Revised en bloc law fixes imbalances in mixed estates

Revised en bloc law fixes imbalances in mixed estates

By Fiona Chan

HOME owners who live in mixed developments - which have both apartments and shops or offices - will now get a bigger say if their estates go en bloc.
This is thanks to a proposed law change which will require another layer of consent from an estate’s owners for a collective sale.

Consent is granted now if owners who hold at least 80 per cent of a development’s share values vote in favour of a sale. If a development is less than 10 years old, the requirement is 90 per cent.

But the upcoming change will add another condition to en bloc sales regardless of whether the estate is mixed or not: The owners who want to sell must also have units that make up at least 80 per cent of the development’s total area. Again, this is upped to 90 per cent if the estate is less than 10 years old.

This change was made to address the imbalance in share values in a mixed development. Share values are assigned when a unit is first sold, and help determine what each owner pays in maintenance fees and how many voting rights he has in an estate’s management.

Although share values are partly determined by unit size, owners of commercial units generally get more share values than home owners. For every one share value given to a home owner, an office owner in the same estate gets four and a shop owner, five.

This has led to complaints from residents in mixed developments who are reluctant to sell their estate en bloc but who may not have a choice.

The proposed change has itself been tweaked since March, when the Ministry of Law first considered a second layer of consent.

Its initial proposal was based on the total number of an estate’s units, rather than its total area. But after feedback from the public and experts, the ministry changed its mind.

Property consultants yesterday said the new rule will make things more equitable for home owners.

‘The original plan to go by number of units would have been unfair to owners of large units, because they would have paid more for their units but would have only one say,’ said Mr Karamjit Singh, executive director of property firm Credo Real Estate.

Mr Lui Seng Fatt, head of investments at Jones Lang LaSalle, warned that this new rule may make it harder for mixed developments to go en bloc. ‘Also, owners with a larger floor area may now have a bigger say, not only in voting but also in how to split the sale proceeds,’ he added.

But the change may not have much impact on the en bloc market - 90 per cent of deals done since last year were in purely residential estates, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.
Source : Straits Times - 28 Aug 2007

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Rents, wages up but S’pore cheaper than HK, Tokyo

Rents, wages up but S’pore cheaper than HK, Tokyo

Also, it has qualities like liveability that economies in region cannot easily copy, says Lim Hng Kiang. But it has to keep an eye on costs
By Erica Tay, Economics Correspondent
EVEN though property costs and wages are on the rise, Singapore remains cheaper than global cities in the region such as Hong Kong and Tokyo, said Trade and Industry Minister Lim Hng Kiang.
Nevertheless, the Republic cannot afford to be complacent, said Mr Lim. ‘We have to maintain vigilance over our costs, as excessive cost increases will dampen our growth prospects,’ he said.

Mr Lim was speaking in Parliament yesterday in response to MPs’ concerns about the impact of rising business costs on Singapore’s economic competitiveness.

In response to questions on this issue from Mr Liang Eng Hwa (Holland-Bukit Timah GRC), Mrs Josephine Teo (Bishan-Toa Payoh GRC), Dr Muhammad Faishal Ibrahim (Marine Parade GRC) and Madam Halimah Yacob (Jurong GRC), he laid out proactive steps that the Government has taken to address supply constraints.

Also, citing as examples London and New York, which are thriving hubs despite their high costs, Mr Lim said ‘competitiveness is more than offering low costs alone’, but also about value creation. In this respect, Singapore has attributes that economies in the region cannot easily replicate, such as its livability.

Also Mr Lim pointed out that in the past three years, the consumer price index has increased at an annual rate of 1 per cent, while overall unit labour cost actually declined at an annual average rate of 2.2 per cent. ‘However, in recent quarters, we have seen increases in property prices and rentals, as well as wages,’ he noted.

He cited recent moves to release land for temporary office space as well as provide more public flats for rental.

The Ministry of National Development (MND) also released additional information on property prices and rents ‘to allow the public and businesses to make more informed decisions on property purchases and rentals’.

And the MND has been putting out an ample supply of land with more than 42,000 private residential units and 640,000 sq m of office space to be completed by 2010.

The Government is also looking at ways to help more Singaporeans such as older workers and women take advantage of the strong employment market and rejoin the workforce.

Despite media reports of ’sky-high’ office rentals, Mr Lim said although the median prime office rent in the second quarter was $9.50 per sq ft per month, the median rent in other locations, accounting for about 80 per cent of office space here, was less than half of that.

Mr Lim also quoted studies which showed that Singapore remains cheaper than other global cities in the region.

A survey on global office market rentals by consultants CB Richard Ellis showed that Singapore was 30 per cent cheaper than Hong Kong, and 50 to 60 per cent cheaper than Tokyo.
Source : Straits Times - 28 Aug 2007

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Collective sales of homes to be more transparent

Collective sales of homes to be more transparent

Home owners to get more say with proposed changes to Land Titles (Strata) Act
By Joyce Teo

HOME owners faced with the momentous decision of selling their home en bloc will soon benefit from a clearer, fairer sales process - and the right to change their minds within five days.
Amid a record number of collective sales in the past two years, some home owners have been left unhappy at the sale process over issues such as how the sales committee is formed.

En-bloc sellers have been plagued by rumours and a lack of clear information on sale procedures. Some home owners with strong emotional attachments to their homes have felt pressured to sell.

In one high-profile dispute, the sale of Horizon Towers for $500 million was blocked on a technicality - the paperwork was not in order - by the Strata Titles Board, after action was taken by owners who were opposed to the sale. They had disputes over issues including the transparency of the sale process. The developers have now taken the sellers to the High Court for failing to see the sale through.

One of the proposed changes will give more power to the board, which can disregard any technical irregularity if it is satisfied that it will not prejudice any owner’s interest.

Another key change is the introduction of strict guidelines on the currently unregulated process of setting up an en-bloc sales committee to oversee a sale. For instance, owners can only form a sales committee and elect members at a general meeting.

On the cards
Another major change will provide for a five-day ‘cooling off’ period after a collective sale agreement is signed during which a home owner may change his mind.

The proposed changes are contained in an amendment to the Land Titles (Strata) Act, introduced to Parliament by Deputy Prime Minister and Minister for Law Professor S. Jayakumar yesterday.

He first outlined some of the changes in March. More proposals were added after public consultation in April and May - which attracted hundreds of suggestions - and talks with industry experts.

Prof Jayakumar said the extra changes will further enhance transparency and procedural clarity, and offer better protection to affected home owners. There are more than 30 proposed amendments to take effect as soon as early as October.

One change addresses an imbalance in voting rights in some mixed retail, office and residential developments - by adding a new level of owner consent by floor area, before a sale can proceed.

To ensure owners are kept in the know, general meetings must be held to look at issues such as appointing lawyers and consultants, or dividing sales proceeds.

Also, a lawyer must be present to witness the signing of the collective sale agreement, and to explain the legal terms and liabilities. Observers say this move will prevent owners from complaining that they were forced to sell under duress.

To assure owners the best price is reached, a collective sale launch must be made by public tender or public auction. If this method fails, the sales committee can follow up and negotiate with any bidder. Still, a sale by private treaty must be concluded within 10 weeks of the close of the tender or auction.

And an independent valuation has to be obtained on the date the tender closes with bids to be revealed to the owners as soon as practicable - to help them decide if the bids are favourable.

Another change will return any remaining money in a condo’s management and sinking funds to owners - not the purchasing developer.

The Strata Titles Board can increase the amount a minority owner gets from sales proceeds if, say, he spent a lot to do up his home before finding about the sale.

‘All the changes will give owners more say in a collective sale,’ said Mr Nicholas Mak of consultancy Knight Frank. ‘But they come at a price as the sale process will most likely be lengthened.’

Also, professional fees will inevitably rise, said Credo Real Estate’s managing director Karamjit Singh.

Source : Straits Times - 28 Aug 2007

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Some may slip through the HDB safety net

Some may slip through the HDB safety net
IT is a sensible policy to encourage home ownership. Secure housing, one of our most basic needs, also provides the place where we connect with the wider community through education, employment and community networks. In addition, owning one’s home provides stability and makes for sound financial planning.

As Prime Minister Lee Hsien Loong said in his recent National Day Rally speech: ‘Home ownership through an HDB flat is the best form of social welfare for citizens, as it gives every Singaporean a stake in Singapore’s success. When we help you to buy a house and give you something which is valuable and which is rooted in Singapore, when Singapore grows, property values go up, your flat value goes up.’

A big part of the social support system in Singapore is centred on helping Singaporeans own an HDB flat. The public housing board will assume an even bigger role with the changes announced by Mr Lee in his speech.

To help more of the lower-income own their own homes, the government will give a more generous housing grant, raising it to $30,000 from $20,000. Meanwhile, more people will also become eligible for the grant as the household income limit will be increased from $3,000 to $4,000. The government will also be helping elderly flat owners to unlock the value of their flat and convert it into a stream of income to supplement their retirement expenses by offering a form of reverse mortgage. HDB will buy back the tail end of the flat’s lease and leave the individual with a shorter lease of 30 years. HDB will then pay a lump sum to the owner and monthly payments for the rest of his or her life which will serve as a form of annuity. These new policies will reinforce the unique Singaporean HDB-centric social support system.

As noted in a report by Citigroup economist Chua Hak Bin yesterday, already the current distribution of social support or transfers is heavily skewed towards the decision to buy an HDB flat. The most generous of the subsidies are HDB housing grants of $30,000-$40,000 and a 20 per cent price discount for the purchase of new flats. Mr Chua posed the question of whether, over the longer term, Singapore’s social support system should shift towards a more Workfare-centred one rather than the current HDB-centred one.

He said: ‘Tying the most generous social support to home ownership may penalise those who are too poor to purchase an HDB flat and encourage the assumption of a heavier debt burden than otherwise. Should lower-income households who do not exercise their privilege to buy an HDB flat be given the lump-sum cash grant equivalent to $30,000-$40,000 (perhaps deposited into their CPF accounts) upon reaching a certain age instead? Such an option may produce an outcome where the social transfers are more a function of need rather than a decision tied to home ownership.’

Singaporeans who don’t own HDB flats may number 200,000 or less. Not that large a group, but they are most likely the ones who need help most. Hence the suggestions are definitely worth considering.
Source : Business Times - 28 Aug 2007

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Inflation expected to be 1-2% in ‘07: Hng Kiang

Inflation expected to be 1-2% in ‘07: Hng Kiang

By NISHA RAMCHANDANI
DESPITE soaring property prices and good wage increases, inflation is expected to come in at between one and 2 per cent this year, Minister for Trade and Industry Lim Hng Kiang said yesterday in response to parliamentary questions on the Singapore economy.
While this expected inflation rate is an increase from the average annual rate of one per cent for the past three years, Mr Lim said that inflation is ’still very reasonable’ seeing that Singapore has been enjoying practically 16 quarters of growth.

‘The current cost pressures are reflective of our competitiveness and resultant strong economic growth,’ Mr Lim said, noting that the economy is projected to grow by 7 or 8 per cent this year. The growth has been apparent in both the manufacturing and services sectors. Overall unit labour cost increased by 5.8 per cent year-on-year in the first half of 2007 while unit business cost for manufacturing increased by 2.6 per cent.

Mr Lim also pointed out that the government had taken steps to combat immediate space constraints by introducing a supply of interim office space, along with HDB flats for rent. The ministry of national development has also published additional information on property prices and rents to keep the public and businesses better informed. More than 42,000 private residential units and 640,000 square metres of office space will be available by 2010, to help meet demand.

With regards to manpower, the minister explained that the government is planning to help more Singaporeans - like women and older workers - rejoin the workforce so as to benefit from the robust employment market. ‘Our focus is to create better jobs for Singaporeans and better opportunities to attract global talent,’ he said.

Mr Lim cited Singapore’s ranking this May by the World Competitiveness Yearbook as the second-most competitive economy overall among 55 countries, as showing that Singapore remains an attractive destination for investors, talent and tourists, even in the face of increased costs.
Source : Business Times - 28 Aug 2007

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Services sector shows strong growth in Q2

Services sector shows strong growth in Q2

BUSINESS revenue in the services sector saw its strongest growth in 12 quarters in the April-June quarter, driven by the booming financial and property markets.

The Department of Statistics (DOS) says the business receipts index for services rose 15.6 per cent year-on-year in Q2 - the highest growth since the 18 per cent jump of Q2 2004.

Excluding financial and insurance services - which saw a 33.5 per cent surge in business receipts in the quarter - the overall increase was 10.5 per cent.

The financial services industry fared particularly well, with turnover growing 35.6 per cent in Q2, thanks to brisk business in Asian currency units and banks’ domestic banking units, as well as brokerages and fund management firms. Insurers also reported strong revenue growth.

The real estate industry saw another quarter of strong revenue, with its business receipts index rising 27 per cent in Q2, following a 19 per cent increase in Q1.

‘In particular, real estate agents registered a significant increase in their earnings,’ DOS said.

Within the business services segment, market research and management consultancies recorded revenue gains of nearly 37 per cent in Q2.

Private schools and others in the education services industry also saw double-digit growth in business receipts.

The one exception appears to be in ‘recreational activities’, where turnover dipped 2.4 per cent in the second quarter.

Source : Business Times - 28 Aug 2007

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No effort spared in ensuring safe F1 race: DPM

No effort spared in ensuring safe F1 race: DPM

By LYNETTE KHOO

NO effort is being spared to make sure that next year’s Formula One Grand Prix in Singapore is conducted safely, Deputy Prime Minister and Minister for Home Affairs Wong Kan Seng told Parliament yesterday.

Mr Wong: Attention is also being paid to the threat of terrorism
The race will take place on a street circuit around Marina Centre on Sept 26-28, probably at night.

‘At this stage, the various plans and details are still being worked out between the various government agencies, the race promoter, Singapore Grand Prix Pte Ltd (SGPPL), and the Federation Internationale de l’Automobile (FIA), which is the international governing body for all motor racing events,’ Mr Wong said in response to a question from Ellen Lee, MP for Sembawang GRC.

The Ministry of Home Affairs will be working with relevant agencies, SGPPL and FIA to implement the various safety and security measures for 2008 and succeeding years. Attention is also being paid to the threat of terrorism, as the F1 event is expected to draw a huge crowd, including a large number of foreigners, Mr Wong said.

Safety and security measures include lining up barricades around the perimeter of the race circuit, similar to the arrangement adopted by most countries hosting F1 races, and deploying police for crowd control and conducting checks on bags and personal belongings at designated access points to prevent smuggling of any weapons or prohibited items. Vehicle movement will be restricted in sensitive areas.
Source : Business Times - 28 Aug 2007

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Amendment to Land Titles (Strata) Act

Amendment to Land Titles (Strata) Act
It will extend en bloc sale by majority consent to five more developments

(SINGAPORE) A proposed amendment to the Land Titles (Strata) Act will extend en bloc sale by majority consent to five developments not covered by current legislation - Goldhill Plaza, Goldhill Shopping Centre, Katong Plaza, Roxy Square Shopping Centre and Bukit Timah Shopping Centre.

Strata title certificates were issued for the projects but the original landowner/developer retained the title certificates and instead gave long leases - at least 850 years - to buyers of units.

Owners of such units can only do an en bloc sale with unanimous consent - and the approval of the original developer, who owns the reversionary interest in the property.

But the ministry of law proposes to allow them to proceed with an en bloc sale by majority consent.

And the original developer’s consent will not be required, because if the Strata Titles Board approves an en bloc sale, he will lose all rights to the land.
Source : Business Times - 28 Aug 2007

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Law may alter the pace of en bloc sales

Law may alter the pace of en bloc sales
Amendments could see sales surge in near future, but sites may take longer to launch later
By KALPANA RASHIWALA
(SINGAPORE) Proposed changes to the law will make the en bloc sale process more transparent and include safeguards to ensure that the various stakeholders get a fair deal.

Sales committees will have to be properly formed and elected. Collective sales agreements (CSAs) will be witnessed by lawyers who can clarify doubts and explain terms and liabilities. Even after they sign, potential sellers will have a five-day ‘cooling-off period’ during which they can change their minds. Even the definition of majority consent has been tweaked.

In the immediate future the changes, which are expected to become law in early October, could serve as a catalyst to speed up the signing of CSAs, says CB Richard Ellis executive director Jeremy Lake. ‘Otherwise it appears that everything may have to be unwound and the process restarted under the new law,’ he added.

But in the longer term, the pace at which en bloc sites have been galloping into the market may slow. This is largely because new rules and procedures - including how sales committees conduct their business - mean it could take a longer time to launch a site for sale. However, the pace of collective sale deals sealed will still depend largely on market conditions, reckons Credo Real Estate managing director Karamjit Singh, who welcomed the spirit of the changes that promote greater transparency.

Law firm Rodyk & Davidson’s partner Norman Ho said lawyers’ fees for collective sales, usually $3,000 to $4,000 per unit, could double or triple because of the extra work involved - primarily because lawyers will now be required to witness signatures and certify the monthly updates on the consent level. ‘This will also aggravate the current shortage of en bloc sale lawyers,’ Mr Ho reckons.

Agreeing, Credo’s Mr Singh said requiring lawyers to witness signatures will ‘create a bottleneck in the process’.

Like many in the industry, Mr Ho questioned the need to get lawyers to witness signatures, especially since a cooling-off period is also being introduced.

A key amendment is an additional requirement for the definition of majority consent for en bloc sale, to be based on the area of the units in the development.

The existing condition, that requires consent from owners controlling at least 80 or 90 per cent of a development’s share value - depending on whether it is more than 10 years old or less, respectively - will still apply. But a second condition will now require consent from owners of units that form 80 or 90 per cent of area in the development - again depending on its age.

This is different from the Ministry of Law’s earlier proposal in March, which had sought to peg the second condition of consent on 80 or 90 per cent of the number of units owned in the development. Feedback showed that basing the second requirement on area will mitigate bias against residential owners in a mixed development - who typically have lower share values. At the same time, the requirement would not work against commercial unit owners, especially those whose units have much larger floor areas.

Another big section in the Land Titles (Strata) (Amendment) Bill tabled for first reading in Parliament yesterday by Deputy Prime Minister and Law Minister Prof S Jayakumar governs the formation, composition, constitution and proceedings of en bloc sales committees.

A sales committee will have to be elected by more than 50 per cent of owners present at a general meeting of the management corporation before signing of the CSA may begin. Eligibility criteria of committee members are listed and the sales committee will have to convene general meetings to consider key issues such as the appointment of the property consultant and lawyer, apportionment of sales proceeds and the terms and conditions of the CSA.

The sales committee will also have to provide monthly updates - instead of every eight-weekly currently - of the consent level, to keep owners better informed.

Every launch for sale must be through a public exercise like a tender or auction. However, the sales committee can engage in follow-up negotiations with any bidder, especially if the tender/auction fails to achieve the desired price. But a sale by private treaty must be concluded within 10 weeks of the close of the tender/auction. Otherwise, the tender will have to be relaunched for sales efforts to resume.

Credo’s Mr Singh welcomed the 10-week deadline, saying it ‘instils discipline as the market has shown itself to be very dynamic’.

‘In fast-moving markets, private treaty negotiations do not give you comfort that you are dealing with the best buyer. But a tender does, because you are inviting more participants to the negotiating process rather than limiting yourself to one or two,’ he added.

A MinLaw spokesperson said: ‘The proposed amendments to the Land Titles (Strata) Act are to provide additional safeguards and to ensure more transparency for all owners, that is, the minority and majority owners, but in a way that does not make it unduly onerous to bring about an en bloc sale.’
Source : Business Times - 28 Aug 2007

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A Secret Formula For Success

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