's fewer than five," he says.

Yet, the queries from eager sellers keep coming. Besides the eight en bloc deals (including one industrial property) worth S$3.5 billion that were awarded this year, and another seven that have been launched, market talk is that there are still about 50 to 60 under way, in various stages of completion. Many are still at the gestation stage, Mr Lee says, some as premature as still forming their sales committees.

Norman Ho, partner at Rajah & Tann, also observes that law firms are receiving more queries than they can take on, and many lawyers are not issuing quotations anymore.

"A lot of owners and sales committees intending to do en bloc sales of their developments have called us over the last few months, but the problem is that there are so many potential en blocs and very few lawyers who have the relevant experience.

"For me, I won't quote unless the project is quite manageable for the team, as I want to make sure we do a good job. The owners must also have realistic pricing, otherwise it is very difficult."

There is also an urgency to the task at hand, a rush to catch demand at the early point of the market upturn before prices surge too high.

Mr Ho says: "En bloc processes are now taking a shorter time to gather the consensus, because there are so many en blocs. The faster you go, the faster you get to market, the better the possibility of getting a buyer. Resale prices are still relatively low and buyers are bidding at very high prices, so sellers are trying to sell quickly."

According to Mr Lee from Rodyk, the most active law firms in the en bloc space are Lee & Lee Advocates & Solicitors; Dentons Rodyk & Davidson; De Souza Lim & Goh; and Rajah & Tann Asia.

He adds that it is not advisable to engage a lawyer from outside the field for the job: "People who have not been in the legal practice in this area would not know the pitfalls. Do you want to learn at the expense of your clients?"

Lawyers are not the only ones whose phones are ringing off the hook as the collective sale market reheats; consultancies and property marketing agents are getting it, too.

Ian Loh, Knight Frank Singapore executive director and head of investment and capital markets, notes that the queries he gets usually come from sellers residing in condominiums that are more than two decades old.

Knight Frank is currently marketing Dunearn Court and Normanton Park; their tenders close on Sept 6 and Oct 5, respectively. The marketing agent's role is to guide the sales committee through the process of setting a reserve price, securing the 80-per- cent consensus, as well as in the apportionment and distribution of sales proceeds.

Mr Loh says that sellers vary in disposition. Some are more realistic, others more stubborn and will not sell unless the bids hit a certain price. So far, the number of bids for each tender has also ranged widely this year from one to 10.

Also, despite all the talk of an en bloc fever, not many sites are sold significantly higher than their initial guide prices. So far, the exceptions are only Rio Casa (28 per cent higher), Eunosville (17 per cent higher) and Serangoon Ville (16 per cent higher).

Yet another potential beneficiary down the road is property agents. ERA Realty key executive officer Eugene Lim says that they will likely reap the benefits when owners vacating their homes seek a replacement or investment home with their newfound wealth.

But this will take time, as the money only rolls into sellers' pockets four to six months after the date of award. The project still has to obtain regulatory approvals from the Strata Titles Board and High Court.

When asked if the en bloc market this year will beat 2007's record of 88 deals worth S$11.5 billion, most say it is unlikely, but next year bears watching.

Mr Loh says the momentum started too late in the year. "We only have a couple of months left. Not all the 50 deals will be done this year. The 2007 peak was carried through on a momentum that started from 2005. But the momentum this year only started in May with the sale of One Tree Hill Gardens."

Mr Lee believes that the real "avalanche" will start next year. "This year, many of the en bloc sales are still in the gestation period, growing to a stage where they are ready for launch.

"Not all the deals can move so quickly. Issues like apportionment and reserve prices will hold them back in the initial stage, and the collection of signatures will take a while. I'd say that the first half of next year would be when you'd see an avalanche of deals coming."