En Bloc Sellers Should Be Aware Of Powers Of Sales Committee

Source : Channel NewsAsia, 15 Aug 2007

Owners should understand the collective sales process and the powers bestowed on their sales committee right from the start.

This will help minimise potential problems arising from an en bloc deal.

Dissenting views among home owners are common.

The Strata Titles Board received 45 en bloc applications in the first half of 2007 - 4 were resolved after mediation, another 4 set for hearing, and 24 others pending.
10 applications went for collective sales order uncontested, and 3 were withdrawn.
The usual grouses include apportionment of payout and valuation of the property.

While the law does not require valuation to be done anytime before the sale, lawyers said it might be advisable to do so, before making a decision to sell.

It is also important for the owners to select a reputable marketing agent to ensure adequate steps are taken to market the property at the best possible price.

Another suggestion is to add a clause in the sales agreement to provide for a revision of the reserve price according to market conditions.

But property analysts countered that an overly flexible reserve price will not give developers the peace of mind to bid for the site.

Apart from pricing issues, the content of the sales agreement and the conduct of the sales committee should not be overlooked.

“The asset that is put in the hands of the sales committees (involves) hundreds of millions of dollars. More thought should be given into this process, in terms of due diligence required on the part of the sales committee, controls, and declarations of conflicts of interest, which need not reach the level of statutory duties of directors,” said Philip Fong, Partner, Harry Elias Partnership.

The government is expected to amend the laws on en bloc sales soon.

Experts said that while it will make the process more transparent and allow residents to have more say, there could be other challenges.

“The effect is it’s going to cause the collective sales process to drag on a bit longer because you need to call for EOGM for example. That could pose some additional challenges to the agents because more documentations need to be done,” said Nicholas Mak, a property analyst at Knight Frank.

Selling aside, owners must also be prepared to pay more for their replacement home, given the current property boom. - CNA /ls