For quick reference access: Questions by following MPs and NMPs, go to these pages in this scribd document: - MP Hri
Kumar: Page 6 - NMP Mildred Tan: Page 7 - NMP Paulin Tay Straughan: Page 8 - MP Ellen Lee: Page 10 For replies by Minister for Law, go to page 14 in this scribd document. Extract from Hansard:
Parliament No: Session No: Volume No: Sitting No: Sitting Date: Section Name: 11 2 87 3 2010-05-18 BILLS
LAND TITLES (STRATA) (AMENDMENT ) BILL Order for Second Reading read. 3.08 pm The Minister for Law (Mr K Shanmugam): Since the amendments in 2007 to the Land Titles (Strata) Act (LTSA), my Ministry has continued to consider public suggestions on how to improve the Act further. As part of our review, we have also consulted with industry experts such as academics, lawyers, property consultants, REDAS and representatives from the Strata Tiltles Board. This Bill is a result of that exercise. Context of amendments to the Land Titles (Strata) Act In 1999, the LTSA was amended to provide for en bloc sales to be completed with majority consent. Depending on the age of the development, the criterion for majority consent is now pegged at 80%, or 90%, based on share values and floor area. More than 10 years have passed since we made this amendment to the Act. There have been a variety of completely opposing viewpoints expressed on this as well as other aspects of this particular piece of legislation. Some have criticised that the policy of allowing en bloc sales undermined the property rights of individual owners, resulting in homeowners being evicted from their homes against their wishes. There have been calls for a reversion to the pre-1999 regime, where unanimous consent was required for an en bloc sale. Others have called for a restriction of an en bloc sale by majority consent to only much older buildings or if there are structural defects. And yet, others have argued the opposite: that the consent requirements for en bloc sales are too onerous and that we should, in fact, lower the requirements further. There have also been calls for procedural requirements to be relaxed even further. For example, there have been strong calls to scrap the five-day cooling off period and the
requirements to have a lawyer witness in the signing of the collective sale agreement by flat owners. Our approach has been to do what we believe is right as between the competing interests. Each owner has a right to live undisturbed in his flat and has the right to decide whether to sell or not to sell his flat. At the same time, majority views on whether there should be a sale of the development should be recognised as well. And there is public interest in intensifying developments and rejuvenating older developments. These different interests need to be balanced. The proposed amendments seek to achieve that balance, further to the 2007 amendments. The LTSA serves as a framework for all strata owners, be they pro-sale or antisale, to jointly decide whether to carry out an en bloc sale. The Government monitors the en bloc sale market and, where necessary, will refine the Act as we are proposing to do today. Role of the Strata Titles Board (STB) I will now highlight the key amendments. First, is the amendment to have the Strata Titles Board (STB) focus on its mediatory role for en bloc sale applications. Currently, the STB assesses all en bloc sale applications that have achieved the 80% or 90% majority consent requirement. This is to ensure that each en bloc sale transaction is done in good faith and complies with the provisions under the LTSA. The STB executes this role by both mediating and adjudicating on objections, filed by minority owners, who are against the en bloc sale. In recent years, a number of such sale applications have become highly contentious with objectors raising questions on points of law, ranging from judiciary to constitutional law. Despite the best efforts of STB to mediate and adjudicate, a significant number of these cases have ended up in the High Court and even the Court of Appeal. These complex cases have resulted in protracted proceedings at the STB. This has strained the STB's resources, and has also affected its ability to consider other applications promptly. We, therefore propose that the STB focus on its mediatory function for en bloc sale applications. This will allow the STB to devote its attention to mediate on the relatively "straight-forward" cases. If mediation is successful and all objections to an en bloc sale application have been withdrawn, the STB can proceed to issue an en bloc sale order. To prevent undue delays and to give greater certainty to the mediation process, it is proposed that the STB will be given up to a maximum of 60 days, from the first day of mediation to try and resolve any objection for each application. For contentious cases, when it becomes obvious that any further mediation is not going to be useful, the STB may issue a "stop order" to conclude the mediation process. Majority owners can then choose to apply to the High Court for adjudication. There have been some public concerns that this Amendment will make it more difficult and costly for minority owners to file objections to an en bloc sale application. The fact is that, in contentious cases, the process is likely to be longdrawn and parties may have to seek legal representation, if they want to pursue every avenue. That is already the position now. After the amendments, minority owners can continue to file their objections to the STB, and the STB will then try to resolve any
disagreement through mediation. If there is no resolution at the STB's mediation stage, the STB will then issue a "stop order", as I mentioned earlier. If the majority owners will not proceed to bring the case to the High Court for adjudication within 14 days of such a "stop order", the en bloc sale application will lapse. If the case is brought before the High Court, objectors can then decide whether they wish to continue with their objections to the sale. This new regime will apply to applications that are made to the STB after the new Act has come into force. Other than this set of amendments, we also intend to amend the Land Titles (Strata) Act Schedules, which are subsidiary legislations. Some of them are of considerable public interest and I will refer to them. Two-year restriction period requirement We will amend the Land Titles (Strata) Act Schedules to impose stricter requirements for owners to restart en bloc sale attempts, if there has been a preceding failed attempt. In recent years, there have been growing complaints against pro-sale owners especially "en bloc raiders". These raiders will repeatedly try to initiate en bloc sale attempts even when they failed to get sufficient support from other owners in previous attempts. Our view is that such repeated attempts especially frivolous ones should be discouraged. If there is no prospect of an en bloc sale succeeding, then owners should not be harassed, nor should owners be worn down or be subjected to attrition tactics. The owner's right to live in peace and not be subjected to repeated attempts should be respected. We therefore propose to introduce a two-year restriction period starting from the date of a failed en bloc attempt. Currently, an en bloc sale attempt can be initiated by convening a general meeting where owners will decide whether to form a collective sale committee and to elect members to this committee. The Act already stipulates that a general meeting shall be convened as long as there is sufficient support from at least 20% of the owners by share value or 25% of the total number of owners within that development. Currently, this 20% or 25% requisition rule applies even if there have been prior failed en bloc sale attempts. Hereafter, if a strata development encounters a failed attempt and the two-year restriction period kicks in, the first retry to convene a general meeting to form a new sale committee will need to meet at a higher requisition level of 50% either by share value or total number of owners. If there is a further failed attempt within the same restriction period, subsequent retries to convene a general meeting to form a sale committee will need to meet an even higher requisition level of 80% either by share value or total number of owners, ie, there must be a high degree of certainty that the proposal will succeed before the general meeting can be convened. The 50% and 80% requisition levels will only apply to general meetings to form a sale committee. For all other general meetings convened for the purposes of the en bloc sale, the existing requirements for the 20% or 25% requisition level will continue to apply. At the end of the two-year restriction period, the requisition level will revert to the original 20% or 25% requirements. These new rules will apply to all strata developments in which there is a failed attempt after the new legislation has come into force and the schedules are amended.
We will also amend the land Titles (Strata) Act schedules to expand the requirements for owners to declare their interests if they are standing for election to a collective sale committee. Currently, candidates must declare if they have interest in any property developer, property consultant, marketing agent, or legal firm that may constitute a conflict of interest within the proposed en bloc sale attempt. Hereafter, it is proposed that candidates will also be required to declare the extent of ownership they have in the strata development. In addition, they will have to declare any ownership interests held by connected persons related to them. Such connected persons will include immediate family members as well as companies in which the candidate and/or his family collectively hold more than 5% voting power. The aim of this additional disclosure requirement is to enhance the transparency of the sales committee election process and help other owners make a more informed decision on whom they should elect to their sale committee. Such disclosure requirements will not be restricted to the sale committee election phase. Serving members of established sale committees will also be required to update the chairperson of the respective sale committees within seven days of knowing any changes to their declared interests. Consequently, the sale committee will be required to put up notices in the strata development notifying other owners of such new declarations within seven days. These disclosure requirements will apply to all sale committees which are formed after the new Act has come into force. However, we recognise that there may already be existing sale committees during this interim period. For such sale committees, members will have to make additional declarations to their respective chairpersons within thirty days of the amended schedules coming into force. There are in addition a few other ancillary amendments to the LT(S)A schedules. These amendments seek to clarify and streamline the en bloc sale procedures. The first amendment will provide that once the sale committee has been formed, it will have up to one year to prepare its collective sale agreement and to obtain the first signature for its agreement. If the sale committee fails to do so, it will automatically be dissolved. This ensures that the sale committee cannot remain dormant after its formation and drag out the en bloc sale process indefinitely. The second amendment will provide that the general meeting convene for the purposes of the en bloc sale shall be dissolved if the meeting quorum is not met within an hour of the designated start time of the meeting. This amendment will help to provide certainty on whether such general meetings can proceed. Third, currently sale committees are required to hold general meetings to provide updates to owners on its sales such as the consent level of paid on the Collective Sale Agreement (CSA), the number of bids and bid amounts obtained on the sale tender and the terms and conditions of the sale and purchase agreement with the eventual buyer. The requirement for sale committees to hold such general meetings will be removed. Instead, sale committees are to hold simple meetings to inform owners of these issues. The intention is to avoid making the process of updating owners too onerous. This will also minimise the drawing down of management funds by sale committees to convene general meetings.
However, not all general meeting requirements will be removed. Sale committees will still need to convene general meetings when owners are required to decide on critical issues such as the appointment of lawyers and corporate consultants, the approval of the method to the portion sale proceeds and other terms and conditions under the CSA. Lastly, Sir, I would like to touch on suggestions which have been raised by some but which we have decided not to adopt in our regulations. There have been calls to disallow management corporation members from being members on the sale committee concurrently. This is due to concerns or a potential conflict of interest. We have considered this issue carefully and have concluded that we should not institute such a legislative requirement. Each strata development has its own unique set of circumstances. The decisions on who should be eligible to stand for election to the sale committee are best left to the owners of each development to decide. For example, in smaller strata developments, there may simply be insufficient owners who are willing to volunteer and serve separately on the management corporation and the sale committee. There will also be owners who prefer to appoint trusted and long-serving members of the MC council to represent them in their sale committee as well. I should add that even as a management corporation council member becomes a member of the sale committee, he or she still has a responsibility to uphold the duties charged to the management corporation council. Any dereliction of duties should be reported to the Building Construction Authority (BCA). We will also not remove two other requirements to those who are pro en bloc as well as some industry professionals that have been asking for. One, the five-day cooling off period after the CSA is signed and two, the need for owners to sign the CSA in the presence of a lawyer. The property which is to be the subject of a CSA may often be a very significant asset for the owner. It is important that the owners understand the CSA and it is important to avoid any arguments as to what was or was not said to them. It is therefore best to continue to keep the requirement that the lawyer must be present when the CSA is signed. The importance of ensuring the integrity of the transaction outweighs the administrative issues of having a lawyer present for each owner's signature. We also want to ensure that the consent that the owner gives is informed, genuine consent. Owners will be contracting to sell their flats in multi-million-dollar transactions. In that context, it is appropriate to give them a few days to reflect on their decision after they have signed. That imposes some uncertainty for those seeking consent but all things considered, it is difficult to argue against giving house owners more time to reflect on their decision on the sale of their homes. Sir, through these amendments contained in this Bill, we hope to improve the regulations governing en bloc sale transactions and ensure a fair environment where the interests of all strata property owners are balanced be they pro-sale or anti-sale. Mr Speaker, Sir, I beg to move. Mr Speaker: The question is that the Bill is now read a second time. Mr Hri Kumar.
Mr Hri Kumar Nair (Bishan-Toa Payoh): Mr Speaker Sir, I support the Bill. I wish to raise three queries. The first relates to the proposed two-year restriction period following a failed en-bloc attempt. En-bloc sales have generated much debate, controversy and litigation. But at heart of the legislation lies a fundamental principle – to what extent should the Government interfere in the rights of parties to own and dispose of their homes? For older apartments and condominiums, we have given legal effect to the concept of majority rule because it is in the interest of Singapore to maximise the use of land. But the potential of high sale prices have led to instances where en-bloc sales have been pursued relentlessly by some, to the anger and unhappiness of those who oppose them. Neighbours have turned against each other. It leaves a bitter taste, whether the sale is ultimately successful or not. So we are now introducing more measures to temper the powers of the majority. One proposed amendment creates more barriers for owners to make repeated attempts to restart the en-bloc sale process. A two-year restriction period is being proposed after a failed en-bloc sale attempt. During these two years, the first attempt to convene an EOGM to appoint a sale committee will require the agreement of 50% by share value or of the total number of owners. Any subsequent attempts to convene an EOGM within this period will require 80%. I understand the rationale for the proposal. It has the benefit of preventing unnecessary depletion of management corporation funds, and provide owners disinterested in selling with some reprieve. However, the Government has to be clear what its role is. An en-bloc sale is ultimately an agreement between private home owners and subsequently, the developer. Although some safeguards should be put in place to protect the minority, are we going too far by dictating when owners can even embark on the process? I accept that repeated attempts can be very inconvenient and frustrating for unwilling sellers, but this is something owners should work out on their own collectively. It is no different with how owners decide what rules should govern the management of their property. There is no limit to the number of EOGMs owners may call may call on other issues. Why should en-bloc sales be any different? I therefore suggest that the threshold should remain 50% for all subsequent attempts. If more than 50% of owners want to explore a sale, we should not stand in their way. Ultimately, if they cannot secure the necessary 80% or 90% consent, the sale will fail. The law should not have to step in just because of possible inconvenience and annoyance. Those who disagree simply have to say "no". If the concern is that MCST funds will be wasted by the calling of numerous meetings, then all we need to do is require those with requisition subsequent meetings to bear the costs of those meetings, to be reimbursed only if the subsidiary proprietors agree to embark on the en-bloc process. That should be sufficient to discourage frivolous requisitions of meetings. The next issue I would like to raise is whether the Government should review which buildings qualify for en-bloc sale. An en-bloc sale essentially concerns three interests groups – the majority, the minority, and the State. As the building gets older, the national interest in redevelopment becomes more important. For buildings that are 20 years or older, an 80% majority is required. For those that are between 10 and 20 years, a 90% majority.
However, 10 years is too short a time to justify the need to re-develop. It is a waste of resources for buildings that are relatively new to be demolished. It is difficult to see how national interest can override the rights of private ownership in such cases. Likewise, there is a more compelling case to reduce the threshold for buildings which are 30, 40 or even 50 years old. Would the Government therefore consider reviewing the current age under which a building qualifies for en-bloc sale, and to reduce the thresholds for very old buildings? Third, a point of clarification on the issue of conflict of interest. Under the proposed amendments, a person standing for election as a member of a collective sale committee must declare any conflict of interest, failing which his election shall be void. That is clearly a sensible move. Likewise, a serving member of a sale committee must also declare conflicts within seven days of being aware of the same. However, the amendments do not specifically prescribe any consequences of his failure to do so. Could the Minister clarify what consequences apply or are intended? Mrs Mildred Tan (Nominated Member): Mr Speaker, Sir, thank you for allowing me to speak on this topic. I support the strengthening of this Bill, which is worth timely and necessary. However, I would like to make two suggestions on the process. The newspapers and commentators have already spoken about the changes to the cooling off period which are good, and which I support. Overall, the changes will ensure that the sales process is taken seriously, and is moved along expeditiously. More importantly, I think, while it recognises the role that personal interests and emotions play a large part in any property transactions, it also recognises the need for the distillation of a collective interest and for this process to be fair as well as quick. It is therefore a good idea to allow the process to move more quickly to the Courts. This is not because I do not support the idea of mediation, but because I do not think the same body should mediate and adjudicate. More critically, I also think that allowing more time for emotional debate does not help the resolution of competing interests during en-bloc sales. Sir, an en-bloc sale requires the need to reconcile many different points of views. But when we speak of collective decisions, there are basically three ways to get it right. First, your decision is right if it is the most reasonable. Second, your decision is right if you go through the right process. Third, your decision is right if it takes into account all legitimate interests of the case. The first is the best, of course, especially if there is full agreement and a unanimous decision is reached. The second relates to the process of mediation and adjudication, and it is my view that the amendments to the bill improves these processes as well. The third way refers to adjudication – of the process of taking into account the different interests in the case – whether this is for profit or for sentimental reasons. In principle therefore, I feel that any decision emanates from this Bill is fully justified.
I believe that when rules are clear and when the interest cannot be reconciled, we should then take a expeditious route, bite the bullet, and allow the process itself to provide the justification of the decision. Hopefully the thought of going to court which could be an expensive and potentially difficult process should be a deterrent forwards litigation, and not an excuse to drag out mediation. My only reservation comes from the constitution of the sales committee. First, I see that the new law allows a simple majority of owners to vote out dissenters from the committee. That is to say, a sale committee member who does not agree to the sale can now be voted out. To me, this may create the situation of a committee that is inherently biased towards a sale. We ought to retain members because they are reasonably intelligent, have some stake in realising the full value of the property and are willing to participate intelligently in the process of negotiation. Just because they are against any particular sale, or terms of sale, should not automatically disqualify him. That person should also be agnostic about whether he is opposed or supportive or any particular sale. If he does not agree to any particular sale, as long as he discharges his duties with proper due diligence, disclosure and governance, I feel he should be allowed to disagree. In any case, the strength of numbers will already count in the voting process of the en-bloc sale itself. Second, and relatedly, I feel that with the time limit on mediation, and a potential swifter process to the courts, there needs to be some minimum qualification that members of sales committee should have. For example, they will need to understand the basics of property law, property rights, conveyance and so forth. As the sales committee now will more likely need to work at a different pace and level from the past, I would ask the Minster to consider if we need to state some minimum requirements or criteria be it the knowledge of the law, evaluation and estate management to qualify people who want to sit on these committees? Sir, I support the Bill. Assoc. Prof. Paulin Tay Straughan (Nominated Member): Thank you, Sir, for this opportunity to place on record my endorsement of this important Bill. Home ownership is, to many, more than just an economic investment. Especially for elderly homeowners, the home is a repository of precious social memories. When en-bloc fever hits a development, it is particularly heart-wrenching when we read of elderly homeowners who are forced to sell their homes, relocate, and as a result, suffer spatial and social displacement. With your permission Sir, I would like to share with the House the research findings of my colleagues at the university on the impact of en-bloc sales on older persons and community building. Assoc. Prof. Alice Christudason, from the Department of Real Estate, and Assoc. Prof. Kalyani Mehta, from the Department of Social Work, are the investigators in this project funded by the NUS. They found that those had lived in the estate for about 20 years or more, and these are usually the older residents, they were often negatively affected by the whole process of Collective Sales (CS).
Apart from the destruction of their social support systems, respondents in my colleagues' survey expressed great anxiety about finding replacement homes, the actual moving process, and the problems of adjusting to a new living environment. Some even suffered traumatic health consequences. Therefore, I am in strong support of this Bill as it incorporates reforms which protect the minority homeowners who are not in favour of the en-bloc proposition. This Bill further empowers the Strata Titles Board (STB) to ensure that each application is done in good faith. Of significance are the disclosure requirements for individuals who stand for election to the Collective Sale Committee (CSC), as well as the extended restrictions on when an Extraordinary General Meeting can be called. I see these as proposals that serve to protect the minority proprietors, who are often older residents. In addition to these, my colleagues have also made three recommendations based on their research findings, which I would like to share with the House. The first is the creation of a resource unit, perhaps to be located in the STB, that will serve to mitigate the stress and negative consequences of relocation especially for the vulnerable homeowners, which include frail elderly living alone, the physically handicapped, and the mentally challenged. The second proposal is the publication of an information booklet that can be made available to those who require clarification about the en-bloc process. This publication can include fundamental concepts such as share value and the apportionment method, obligations of those in the CSC, grounds on which a minority can object to the sale application, the role of the STB, and other rights of the minority including adjudication. The third recommendation proposes that, in view of environmental concerns on wastage due to unnecessary construction, the age and state of repair of buildings be included as factor in the STB’s evaluation of the application for CS. Christudason and Mehta’s preliminary findings reveal that for 223 out of the 325 buildings which have gone through CS since 1999, the majority, 80 buildings were between 21-25 years of age. However, a small number of developments, 28 buildings were only 11-15 years of age at the point of going through CS. The researchers proposed that Singapore could consider the example of Hong Kong where the age and state of repair of a building are factors which the Tribunal must take into consideration before it approves an application. I shared these proposals with the House and the Minister as I believe that they will further enhance the safeguards to protect homeowners who wish to enjoy the fruits of their labour in their retirement years. Mr Speaker: Order. I suspend the Sitting and will take the Chair at 4.00 pm. Sitting accordingly suspended at 3.39 pm until 4.00 pm. Sitting resumed at 4.00 pm [Mr Speaker in the Chair]
LAND TITLES (STRATA) (AMENDMENT ) BILL Debate resumed. Ms Ellen Lee (Sembawang): Mr Speaker, Sir, this Bill aims to provide greater transparency and streamline procedures for en bloc sales to avert the long-drawn conflicts arising from such property transactions which have plagued us. I am happy to note that the role of the Strata Titles Board (STB) will be refined to focus on mediation (with a maximum mediation period of 60 days) and it is henceforth empowered to issue a "stop order" to cease mediation if the owners are keen to bring the case to court. This change could potentially help to reduce the costs and time taken to resolve more contentious en bloc applications via the litigation route. I am also pleased to note the requirement that a person standing in a collective sales committee must disclose the extent of his or his kin's ownership in the development to offer greater transparency. To further expedite the process, the sales committee can vote off a non-consenting member by a simple majority when an application for the sale has been made to the STB. The imposition of a two-year restriction period on en-bloc properties that fail to sell is one that has so far garnered mixed reactions from the industry and the ground. Those who wish to re-start the sales process during the restriction period will also have to abide by stricter rules. This measure could also prevent the draw down of management committee funds where Extraordinary General Meetings (EOGMs) are convened incessantly. Furthermore, the first re-try to convene an EOGM to re-appoint a sale committee will need to meet a requisition threshold of 50% by share value or total number of owners. This threshold will be moved to 80% for subsequent tries to convene an EOGM during the two-year period. I opine that it is timely to remind ourselves what was said in Parliament in 1998 and 1999 (as reported in Hansard Vol. 69 at Cols. 601-607 and Cols. 632-634) that the en bloc sale legislation was to, I quote, "create more housing units in prime 999year leasehold or freehold areas for Singaporeans" and that "a secondary benefit is that these developments, especially the older ones, could have been rejuvenated through the en bloc process". The secondary benefits of urban rejuvenation and higher landuse intensity as part of our national agenda may well be achieved at personal cost to citizens, by (i) impacting their homes, and (ii) downsizing or downgrading the real estate assets that form part of their retirement nest egg. Whilst it is recognised that en bloc sale offers one more channel to monetise the assets, we should bear in mind that demographic age profile of owners spans a spectrum and too early monetisation for owners below the age of 70 may not be prudent, given present life expectancies of 80 for men and 84 for women. More importantly, the changes should be calibrated to protect homeowners. The playing field is not level from the start as in en bloc sales, homeowners are the lesssavvy sellers pitted against corporate developers who are expert industry players. Homeowners rely heavily on valuers, lawyers and property agents to safeguard their interests. But the valuer is mandated by law to come on stage only after the curtain falls - "to provide independent valuation upon close of public tender" and the lawyers and agents are not prohibited by law to work on no-sale-no-fee basis despite the inherent moral hazards. It is also noteworthy that these valuers, lawyers and agents
have recurring business relationships with developers whereas they are likely to act only one-time for the en bloc homeowners. In the same vein, Sale Committee members and majority consenters are effectively selling unwilling homeowners' units along with their own units when minority dissenters are forced to sell under a collective sale order. A great deal is at stake. I believe that transparency, accuracy, currency, relevancy and equity are important tenets which may well be improved if the Minister considers the following enhancements: (a) Apportionment Method Mandate. This requires a written report by an independent property appraiser prior to approving the terms of the Collective Sale Agreement (CSA) as to the appropriate apportionment method to apply for the estate with justification for such recommendation. This should not be too costly relative to a full valuation report and may be a more practical compromise. Yet, it would establish one of the key decision factors on a professional basis. This goes towards improving accuracy and equity. (b) Agent's Business Proposal for potential developer-buyers and valuation report. Another possibility is to require that the Agent's Business Proposal with sensitised analysis of residual land value (RLV) to be given to potential developer-buyers so that, in turn, the business proposal can be distributed to each owner as the agent's commission is paid by owners upon the sale of the estate. To further improve transparency and equity, two representatives from the agent's company should affirm or swear a Statutory Declaration that they have provided the full and complete set of business proposals to each owner for further consideration. By the same token, the valuation report to be obtained upon "close of public tender", must be one based on updated Development Guide Plan (DGP) specifications, projected RLVs with Development Gross Floor Area (GFA) sensitisations and apportionment method. Valuation is an art and not a science. Hence, it is not uncommon that interested parties will hunt down valuers who are prepared to say what these parties want to hear. This may well go towards improving transparency and currency. (c) Re-affirmation by majority consenters. Perhaps it is also timely to mandate reaffirmation by majority consenters prior to execution of Sale and Purchase Agreement with developer-buyer for equity. At present, the Bill provides for up to a 24-month window to (i) procure the Collective Sale Agreement signatures, (ii) commit developer-buyer and, (iii) file notice of application of collective sale with the Strata Titles Board. This gestation period is too long. As en bloc interest is usually sparked in an upward moving property market, there is increased likelihood that within the period of up to 24 months, the current market value may already be out-of-sync with the reserve price that was locked-in by the majority consenters via the Collective Sale Agreement. Despite these pre-loaded factors (long gestation period and upward spiraling market), the Bill does not provide for re-affirmation of majority consenters. Even where the sale is by tender, there should be a simplified re-affirmation procedure whereby the lawyer must produce proof of dispatch of such document. The reaffirmation document could then be collected by the property agent for consolidation by the lawyer or returned direct to the lawyer via registered post (or fax to be followed by post) within a stipulated period from date of dispatch. The level of re-affirmations should meet the requisite majority consent level but need not match the previous
consent level. There could also be a deeming provision that non-return of such document by the specified deadline would be tantamount to re-affirmation. For practical reasons, I can appreciate why the Bill mandates an independent valuation report only upon close of tender, although that would clearly mean the two key factors, ie, the reserve price and the apportionment method that determine the level of majority consent were set without professional basis. As these two factors are inscribed into the Collective Sale Agreement which is mandated for a long lag time of up to 24 months to lock-in the majority consenters, will the Bill be, in fact, putting the Sale Committee and the valuer in a bind? For the Sale Committee, as proven in the Horizon Towers en bloc fiasco, the Sale Committee volunteers could be potentially ensnared into a situation of "damned if you do and damned if you don't". When the market is likely on an uptake to spark en bloc interest, it is naturally in the interest of the no-sale-no-fee property agent to recommend to the Sale Committee to launch tender just before any likely market runup in order to secure a sale as opposed to launching a tender at market peak. Once the reserve price is hit (despite the fact that such reserve price could potentially have been set some 18-20 months ago), the Sale Committee may be wary of aborting the sale even though they realise that the market run-up has made such reserve price out-ofsync because the valuation report would not reflect run-up as it would be based on values prior to the run-up. For the valuer, given the legacy issues created by the Commissioner of Buildings, pre-April 2005, where the bandwidths for share values were set at a wide 100 sq m interval and the typical composition mix in most estates where big-unit owners are outnumbered, it is natural that the line of least resistance would be exploited by the Sale Committee, agent and small- unit owners even though it defies equity and transparency. Hence, with 80% or more of the owners pre-agreeing to an apportionment method set without professional basis and locked into the CSA, no valuer would commit professional suicide to say upon close of tender that the apportionment method in the CSA was improper. All the more so when the valuer knows that the agent and lawyer would have spent time and money for potentially up to 18-20 months' of marketing the estate, marshalling consent, drafting legal documents, witnessing CSA signatures, attending EOGMs, etc, and if the sale should fail because of valuer's dispute with the apportionment method, the valuer knows that no fees would be paid to the agent and lawyer. By close of tender, the potential developer-buyers would also have spent time and effort to evaluate the project before bidding. Compounding all of the above is the business reality that valuers depend on agents, lawyers and developers for their professional appointments and business referrals on an ongoing basis, whereas the valuer acts for the en bloc estate only once. Would the present Bill's framework serve to pre-load the dice against homeowners? En bloc sales also have harsh social impacts on the elderly in our society. I am also referring to the same NUS research project entitled, "The Impact of Collective (En bloc) Sales on Older People and Community Building" undertaken by Assoc. Prof. Alice Christudason and former NMP, Assoc. Prof. Kalyani Mehta, that my fellow Member, NMP Assoc. Prof. Paulin Tay Straughan has mentioned earlier. It stated that older persons who had lived in the estate for about 20 years or more were often
negatively affected by the whole process of collective sales. And I shall not repeat again all that she has mentioned earlier. In view of the various and numerous contentious issues that have arisen out of this phenomena, it would be good to have more information made available to homeowners who require clarification about the collective sale process as they are likely to be facing en bloc for the first time in their lives at an advanced age and most are at a loss as to what to do next. This can reduce misconceptions and provide homeowners with a basic understanding of collective sale and their rights. In the light of all this, it is imperative that en bloc sales should be handled with utmost care and resolute government intervention to protect homeowners and where education should be the desired approach instead of leaving it purely to free market forces. There are dissenting views that the Bill by mandating that the will of the requisite majority would prevail over the will of the minority, even in respect of ownership of private property, has already impinged upon the concept of free market forces which in essence should be based on 100% consent as was the case prior to October 1999 when the previous Bill was gazetted. However, free market forces cannot be given full rein in all circumstances especially when it affects larger national and communal needs. It is believed that once this can is opened, it may unleash different worms with a new set of forces that justify recalibration to counterbalance them. Looking at the frenzy that surround en bloc transactions in the recent two years, it is clear that one of the key factors for the potential developer-buyer astronomical bidding price is the residual land value which en bloc legislation may be unwittingly unlocking for the developer-buyers more than the homeowners. I wonder if the Ministry could clarify if this perspective is correct. With these considerations, Sir, I support the Bill. The Minister for Law (Mr K Shanmugam): Mr Speaker, Sir, I wish to thank the Members who have spoken on the Bill. Members have generally been supportive of the Bill, but they have made some suggestions and raised some questions. Before I address the specific issues raised, let me reiterate the Government's thinking in deciding on what should be the safeguards prescribed in the legislation. We are guided by two main considerations. First, we seek to balance the interests of all owners. Those who are anti-en bloc sale want to have the sale process made more difficult; those who are pro-sale want the process made easier. Our task is to decide what would be a fair regime that will make the process more transparent to protect the interest of all strata unit owners, whether they are pro-sale or anti-sale. Neither side will be totally happy with the decision of the Government. But it is a matter of judgement and we have to try and strike a fair balance. Second, the Government is guided by the principle that we should not micromanage the process and prescribe too many requirements as they may not be applicable to every development. Some of the measures suggested by Members are not without merit. They may well be very useful for specific developments, and owners may wish to adopt them. But it does not follow that these requirements should be or can be prescribed for every en bloc sale. Doing so may introduce unnecessary
rigidity and pose considerable difficulties for owners if the requirement does not make sense for their particular development. Hence our stance is not to be overly prescriptive. The real point is that owners are free to adopt these measures if they think they are suitable for their particular circumstances. Thus, the ultimate choice is with the owners themselves on how the sale should be conducted. Ms Lee, taking the last point that she made, made a reference to unanimous consent. One can really ask whether unanimous consent is the best way to achieve the objectives of unlocking the value in the land, and giving owners a say on how the collective properties should be developed. One single person in a 200-unit development could then hold up the entire development. Does that strike one as fair? So in all these things, you try and strike a balance. We have set 80% and 90% requirements. Mr Hri Kumar says why not go even lower. I will come back to that. But there are these competing interests and we balance them. And I do not think it is these rules or the fact that we allow these en bloc sales is necessarily contributing to the increase in property prices. That is subject to a whole variety of factors which is not appropriate to go into here. But supposing we made it very, very difficult to do en bloc, what do you think would be the impact on supply and what do you think will be impact on prices? Ms Lee and Prof. Straughan touched on the concept of social impact of en bloc sales, particularly the impact on elderly owners. For some elderly owners who have lived for a long period in strata units, I can understand how the process of selling and relocating may affect them emotionally. On the other hand, there may also be owners who welcome the opportunity, elderly owners who welcome the opportunity to monetise their investment and sell their apartment units and perhaps move to another unit. We cannot decide on the relative merits between those who wish to sell and those who do not wish to sell. What we can do and have done is to provide for a framework to allow the issue of sale to be decided by the vast majority of owners and put in place a process that is fair and transparent. Ms Lee spoke about how en bloc sales are achieved at the personal costs to owners who have to sell their homes and downgrade their real assets. An en bloc sale can only take place if an overwhelming majority of owners think the sale is beneficial to them. It will be odd if more than 80% of owners vote for an en bloc sale which is disadvantageous to all of them. And the sale still has to pass the good faith test. Ms Lee also asked if the Residual Land Value of the properties which results in "astronomical bidding price" by buyers is unlocking more value for the developerbuyers than the homeowners. If a transaction is fair, it should result in a win-win situation for the transacting parties. If buyers are prepared to pay very high prices, it must also benefit the homeowners who are selling their properties. The legislation provides that the en bloc sale must be done through an open tender. This means that the price obtained should be the best price under the prevailing market conditions. But if sellers feel that even this best price is not high enough and they are not benefiting adequately, they can choose not to sell.
Prof. Straughan suggested that a Resource Unit can be established to help vulnerable homeowners, such as the elderly, physically handicapped and mentally challenged, affected by such en bloc sale efforts. She also suggested the publication of an information booklet on the en bloc sale process. MinLaw has been working to provide the public with information regarding en bloc sale regulations. For example, in 2009, arising from the public feedback on the lack of understanding over apportionment methods, we have worked with the Singapore Institute of Surveyors and Valuers (SISV) to issue a set of guidelines on general apportionment methods which owners may consider. The guidelines illustrate how and when to apply these apportionment methods. The guidelines can be found on SISV's website. I thank Prof. Straughan for her suggestions. My Ministry will discuss with the STB and professional bodies such as the Law Society and the SISV to see how we can put out more information. Ms Lee also queried whether we have achieved the objective of creating more housing units in prime areas and rejuvenating older properties through en bloc sales. Let me share some statistics with the House. Between 2005 and 2009, there were 462 en bloc transactions. Of these, almost half, or 217, are being redeveloped or have been redeveloped. These 217 developments originally had about 12,000 strata units - slightly less, 11,994. After redevelopment, the resulting new developments will have more than 26,000 strata units, more than doubling the number of strata units. Specifically, for example, the 152-unit Westpeak Condominium, sold in 2006, will be redeveloped into The Parc Condominium, with 659 units. Also sold in 2006, Le Marque and Century Ville, totaling 53 units, will be redeveloped into 278-unit Cyan Condominium. Prof. Straughan proposed that the STB should consider, among other factors, the age and state of repair of development in considering the application for en bloc sale. Mr Kumar asked if 10 years is too short a time to justify the need to redevelop. The issue was discussed at length by the House when we were proposing amendments to the LTSA in 1999. The matter was then referred to a Select Committee, which eventually took the view that it should ultimately be up to market forces that will determine whether an en bloc sale is economically viable. Demolishing younger buildings may not necessarily be a waste of resources if land potential can be better utilised through more intensive redevelopment. And, if the owners themselves, or a vast majority of them wish to do so, that ultimately is the litmus test. That said, on the ground there has not been a rush to redevelop properties which are not too old. From 1999 until now, the STB had approved 160 applications for en bloc sales. Of these 160 cases, only one case involved a development less than 10 years old. It was nine years old at that time. The other 159 developments were more than 10 years old when they applied for an en bloc sale. [Ninety-nine percent were above 10 years old, 69% (about 70%) were above 20 years old; and about 34% were more than 30 years.] There are, I note, some disparities between the statistics I have just cited and those cited by Prof. Straughan from the NUS report that she quotes. I
am not sure of the data source used by the NUS researchers. They may perhaps have included the developments which had obtained 100% consent from their owners to go for an en bloc sale. When there is a 100% consent, there is no need for owners to make an application to the Strata Titles Board for an en bloc sale. And if there is unanimous consent for an en bloc, really we should be careful about enacting rules which will prohibit sale based on the age of a property. Mr Hri Kumar also asked if we have plans to reduce the consent level for buildings which are 30 or 40 years old. This point has been raised a number of times, by people who want the en bloc sale rules eased. Mr Kumar said that the public interest in rebuilding such older developments should be given more weight. The House also heard a slightly contrary view from Prof. Straughan, who focused quite graphically on the impact on the elderly, and Ms Lee as well. So when you have as a clinical lawyer's approach contrasted with a sociologist's perspective, I was very tempted to say, "you know these corporate litigation lawyer types, they are all logic and no heart" but since Mr Kumar has at times shown that he has a heart, I cannot say that, I think. However, humour aside, as of now, we see no compelling reasons to reduce the consent level. For older properties, the case for redevelopment is much stronger and it really should not be difficult to achieve 80% consent level. And if people do not want to sell it - if you cannot get 80%, and people do not want to sell, and without doing any research, I could suggest some reasons, they may well have people who have stayed there for a longer period of time, have a greater attachment and may well fall into the category that Prof. Straughan was talking about older people and if they do not want to sell, you do not want to force them to sell either. So, yes, there are arguments both ways, and we never say never, but we do not see at this stage, a reason to change the voting requirement. Mr Kumar suggests also keeping the threshold at 50% for subsequent attempts in respect of the rule that we are proposing over a two-year moratorium. And "moratorium" is actually not the best word to describe it. When you have a failed attempt and you want to try again, you need to get a 50% consent before you try and if you fail again within that period, you need 80% consent level before your second try and all subsequent tries. There is really no right and wrong level of threshold. We have to make a judgment call. Within a two-year period, if there were already two previous en bloc attempts which have failed, I think the signal from the majority, or at least a significant minority, of the owners is quite clear. Those who are pushing for en bloc sales should then respect the wishes of that significant minority. If we keep the threshold level at 50%, this means that if only 50% of the owners are keen on an en bloc sale, they can make further failed attempts within a 2-year period even if it is clear that they cannot get the 80% level for the sale. Now, really, there can be no objection in principle to require that before you restart the entire process, you have to make sure that you are going to succeed. If it is a third attempt within two years, there can be no objection in principle to requiring them to show that
80% of the people agree. And if they cannot agree, that means the attempt is almost certainly likely to fail, then why put everyone through the process? Our point also is that common funds are used for this exercise. And Mr Kumar says, "Well, you know, you can mandate that and say that they must pay out of their own pocket". Yes, we could do that, but there is the other aspect which I have emphasised, which is in a development, people if they have made their views extremely clear, and there is no realistic prospect of success, should not be bothered again and again. And when the two-year period has lapsed, the consent level to convene an EOGM reverts to the lower 20 or 25% levels. Mrs Mildred Tan voiced her concerns that the proposed amendment to allow a simple majority of Sale Committee members to vote out dissenting members from the Committee may result in a committee that is inherently biased towards an en bloc sale. I think I need to clarify here, this provision can only be invoked after the Sale Committee had obtained the requisite 80% or 90% owner consent levels and has made the en bloc sale application to the Strata Titles Board. As such, the provision will not diminish non-consenting owners' ability to participate in the en bloc sale process. It is only after the requisite 80 percent or 90 percent consent level has been reached that the Sale Committee can vote out dissenting members. It is at this stage that a non-consenting Sale Committee member can choose to file his or her objections to the sale application directly to the STB. The Sale Committee which represents the majority of the owners who had consented to the sale should be allowed to expedite with the sale process without being slowed down by non-consenting members on the committee. Mrs Tan has also suggested that there should be a minimum qualification standards stipulated for Sale Committee members. I appreciate the intent behind this suggestion, but again, I think we should not be micro managing these issues. The owners should be free to decide who they would like to elect to represent them on the Sale Committee. Ms Lee proposed that there should be requirements for an independent property appraiser to recommend an appropriate method to apportion sale proceeds among owners, prior to owners approving the terms of the Collective Sale Agreement. Currently, the Act provides for an independent report on the method of distribution. This report, together with some other documents, is required to be sent to all owners before the en bloc sale application is made to the STB. Beyond that, if owners feel that such a report would be useful for them to better understand the proposed en bloc sale, prior to signing the CSA, they can always require the Sale Committee to provide such a report. Owners have the ultimate say. They can ask for what they think is necessary, for the process, or for them to participate in the process. If owners wish to find out more about apportionment methods, the SISV has issued a set of guidelines to recommend general apportionment methods. The guidelines also illustrate how and when to apply these apportionment methods. They can be found on SISV's website.
With regard to the requirement for a valuation report, the Sale Committee has to obtain a valuation report on the date of the close of the public tender or public auction. This is because we believe that this is the single most important juncture in the en bloc sale process where a valuation report will ensure that the development is not sold below prevailing market rates. Beyond that, there is no one-size-fits-all solution for the provision of valuation reports to guide owners when they are signing the CSA. Ultimately, it depends on the risk appetite and comfort level of different owners. Furthermore, valuation reports have a shelf life of a few weeks to several months depending on the volatility of the property market. Hence, it is best to leave it to the owners to jointly decide on the number and frequency of valuations to be carried out. We do not mandate that it should only be given at that point in time. We mandate that it should be given at such a point in time and all other points in time, it is up to the owners to decide if they want further valuations at whatever cost is appropriate. Similarly, on Ms Lee's other proposal for the appointed property consultant or agent to provide their business proposals that they prepare for prospective buyers, it is best to leave these matters to the owners to request for such information if they consider it appropriate. It may be appropriate for some developments, may not be appropriate for others. At the end of the day owners are making choices with respect to their properties which involve millions of dollars. You expect them to know what they want, and what sort of safeguards they wish. Our task is to prescribe certain minimum standards of conduct and to make sure that the whole process is fair, transparent and refine it as we go along, as we are doing now. Ms Lee also proposed that there should be a mandatory requirement for a Sale Committee to seek reaffirmation from the owners before the award of a Sale tender. A Sale Committee has to act in accordance with the mandate specified in its CSA. Thus, it really depends on what mandate is given to the Sale Committee. If the owners empower to Sale Committee to make the decision for award of tender within certain prescribed parameters, without the need for reaffirmation, then it is not the Government's business to intercede and tell the owners how they should run the process. Likewise, there is nothing in the legislation, either in the past or going forward, to prevent owners from specifying that they want the Sale Committee to seek such a reaffirmation from the owners before the tender is awarded. This can be provided in the CSA if the majority wants. Mr Speaker, Sir, this Bill represents another step towards refining the en bloc sale regime in Singapore. The Ministry will continue to review the Act in accordance with the state of the en bloc market, and the experience that we get, we will make further refinements if necessary. Order for Second Reading read. The Minister for Law and Second Minister for Home Affairs (Mr K Shanmugam): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."
Sir, I beg to move. The House immediately resolved itself into a Committee on the Bill. - [Mr K Shanmugam] Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. Bill considered in Committee; reported without amendment; read a Third time and passed.