June 1, 2008

En bloc sales bring out the worst in Singaporeans
By Jessica Cheam

After a most spectacular year for the en bloc market last year, sales activity has finally frizzled out and for most parties involved, it is a welcome time-out. While property agents may lament the slowdown, one group of home-owners can heave a sigh of relief, as the threat of being forced to sell their homes retreats into oblivion.

Well, for most, anyway.

The recent debacle at the annual general meetings of two of the most iconic condominiums on the East Coast - Bayshore Park and Mandarin Gardens - proves that while the market has gone dead, en bloc woes have not, and will not, go away.

Some points of contention that arose at the meetings were the use of proxy votes to influence decisions, and conflicts of interest arising over the roles of management councils and sales committees.

In the course of my job, I have covered my fair share of en bloc deals, and as a non-partisan observer of proceedings, I have come to one conclusion about the ‘uniquely Singapore’ phenomenon that is the en bloc.

It is ugly. And it brings out the worst in Singaporeans.

Recent developments have also highlighted weaknesses in the law regarding collective sales and a private property owner’s rights. This is despite the tightening of en bloc rules that kicked in last October, which ensure, among other things, that sales committees are properly elected, and collective sales agreements witnessed by lawyers.

This has no doubt cooled the en bloc fever which gripped the nation last year, with a total of 116 collective sales generating record investment sales of $13.64billion.

But some glaring flaws in the en bloc process remain. They include the distribution of sale proceeds, the role of the management council versus the sales committee, and the use of proxy votes at annual and extraordinary meetings.

Let me elaborate.

Firstly, owners should be compensated according to their flat attributes - height, cost of renovation, view.

I have found that pro-en bloc types usually own low-floor units, with average furnishings and view. Anti-en bloc types, by contrast, typically own beautifully renovated top-floor units with stunning views - it is no wonder that these owners want more compensation or refuse to sell, according to how much they have invested in their homes.

Current laws favour the average owner, who receives a pay-out equal to that of his top-floor neighbour, which is obviously unfair and has been the root of many conflicts and arguments.

The Strata Titles Board (STB) has also previously ruled that renovations, along with interest, are not a ‘deductible expense’, which means your renovations count for nothing in a collective sale.

To create a level playing field, provision should be made so that owners get fair value for their homes, perhaps by a government-appointed independent valuer.

Secondly, the management council and sales committee should be kept separate by law, since the role of the former is to maintain the upkeep of the estate, while the other’s role is to sell it.

Current laws allow a sales committee member to be on the management council as well, but this has caused unhappiness at many estates - not just at Bayshore and Mandarin - where suspicion breeds among residents towards those who carry both positions.

On the issue of proxy votes, it is theoretically democratic. But it also allows decisions to be skewed one way, because residents who want certain things changed will attend meetings and get proxies from similar-minded neighbours to achieve the results they desire.

Meetings currently require only 30per cent of the total share value held by residents of an estate to attend, which enables decisions to be made without majority consent.

This should be looked at. One solution could be to raise the minimum requirement of residents present to 80per cent, or instead to do away with proxy votes altogether so that voting cannot be manipulated - perhaps via an online or e-mail voting system.

My advice in the meantime?

Don’t buy into a strata-titled property if you do not want to be forced to sell your home. Current laws do not ensure you will be able to live in your condominium unit until your dying days - even though, in my opinion, you should be able to.

Most countries in the world allow this basic right, why can’t we?

Perhaps the lawmakers could take some of these issues into consideration when compiling the next set of refinements.

Beyond the economic value of urban rejuvenation or boosting shareholder value for property developers, the en bloc phenomenon has ripped apart the moral fibres and harmony of our society.

Is this a cost our society is willing to pay?

On the one hand, I can sympathise with those who want to sell: they may be approaching retirement, or perhaps have plans to move away, and want to get the best price.

But there are people who have spent hundreds of thousands of dollars beautifying their homes to be their retirement nests, plus those who value the environment they live in beyond any amount of realisable value.

Do the former have the right to determine if the latter lose their homes? Owners still have a choice to sell their homes on the open market.

In terms of ’specuvestors’ who swoop in to snap up units in the hope of making a quick collective sale buck, their motivation is even more inexcusable. It is okay to want to make money, but do it without hurting someone else.

It’s not just Singaporeans who become embroiled in controversial sales, but also foreigners and permanent residents.

I just hope that my estate never has to go through this nightmare. It is sure to do permanent damage to relationships which have taken years to build up, but which take only a sale notice to destroy.

May 13, 2008 - reply to Mr Tan Kok Khoon's letter

Mandarin Gardens' management panel steps down over enbloc disputes

We would like to point out contradictions in Mr. Tan Kok Khoon’s letter to the Straits Times forum dated 9 May 2008 and captioned: “MANDARIN GARDENS EN-BLOC SALE - Committee not involved in AGM”.

According to Mr Tan Kok Khoon, the Mandarin Gardens Collective Sales Committee (CSC) “was not involved in the proceedings of the annual general meeting on April 27”, but the facts speak otherwise.

Official records show that a total of 200 owners attended the AGM, of which 93 attended in person and 107 attended by proxy. Of the proxies, 69 were held by two CSC members, one of whom was Mr Tan Kok Khoon himself who held 55 proxies.

Yet, Mr Tan Kok Khoon says in his letter: “We certainly did not organise any collection of proxies", thereby suggesting that this large concentration of proxies in the hands of two CSC members came by without organization and effort, which is hard to believe.

Mr Tan also said in his letter: “One of our [CSC] members present at the AGM declared that none of us would stand for election to the council.” In fact, a resolution to prevent CSC members from being Management Council members and vice versa, was soundly DEFEATED by 67% of the votes. Clearly, the CSC did not approve of this resolution and used their proxies to vote against it.

Finally, two CSC members tabled a resolution to bar the Management Council from spending more than $50,000 for urgent matters. This controversial resolution was PASSED by a 61% majority, obviously with the help of proxy votes held by CSC members.

It is evident to us who attended the AGM, the longest ever recorded at Mandarin Gardens, that CSC members influenced the proceedings and determined the outcome of the AGM.

From:

K Kuladeva
Dennis Butler
Jeannette Aruldoss

May 9, 2008 - published in ST Forum

MANDARIN GARDENS EN-BLOC SALE
Committee not involved in AGM

PLEASE refer to Monday's article, 'En-bloc uproar at Bayshore Park, Mandarin Gardens' by Ms Jessica Cheam, and the letter by Mr Augustine Cheah, 'En-bloc system needs relook, as Bayshore shows'.

The Mandarin Gardens collective sale committee would like to clarify that it was not involved in the proceedings of the annual general meeting on April 27.

However, we know of members who attended as legal owners or subsidiary proprietors. One of our members present at the AGM declared that none of us would stand for election to the council.

We certainly did not organise any collection of proxies, although some subsidiary proprietors may have approached committee members in their capacity as neighbours.

Tan Kok Khoon

May 5, 2008

En bloc uproar at Bayshore Park, Mandarin Gardens
Sales committees rein in estate councils, irking owners who want to upkeep homes
By Jessica Cheam

TALL ORDER: With $2 billion each needed to buy Mandarin Gardens (above) or Bayshore Park, analysts say their collective sales are unlikely in the current market. -- ST FILE PHOTOS

THE market for en bloc sales may have gone dead quiet, but the issue is still raising a ruckus at two of Singapore's most iconic condominium developments in the East.

Sales committees pushing for the collective sales of Mandarin Gardens and Bayshore Park have been accused of trying to control the management councils running these estates and voting down proposals to upgrade estate facilities.

The committees, made up of residents who are pro-en bloc, have denied the charges.
Still, things came to a head last Sunday at both condos' respective annual general meetings (AGM), which lasted up to 10 hours each.

Sales committees are ad hoc committees formed by residents to explore the potential of an en bloc sale. They are different from the management council, which is appointed at the AGM by residents to run the estate and look into the upgrading of facilities.

Residents against en bloc sales at both condos claim that the sales committees had gone round collecting proxy votes from residents so as to control the outcome of the AGMs.

Mandarin Gardens' emotional AGM has left the 25-year-old estate with no management council at all. The existing council quit and refused to be re-elected because of some resolutions passed at the AGM. At the centre of the dispute was a controversial proposal by the sales committee, which was formed last year, to reduce the management council's current limit of $300,000 for expenses on urgent matters to $50,000. This was successful as the sales committee had enough proxy votes to form the majority. Council chairman Neoh Chin Chee said in a letter to residents last week that the resolutions passed made it 'untenable or difficult to carry on as a council member'. Proposals to upgrade the condo's rainshields and swimming pool tiles were also not approved.
The AGM was eventually adjourned when not enough candidates were nominated.

One resident Jeannette Aruldoss, 44, a lawyer, told The Straits Times that the $50,000 limit restricted the role of the council to run the estate. In emergencies, this fund may not be enough to address safety issues, she said.
But sales committee chairman Mr Tan Kok Khoon said some residents had felt the $300,000 limit was too high.

Over at the 21-year-old Bayshore Park estate, the sales committee proposed and pushed through a resolution to reduce the council members from 14 to nine.

Of the nine, four are also on the sales committee, so some residents are upset about the change.
Bayshore resident Mr S.K. Cheah, 40, a sales director, feels there could be a conflict of interest since sales committee members are likely to act in the interest of a sale, above that of the estate.
He noted that at the AGM, some resolutions for maintenance and upgrading were also voted down.
Another Bayshore Park resident, who declined to be named, commented that one common tactic used by many sales committees is to 'run the estate down' or keep maintenance to a minimum, so residents have little choice but to vote for a sale later.

But Bayshore's sales committee member Alan Chua told The Straits Times that they had no intention of doing that.

'We've lived here for many years and love this place, why would we do that?' he said.
On the en bloc sale potential, Savills Singapore director (marketing and business development) Ku Swee Yong noted that at least $2 billion each would be needed to buy each estate - a tall order even when the market is good. 'With the current market, the sale is impossible,' he said.
jcheam@sph.com.sg


EN BLOC SYSTEM NEEDS RELOOK, AS BAYSHORE SHOWS, FORUM

By Timothy Ouyang, Channel NewsAsia | Posted: 02 May 2008 2033 hrs


SINGAPORE : Enbloc sales woes and unhappiness at Mandarin Gardens have left the condominium without a management committee for the past week.

The previous committee refused to be re-nominated for elections at its Annual General Meeting last Sunday.

Since then, no one is taking charge of the day-to-day management at the condominium on Siglap Road.

Channel NewsAsia understands that the entire management committee stepped down because of disputes with the estate's enbloc sales committee.

Apparently, the enbloc sales committee pushed through resolutions which are unfavourable to the entire estate, through its control of proxy votes.

When contacted, the Strata Titles Board said such cases are rare, but it is unable to do anything at this point.

Under the law, all residents are jointly responsible for any liabilities incurred by the condominium during this period. -  CNA/ms
Source: http://www.channelnewsasia.com/stories/singaporebusinessnews/view/345192/1/.html

Here is a letter from a Stayer:

If anyone still holds the view that the current set of laws under the BMSMA and LTSA (Amendment) are sufficient to regulate the issues of en bloc, then this current ttale of 2 condos might provide food for thought.

On Sunday 27 April, both Bayshore Park and Mandarin Gardens held their AGM's. 2 estates with over 1,000 units each sitting on very desirable 1m sf of land, next to the seafront.

Both estates have gotten an en bloc initiative off the ground, with respective sale committees elected. With the support of the pro en bloc portion of the residents, the voting powers are then used to control the rest of the estate even though the votes represent only a minority of residents. Because like all estates, very few turn up for these meetings. Let me illustrate:

In Bayshore Park, the pro enbloc group outvoted other residents on crucial issues and in the selection of council members. Averaging 60% of votes cast at the AGM, this is only roughly 20% of residents (as only 30% of owners were represented at the AGM) . So this pro en bloc group voted down a proposed increase in maintanence charges in line with current inflation, voted for a lower increase in the sinking fund, voted down the crucial replacement of copper pipes in the common corridors and voted down any exploration of corridor upgrading. Because pro en bloc groups are usually not for estate maintenance.

Additionally, the pro en bloc group voted in for a reduced number of council seats to 9 (why?) to perhaps make sure that 4 sale committee members were voted into the council. This ensures that 4 of the 5 previous council members retained were those who have shown pro en bloc inclinations. They made sure that 2 previous council members who were not favourable on the en bloc of the estate were not re-elected.

Over at Mandarin Gardens, in a similar vein, the pro enbloc camp mustered enough proxy forms to control 65% of the votes of those present in the AGM. In a similar vein, the pro enbloc group defeated a motion to reduce water ponding of walkways and lift lobbies to improve safety. To top it all, they passed a perverse resolution to reduce the expenditure limit of the MC from $300k to $50k. This effectively makes it almost impossible for the MC to function!

Consequently, the incumbant council refused to stand for re-election. Even more devastating for Mandarin Gardens, even the pro enbloc camp fielded no candidates for the council. Hence, the AGM for Mandarin Gardens ended with no council being elected ! As councils can only be voted in at the AGM, this causes a BIG problem.

There is now NO MC for Mandarin Gardens. Under the law, the Chairman, Secretary and Treasurer from the last council will remain in office, but surely the 3 of them cannot run a 1017 unit estate without a team!

The law was not broken at both AGMs. However, many of us afffected are sure that the law was not designed to produce such outcomes.

This is further evidence of the En Bloc Disease which is affecting all of us - it is spinning out of control!