Stumbling Blocs? Enbloc?

Threatening letters, pressure tactics, wild rumours.

As more and more Singaporeans are discovering first-hand, this is the world of en-bloc sales — where neighbours become millionaires or bitter enemies overnight, and a pot of gold awaits, literally, at the cost of your home.

What began as a contagion two years back, as property analysts reckon it, has reached fever pitch. As of mid-March, 17 en- bloc sales have been sealed this year, a record $2.43 billion in transactions, according to Jones Lang LaSalle’s preliminary data.

That’s nearly twice the $1.3 billion generated in the first three months of last year, and more than the $2.41 billion for the whole of 1999, the last boom period for en-bloc sales.

With a typical deal today netting home-owners a million dollars more than if they had sold their unit on the open market, it’s no wonder Singaporeans are rushing impulsively to cash in. After eight years of watching the property market chug along sluggishly, who can blame them?

“Quite frankly, no one — consultants, property agents or the Government — expected this boom,” said Dr S K Phang, a lawyer experienced in handling collective sales.

Yet not everyone succeeds in cashing in. Last year, 25 to 35 per cent of more than 100 en-bloc attempts reportedly fell through, or are still on the market after failing to hit reserve prices.

The neighbourly squabbles begin when residents refuse to give up their home for any price, or will not settle for less than what they think it’s worth. At Farrer Court, a point-block unit bought for $500,000 in 1993 could now fetch a cool $2 million in a proposed collective sale. But Ms Lucy Chong, a retiree in her 50s, is doing everything she can to stop it.

“Even if I get the money, can you find me a place as good as this, in an area as good as this?” she asked.

Her neighbour, an 84-year-old Eurasian living on her own, is “frightened” by the hassle of looking for a new place should the majority back the sale.

But a 72-year-old resident at Clementi Park — a 26-year-old estate where an en- bloc attempt is also underway -— sees it differently. “We should grab this chance. If you don’t sell now, you will find that as the estate deteriorates, you won’t get such good prices.”

Help is on the way

It’s an issue that naturally polarises emotions and people, but some feel the insufficient guidelines and procedures for en-bloc sales aggravate the problems.

This has not gone unnoticed by the Government, which is planning to amend the law on en-bloc sales.

It began a public consultation process this month on four proposed changes aimed at bringing greater equity and fairness to the process.

Currently, a sale can proceed if there is approval from owners controlling at least 80 per cent of share values in estates 10 years or older, or 90 per cent in younger estates. With the change, majority consent will be defined in terms of the number of units owned as well.

The Strata Titles Board will be given the powers to step in and increase sale proceeds for minority owners with valid objections. It will be empowered to issue guidelines on the evaluation of claims for financial loss.

In addition, sales committees — which are currently formed freely among residents — can only be elected at extraordinary general meetings (EOGM) convened by management corporations.

Are these changes enough?

Dr Phang felt a distinction should be made between investors who own the units and actual owner-occupiers. While the owners might make a tidy profit in absolute terms, the huge sums that developers pay them would drive property prices up as a whole — and these displaced owners have to fork out big money for their new homes too.

Said Dr Phang: “A bona fide home owner should be offered an exchange… if you want me to get out of my home, I want a unit back with the same comparable size (after redevelopment).”

Clementi Park resident Dr Patricia Wong argued that it would be “difficult” to garner the 25 per cent support for the EOGM to take place.

Minority retort

But many owners embroiled in en bloc “wars” certainly want to see more legislation in place of the Government’s largely “hands-off” approach.

The Management Corporation’s (MC) role in an en bloc attempt is one bone of contention. At Clementi Park, the MC has been a stumbling block to the pro-tem sales committee, said committee member Mr K C Lim. The appointed property agent has been stopped from going door-to-door, and is hindered in reaching out to residents, he added.

But at Farrer Court, the MC’s endorsement of the en bloc process has proved a thorny issue with residents like Ms Chong. “The involvement of the MC in any collective sales proposal and the pro tem sales committee’s obligations to the residents must be clearly spelt out. There must be more transparency,” she said.

Some residents also feel that sales committee should include those not keen on the sale, to ensure this group is not cut off from the process. But others, like Dr Phang, said it would only lead to deadlock for the committee, which has to work within a set timeframe.

He added: “At the end of the day, the Strata Titles Board can reject a sale if it the process was improper.”

Overall, Chesterton International’s research director Colin Tan thought the amendments would address a fundamental flaw in the current approach. “What the Strata Titles Board is doing now, is to come in at the start and address the concerns of the minority owner – rather than wait till the end and after much unhappiness.”

For example, there are the owners who have recently spent huge amounts on renovating their homes. Currently, the majority owners determine the distribution of sale proceeds and renovation expenditures are not taken into account as a financial loss incurred. To add insult to injury, minority owners say, they are forced to bear the lawyer and agent fees for the collective sale.

Boom today, gone… when?

While the booming property market — buoyed by a rush of foreign funds — shows no sign of abating, the en bloc rush could ironically be head for a slowdown, as more residents hold out for higher payouts.

Said ERA property consultant Stanley Koo: “They track similar developments and look at other areas, but they don’t take into account their own location. The property boom will go on for at least one or two more years, and if owners are more realistic, the en bloc frenzy can still gain momentum.”

Dr Phang agreed that the boom would last a while yet, with the economy doing well. “For example, the civil service just got a pay rise. All this money will flow into the market. But when times get bad, things will spiral downward very quickly.”

Yet it is precisely the notion that “the good times will not last” that feeds the en bloc frenzy. As Clementi Park’s Mr Lim puts it: “If we miss out on this property boom, we don’t know when the next one will come around.”

Source: WeekendToday, 14 April 2007