Property agents and owners of affected en bloc sites are eager to push pending sales

Ahead of proposed changes to the Land Titles (Strata) Act, property agents and owners of affected en bloc sites are eager to push pending sales as they may soon face bigger hurdles when the amendments become law.

Changes in en bloc sale legislation, expected to be passed in early October, are aimed at providing more transparency and safeguards to ensure all stakeholders get a fair deal.

But this means owners that want to sell en bloc will have to follow new rules, which could mean higher costs and a prolonged process.

Jones Lang LaSalle’s regional director and head of investments, Lui Seng Fatt, estimated there are some 50 en bloc sites already launched by tender or expression of interest in the market, with about half of these not having obtained consent from owners holding at least 80 per cent of share value. ‘They would have strong incentives to get through. Otherwise, if the new law kicks in… they would have higher hurdles to clear,’ Mr Lui said.

The amendment will mean that the majority consent is to be based on the area of the units in the development. This is in addition to the current requirement for consent from owners holding at least 80 per cent of share values for developments more than 10 years old, or 90 per cent for developments less than 10 years old.

En bloc deals that have not taken the area of units in the development in their definition of majority consent will have to redraft their collective sale agreement (CSA) if they fail to reach the market before the new legislation is passed. ‘If we don’t achieve the 80 per cent consent we’ll have to restart the exercise,’ said Jeremy Lake, executive director of investment properties CB Richard Ellis.

‘That’s extremely time-consuming, so it makes more sense to try to achieve the 80 per cent as quickly as possible. And for projects that are far away from it with no chance of achieving 80 per cent before the legislation sets in, we will have to review the situation.’ Mr Lake said the new legislation will encourage owners who have been ’sitting on the fence’ about selling en bloc to decide sooner rather than later.

CBRE has about five en bloc applications that have not passed the 80 per cent mark, with the level of consent obtained so far averaging 50 per cent. DTZ Debenham Tie Leung revealed that six of the en bloc deals it is handling are at various stages of signature collection, with some close to achieving 80 per cent consent.

Credo Real Estate has seven or eight projects that have not reached 80 per cent. These consultancies said that while the amendments to en bloc sale legislation will enhance clarity and transparency, they will add to costs and slow the pace of sales. For instance, owners will have to spend more hiring lawyers to witness the signing of CSAs and obtaining valuation reports, said Credo managing director Karamjit Singh.

These consultancies have received calls from concerned sellers who want to discuss the implications of the new legislation on existing en bloc procedure. DTZ director Shaun Poh said: ‘We would probably need to reassess the situation right now. For those close to the 80 per cent mark, I would advise them to hold a meeting with our lawyers to discuss the salient points of the new legislation and encourage them to push through the 80 per cent mark.’ For those far from achieving the minimum consent requirement, DTZ will meet sales committees to help them make informed decisions and redraft CSAs if need be.

While there could be a rush to collect signatures for en bloc sites ahead of the changes to the Land Titles Act, this could be followed by a lull as prospective sellers mull over the new en bloc requirements. ‘I think the bottle-neck will clear once this new legislation becomes standard operating procedure but I can see that temporarily, it will slow down the pipeline,’ Mr Lui of JLL said.

Source : Business Times - 29 Aug 2007