No cheer for minority owners in en-bloc collective deals

Many cannot afford to buy a similar unit in same area even with the windfall they get and are forced to downgrade.

By Janice Wong
Mar 14, 2007
AsiaOne


The rising price of replacement property is dampening the spirits of some owners in en bloc sales, even though the compensation they get from these collective deals is usually much more than if they had sold on an individual basis.

Gillman Heights condo resident Alan Khew is downgrading to an HDB flat. He wrote to AsiaOne to lament that he could not afford to live in private housing anymore, despite the fact that the largest residential en bloc sale in Singapore earned him about 50 per cent more than if he had sold it on the open market himself.

Mr Khew, 42, an IT consultant who bought his three-bedroom unit there for $560,000 in 2000, reckons that the $900,000 sales proceeds will not be enough for him to buy another condo in the same area of Alexandra. A quick check of the Classified ads shows that similar sized, 99-year leasehold condo apartments in District 4 are all above $1 million.

He said: "I have become worse off. With the proceeds, my only choice is to downgrade to a HDB. I am now forced to sell my condominium apartment with swimming pool and clubhouse facilities to downgrade to a smaller HDB apartment."

Mr Khew also felt that the voting rule was disadvantageous to minority resident owners as the National University of Singapore, controlling slightly more than half of share values in the project, has the biggest sway in the deal. NUS owns 305 apartments at Gillman Heights for off-campus staff accommodation. The current requirement of consent from owners for an en bloc sale to go through is a minimum 80 or 90 per cent of share values, depending on the age of the development.

Another disgruntled seller, who is moving from his condo in the Newton area to a 5-room HDB flat in Dover after an en bloc sale, will miss the convenience of living a stone's throw away from Orchard Road.

Said the 61-year-old bachelor: "For a person who doesn't drive, this is an important consideration. The proposed en bloc offer - while triple the price I had originally paid - will not, however, be enough to purchase a similar place in the same neighbourhood. I may be able to rent a condo in the same area for now. But will rents continue to be this cheap forever - or at least for my lifetime?"

Savills Singapore's director of business development and marketing Ku Swee Yong observed that as en bloc deals spread, more sellers from these properties will downgrade.

"Collective sales are expected to continue at this pace. The sellers have to look for replacement unit but by the time they receive their money, the prices of similar accomodation would have risen in this bullish market. In particular, those who are nearing their retirement age will not be willing to overspend and borrow from the bank, and instead will move to cheaper housing," said Mr Ku.

Unhappy en-bloc homeowners can file an objection with the Strata Titles Board (STB). They have to do so in writing, within 21 days of the date of the notice for sale. The board may not approve the sale if it is found that the transaction was not entered into in good faith, after taking into account: The sale price for the whole development, the method of distributing the sale proceeds, or the relationship of the purchaser to any of the flat owners.

Other factors for non-approval: If the objecting unit owner suffers a financial loss, or the sale proceeds are not enough to redeem any mortgage or charge against the flat. An owner in an estate subject to an en-bloc sale will be deemed to have incurred a financial loss if the sale proceeds, after any deduction allowed by the board, are less than the price paid for the property.

As in any en-bloc deal, you can never please everyone, said ERA Singapore's assistant vice-president, Mr Eugene Lim, and STB will go through the process to see if anyone has been unfairly treated, he said.

It is rare for the STB to rule against a sale. "But if the objector proves he really suffered a loss in a clear-cut case, we wouldn't approve of the sale," STB president Tan Lian Ker was quoted as saying in a Straits Times report.

There has been a flurry of letters from minority owners standing up for themselves through the media. Ms Valarie Ong wrote to The Straits Times forum : "With all the negative consequences of en bloc sales, I request lawmakers to put themselves in the shoes of the minority and protect their quality of life."

The Government has proposed several changes. One was for a collective sale committee to be formed only at an extraordinary general meeting (EGM) arranged by the estate's management corporation (MC). Presently, such a committee can be formed ad hoc. The change is designed to achieve better accountability and transparency for all owners, not just the interested sellers.

Another change would give the Strata Titles Board power to raise the sale proceeds for minority owners if, say, they had spent a lot to renovate their homes just before they learnt of a sale. Under the proposals, STB will be given the power to increase sale proceeds to dissenting owners who have filed valid objections and who may not have been treated fairly or equitably in the distribution of sale proceeds, even if there is no bad faith on the part of the majority owners.

The proposed changes could be in place by year-end. A little too late for Mr Khew, perhaps.

To reach the Strata Title Board, log on to http://www.mnd.gov.sg/stb/abtus1.html