Source : The Straits Times, 28 Aug 2007
Home owners to get more say with proposed changes to Land Titles (Strata) Act
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.
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.
On the cards
SUMMARY of key proposed changes affecting collective sales
Additional consent requirement
Additional approval required from owners of units forming at least 80 per cent of area if the development is more than 10 years old and 90 per cent of area if the development is less than 10 years old.
Formation of sales committee
Sales committee to be formed, and its members elected, at a general meeting before the signing of a collective sale agreement can start. More general meetings to be held to consider key issues such as appointment of lawyer and consultant or agent, apportionment of sales proceeds, contract terms and so on.
Collective sale agreement
Lawyer to be present to explain legal terms and liabilities when an owner signs the collective sale agreement. But the owner can change his mind within a five-day cooling-off period after signing the collective sale agreement for the first time.
Mode of sale
A collective sale launch must be made by public tender or public auction. As well, an independent valuation is to be obtained on the date of the close of the tender and bids to be revealed to the owners as soon as practicable.
STB empowered to raise proceeds
The Strata Titles Board can increase the amount that minority owners can get from sales proceeds if it finds that these owners have not been treated fairly. This proposed increase will be at least $2,000, or at most, 0.25 per cent of the sale proceeds for each unit.
Return of monies in management fund and sinking fund Upon sale completion, the money in the condominium's management fund and sinking fund to be distributed to owners.
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