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Singapore: Land Titles (Strata) Act - Possible fallacies of the 'free will of majority' in en bloc sales

Singapore: Land Titles (Strata) Act - Possible fallacies of the 'free will of majority' in en bloc sales

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Published by The Pariah
Analysis of en bloc sale process under Land Titles (Strata) Act with some comparison to show how it contradicts the best practices of Government Land Sales - Copyright: The Pariah, www.singaporeenbloc.blogspot.com
Analysis of en bloc sale process under Land Titles (Strata) Act with some comparison to show how it contradicts the best practices of Government Land Sales - Copyright: The Pariah, www.singaporeenbloc.blogspot.com

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Published by: The Pariah on Dec 24, 2010
Copyright:Attribution Non-commercial


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The Land Titles (Strata) Act (LTSA), Cap 158, invokes majoritianism for non-landed private property.However, the hype of majoritianism does NOT stand up to scrutiny and is not even valid because:
Majority Consenters are pre-empted by law under LTSA from filing their Objections at Strata TitlesBoards (STB) and High Court levels. Case history: The definitive Horizon Towers en bloc saga where HPLLtd publicly threatened to sue all Majority Consenters for > 2x contract price if they seek legal recourseagainst the sale.
Objections that can be filed by Minority Dissenters at High Court level is constrained and limited towhat was stated at STB level when Minority Dissenters are only given 21 days to file such objections.Consequently, our courts will likely be reduced to Rocket Dockets under LTSA 2010 amendments.When an owner suffers a
“financial loss” based on the kindergarten d
efinition under LTSA (viz, buy $1mn butget back less than $1mn from the en bloc sale net of deductions sanctioned by the Court or specified underLTSA), such statutory hurdle could be overcome by contract (eg, the Majority Consenters agree to allocatemore to the owner
with such “financial loss” to undermine LTSA).
, the statutory definition of “financial loss” defies all economic and accounting principles of the time
-value of money. Secondly, the o
wner with “financial loss”
is now preempted from raising
“financial loss” as a
basis of objection. Thirdly, and most importantly, it undermines at core the communitarian interests thatpurportedly justify majoritianism over private property rights.
 By contract 
, a Majority Consenter willinglyaccepts, and
by law
a Minority Dissenter without “financial loss” is forced to accept
, a smaller pay-outcompared to the owner
with “financial loss” even though all
three of them own exactly the same unit-type. Sow
here is the “collectivism” of LTSA
to justify forcing the Minority Dissenter to sell??? Is it
a collective saleof all the lots and common property in a strata title plan
” (ie,
sale on identical basis for all owners)
OR “a sale
of a collection of the lots and common property
in a strata title plan”
(ie, sale on varying basis for differentowners)?
, even if the Court orders that a Minority Dissenter be paid more because the Court “issatisfied that it would be just and equitable to do so”,
LTSA empowers the Sale Committee to
reject the Court’s
decision which would then result in abortion of the collective sale.
Sale Committee members are volunteers who may not be trained/skilled in law, finance, economicsand/or real estate and yet they are empowered to sign multi-million or billion dollar contracts on behalf of allowners. In digesting this significance, you should bear in mind that in typical cosmopolitan city lifestyle -nobody knows their neighbours any more (most are investor-owners anyway and some are flippers who justbought into the estate).Even when Sale Committee members breach, eg, the conflict of law provisions under the Third Schedule of LTSA, there are no penalties specified under LTSA. Instead, LTSA pointedly provides that even if there isnon-compliance with the First, Second or Third Schedules, STB will proceed with the en bloc sale if STB issatisfied that such non-compliance does not prejudice the interest of any person.
Sale Committee volunteers are advised and guided by experts (viz, marketing agent and lawyer) butboth of them are appointed on no-sale-no-fee basis and their respective industry umbrella organizations havenot uttered a word about the inherent yet brazen moral hazards. There is also no correlationbetween the amount of professional indemnity insurance of the marketing agent/lawyer relative to themagnitude of the en bloc transactions at stake, nor any grading system (in sharp contrast to contractors who aregraded and pre-qualified by quantum of tender awards).
The basis on which the estate is being marketed to potential interested bidders is HIDDEN from ownersBEFORE signing the Collective Sale Agreement. This is despite the fact that the marketing agent will be paidby the owners upon successful sale. The marketing agent prepares two sets of books - so to speak.
Agent tells owners the Individual Unit Comparative Replacement basis to cajole them into signing on the basisof an "en bloc windfall" despite the fact that (i) property is all about location and timing and (ii) owners areselling the entire land plot, NOT individual units.Agent then tells potential developers the Residual Land Value (RLV) basis which reflects the true market valueof that land plot.
Upon failure of public tender, LTSA even sanctions (i) back rooms for private treaty negotiations,(ii)side doors for private sale and (iii) amateur volunteers empowered as Sale Committee to sell-first-and-tell-later- basically,
a legalized scam!
In sharp contrast to Govt Land Sales
, NO private treaty talks in back-rooms are allowed post-public tendereven when the Government as seller is represented by well-paid big guns who are industry experts in URA,SLA, JTC or HDB.
En bloc Reserve Price is necessarily known by hundreds of owners for up to 12+12=24 months and sothere is no effective check-and-balance about the marketing agent broadcasting the Reserve Price to potentialinterested bidders.
In sharp contrast to Govt Land Sales
, Estimated Market Value under GLS is zealously guarded by onlyIRAS Chief Valuer up to 12 noon on public tender close date.
Sale Committee volunteers are accorded all-encompassing agency powers under contract, usuallyquietly and cleverly worked into the Collective Sale Agreement by the no-sale-no-fee lawyer. Hence, thesevolunteers could sell based on a Reserve Price that could potentially be established up to 12+12=24 monthsago under LTSA, bearing in mind that for en bloc interest to pique interest amongst the developercommunity, the property market is likely to be on uptrend (or already on an uptick).
In sharp contrast to Govt Land Sales
, the Confirmed and Reserve Lists are reviewed every six months andthe land plots may be removed/added. Even when the Reserve List is triggered under the new provisions, or acommitted Minimum Price bid is proffered under the Confirmed List, the trigger price or the committedMinimum Price is valid only for 16 weeks (not up to 24 months)!
The Apportionment Method (how the en bloc sales proceeds are divided amongst owners of differentunit sizes) is cast in stone upfront WITHOUT any professional assessment by a licensed appraisor. Given thelikelihood of smaller units outnumbering large units in most estates, this only facilitates brazen ´Tyranny byMajority´.Valuation report which would cover Apportionment Method is required by LTSA only upon close of publictender - ie, (i) AFTER 80% have been locked-in under the Collective Sale Agreement, (ii) AFTERagent/lawyer have spent potentially nearly two years' effort on no-sale-no-fee basis leading up to public tender,(iiii) AFTER developer bidders have spent time/effort doing their homework before submitting bids, (iv)WHEN valuers are highly dependent on agents/developers/lawyers for appointment and bizreferrals, and (v) WHEN valuation is more an art than a science. Get real, eh?
There is also a
fallacy about the legal sanctity of contract
and that's why the Majority Consentershave to stand by their signature after a five-day cooling period after signing their individual documents. TheCollective Sale Agreement (CSA) is in effect an Agreement-in-Principle to sell (NOT an Agreement to sell).
The most vital element (the final sale price) is NOT stated in the CSA because the Reserve Price ismerely the base price at which to sell (although some no-sale-no-fee lawyers have even included wriggle roomto sell at lower price by specified margin).Well, there you have the 10.

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