Source : The Business Times, 22 Mar 2007
A collective sale (or more commonly termed en-bloc sale), is a combined sale by the owners of 2 or more property units to a common purchaser.
The most common en-bloc sale is the sale of all the units in a strata or flatted development to a purchaser. The sale proceeds are then divided amongst all the unit owners.
Other variations of en-bloc sales include the sale of all units in a development together with an adjoining development or landed properties.
WHAT DO THE AMENDMENTS TO THE LAND TITLES (STRATA) ACT COVER?
Before the amendments, an en-bloc sale of all the units in a strata or flatted development could take place only if all the unit owners agreed.
The amendments provide that if a specified majority of unit owners in a strata or flatted development agree to an en-bloc sale and meet the requirements of Part VA of the Act, they may apply to a Strata Titles Board for an order that all the units and the land in the development be sold.
WHAT ARE THE TYPES OF DEVELOPMENTS FOR WHICH AN APPLICATION CAN BE MADE FOR AN ORDER FOR EN-BLOC SALE UNDER PART VA OF THE ACT?
The developments for which an application can be made for an order for en-bloc sale by majority agreement are:
Strata developments registered under the Land Titles (Strata) Act;
[Section 84A]
Strata or flat developments where the owners of the flats also own a share in the land and the leases for their flats are registered under the Registration of Deeds Act or the Land Titles Act; and
[Section 84D]
Strata or flat developments where the owners of the flats own a registered leasehold estate of 999 years or more (or such other leasehold period as the Minister may specify) but they do not own the land in the development. The leases for the flats may be registered under the Registration of Deeds Act or the Land Titles Act.
[Section 84E]
As there are no share values or shares in land assigned to flats in such developments, the owners of at least 25% of the total number of flats in the development must apply to the Registrar of Titles for notional shares in land to be assigned to their individual flats to facilitate calculation of the majority agreement.
[Section 84E(2)]
WHAT IS THE REQUIRED MAJORITY WHICH MUST BE OBTAINED BEFORE AN APPLICATION CAN BE MADE?
If a development is less than 10 years old [calculated from the date of the issue of the latest Temporary Occupation Permit (TOP) (or Certificate of Statutory Completion (CSC) if no TOP)], the owners of 90% of the share values, share in land, or notional share in the land must agree in writing to sell all the units and common property or land to a purchaser under a sale and purchase agreement (subject to an order of the Strata Titles Board); and
[Sections 84A(1), 84D(2) and 84E(3)]
If a development is 10 years old or more [calculated from the date of the issue of the latest TOP (or CSC if no TOP)], the owners of 80% of the share values, share in land, or notional share in the land must agree in writing to sell all the units and common property or land to a purchaser under a sale and purchase agreement (subject to an order of the Strata Titles Board).
[Sections 84A(1), 84D(2) and 84E(3)]
Note: The date of issue of the TOP or CSC may be obtained from the Building Plan Department, Building and Construction Authority at 5 Maxwell Road #16-00 Tower Block, MND Complex, Singapore 069110 (Tel No: 63251586, Fax No: 63251607).
WHAT ARE THE STEPS WHICH THE MAJORITY OWNERS MUST TAKE BEFORE SUBMITTING AN APPLICATION?
1. Hold at least one Extraordinary General Meeting to consider the en bloc sale.
[4th Sch. Para. 1(a)]
2. Appoint not more than 3 owners to represent the majority owners in connection with the application.
[Section 84A(3)]
3. Obtain a valuation report for the whole development which must not be more than 3 months old when the application is made.
[4th Sch. Para. 1(c)]
4. Obtain a report by a valuer on the proposed method of distributing the sale proceeds.
[4th Sch. Para. 1(c)]
5. Advertise the particulars of the proposed application in the local newspapers, as approved by the Board, in the 4 official languages.
[4th Sch. Para. 1(b)]
The advertisement must include:
(i) information on the development;
(ii) the names of all the unit owners and their addresses, unit addresses and their strata lot numbers, if any;
(iii) the names of the mortgagees, chargees and other persons with an estate or interest in the units;
(iv) brief details of the sale proposal; and
(v) the place at which the relevant parties can inspect the documents for the en-bloc sale.
[4th Sch. Para. 3]
6. Prepare the application to be made to the Board. A copy of the application form may be obtained from the Land Titles (Strata Titles Boards) Regulations 1999 or downloaded from this website. The form is also available at the office of the Strata Titles Boards at 45 Maxwell Road #01-11, East Wing, The URA Centre, Singapore 069118 (Tel: 63251586, Fax: 63251607).
7. Serve a notice of the proposed application (”the notice”) to all the owners of the units by registered post and by placing a copy under the main door of every unit and to the mortgagee, chargee or other person (other than a lessee) with an estate or interest in the unit and whose interest is notified on the land register for the unit by registered post. [For the address of service by registered post, please see paragraph 10]
The notice must include a copy of:
(i) the advertisement referred to in paragraph 5 above;
(ii) the sale and purchase agreement;
(iii) a statutory declaration made by the purchaser on his relationship, if any, to the unit owners;
(iv) the valuation report referred to in paragraph 3 above;
(v) the report by a valuer on the proposed method of distributing the sale proceeds referred to in paragraph 4 above; and
(vi) the minutes of the extraordinary meeting referred to in paragraph 1 above.
[Section 84A(4), 84D(3) and 84E(5)
4th Sch. Para. 1(c)]
Affix a copy of the notice on the main door of the units whose owners have not agreed in writing to the sale.
[4th Sch. Para. 1(d)]
Affix a copy of the notice, in the 4 official languages, to a conspicuous part of each building in the development.
[4th Sch. Para. 1(e)]
The notice to be served by registered post shall be served on a party:
(i) where the party is an owner of a unit registered under the Land Titles (Strata) Act, at the address as shown on the strata roll;
(ii) where the party is an owner of a unit not registered under the Land Titles (Strata) Act, at the last recorded address at the Singapore Land Registry;
(iii) where the party is a mortgagee, chargee or other person with an estate and interest in the unit whose interest is notified on the land register, at the address on the strata roll or last recorded address at the Singapore Land Registry; and
(iv) where the party is a management corporation, at its address as shown in the Singapore Land Registry.
[4th Sch. Para. 2]
WHAT IS THE PROCEDURE FOR APPLYING?
The application for en-bloc sale must be made using the prescribed form within 14 days of the publication of the advertisement. The application
is to be made by way of a statutory declaration by the representatives appointed by the majority owners, stating that the relevant provisions of the
Act have been complied with. The application is to be submitted at the office of the Strata Titles Boards, 45 Maxwell Road #01-11, East Wing, The URA Centre, Singapore 069118 (Tel No: 63251586, Fax No. 63251607).
The application must include the following:
(i) the documents set out in paragraph 7;
(ii) a list of the names of the unit owners who have not agreed to the sale in writing, their mortgagees, chargees and other persons (other than lessees) with an estate or interest in the flats whose interests are reflected in the land registers;
[4th Sch. Para. 4]
(iii) such other documents that the Board may require; and
[4th Sch. Para.6]
(iv) an undertaking to pay the costs of the Board in relation to any valuation or other reports called for by the Board.
[Section 84A(3)]
WHAT OTHER DOCUMENTS DO THE MAJORITY OWNERS NEED TO FILE?
After submitting the application at the Strata Titles Boards, the applicants must lodge a copy of the application, in the approved form, for registration at the Singapore Land Registry. A copy of the forms can be downloaded from the website of the Singapore Land Registry at http://www.gov.sg/molaw/slr.
[4th Sch. Para. 6]
HOW CAN A MINORITY OWNER OR HIS MORTGAGEE, CHARGEE, ETC, FILE AN OBJECTION TO THE EN-BLOC SALE APPLICATION?
A unit owner who has not agreed to the sale in writing, his mortgagee, chargee or other person with an estate or interest in the unit may, within 21 days of the date of the notice for en-bloc sale, file an objection in the prescribed form with the Strata Titles Boards.
[Sections 84(A)(4), 84D(3) and 84E(5)]
The Board will, within 5 days of the filing of an objection, forward a copy of it by registered post to the representatives appointed by the majority owners and their lawyers, if any.
[4th Sch. Para. 5]
WHAT ARE THE FACTORS WHICH THE BOARD WILL TAKE INTO ACCOUNT IN DECIDING ON AN APPLICATION?
Where no objection is filed against the application, The Board will approve the application unless, after going through the application, it is satisfied that the transaction is not entered into in good faith, after taking into account:
(i) the sale price for the whole development;
(ii) the method of distributing the sale proceeds; and
(iii) the relationship of the purchaser to any of the flat owners.
The Board will not approve an application if the sale agreement requires any unit owner who has not agreed in writing to the sale to be a party to any arrangement for the redevelopment of the property.
[Sections 84A(9), 84D(7) and 84E(9)]
Where objections are filed against the application, The Board will consider all the factors in paragraph 1 above and the objection and may call for mediation.
The Board will not approve an application if it is satisfied that:
(i) the unit owner who objects to the sale will suffer a financial loss; or
(ii) the sale proceeds to be received by a unit owner, his mortgagee or chargee, are insufficient to redeem any mortgage or charge against theflat.
Note 1: A unit owner will be considered to suffer financial loss if the sale proceeds for his unit, after any deduction allowed by the Board, are less than what he paid for the unit.
Note 2: A unit owner will not be considered to suffer financial loss because his net gain from the sale will be less than the other unit owners.
[Sections 84A(8), 84D(5) and 84E(7)]
WHAT ARE THE EFFECTS OF AN ORDER OF THE BOARD FOR EN-BLOC SALE?
Owners of units and land
An order for en bloc sale issued by the Board is binding on all the unit and land owners of the development (including their successors in title and assigns), their mortgagees, chargees and persons with an estate or interest in the units and land (including lessees).
Under such an order, all the unit owners must sell their units (together with the land) to the purchaser in accordance with the sale and purchase agreement. They must produce the certificates of title and relevant title deeds to the representatives appointed by the majority owners for the purpose of the sale.
[Section 84B]
Owners of land in an application under section 84E where the unit owners of a 999-year registered leasehold estate do not own a share in the land Where the Board makes an order for the en-bloc sale of the units and the land, the owner of the land (or reversion) will be deemed to have transferred his estate and interest to the land to the purchaser upon the registration by the Registrar of the transfers of all the units in the development and the Registrar shall enter a notification of the vesting of the land in the purchaser on the land register.
[Section 84E(10)]
Effect on leases of the units
A lease against any of the units (other than the lease held by the unit owner) shall, unless there is an earlier agreed date, determine on the date on which vacant possession is required to be given to the purchaser.
The order does not prejudice the lessee’s right to any compensation from the unit owner. However, only unit owners who have not agreed to the sale in writing or their lessees can apply to the Board to determine the amount of compensation payable.
[Section 84B]
CAN THE MAJORITY OWNERS APPLY TO THE BOARD TO APPOINT A THIRD PARTY TO ACT FOR CERTAIN UNIT OWNERS IN THE SALE?
The representatives appointed by the majority owners may apply to the Board to appoint a person to deal with all matters pertaining to the sale of a flat where:
(i) the unit owner has died and no personal representative has been appointed; or
(ii) in any other case as the Board may think fit.
[Section 84C]
WHO CAN APPEAR IN A HEARING BEFORE THE BOARD?
Where a Board has appointed a date for hearing, it will, where necessary, give to all parties to the dispute or matter a notice of the hearing.
[Regulation 9(1)]
A party entitled to appear before the Board may appear in person or may be represented by his lawyer or such other person as the Board may allow and who may examine witnesses and address the Board on behalf of the party.
[Section 110]
Source : Ministry of Law
The ABCs of en bloc sale
JEREMY LAKE answers some of the commonly asked questions on the collective sales process
The Singapore residential market is witnessing the third wave of collective sales, with a hive of transactions in 2006 and the highest volumes recorded in the last decade. The two other waves occurred in 1994-1997 and in 1999-2000.
This third wave is significantly different from the previous two waves in two aspects. One is the wider and more diverse pool of players. Back in 1999-2000, the market was dominated by a couple of locally listed companies. Now, this has expanded to include foreign funds, private equity groups and institutional players. Previously, such funds have focused on the retail and office sectors.
The other emerging trend is the faster turnaround from the purchase of sites to the launch of projects. The trend these days is for purchasers to buy, seek the necessary approvals and sell quickly, as opposed to adopting a wait-and-see approach. Many of the collective sale sites purchased in the last two years can be expected to be launched this year.
The key challenge for en bloc sales committees is in getting the 80 per cent consensus. Sales committee members are finding it more difficult to persuade owners to sign on the dotted line, as owners anticipate higher asking prices. (Note: The government will be seeking feedback for proposed changes to the process. Among them is getting consent from owners of at least 80 per cent of units in a development, in addition to the existing requirement of a nod from owners with at least 80 per cent of share values.)
We answer some of the commonly asked questions on the en bloc sales process.
Q: When is an en bloc sale feasible?
A: If the land value of your property is higher than the total value of the individual apartments, offices or houses combined, it means your property has redevelopment potential and you may well profit from a collective sale. These are the most common situations where a collective sale might be possible:
Where the land use has been changed. For example, when use has been changed from landed to high-rise, as a result of re-zoning under the Master Plan. Changes were made to the Master Plan by the Urban Redevelopment Authority in 1993/1994 which sparked a series of collective sales.
Where the Master Plan provides for an increase in plot ratio.
Where the existing development has not fully utilised the allowable plot ratio. This is especially true of older apartment buildings built before 1985.
Q: How does one work out a collective sale agreement?
A: The land price which a purchaser pays is shared among the owners in a pre-determined method. The collective sale premium is the difference between the collective sale price and the most recent transaction of the same unit type in the open market.
Q. What are the methods of apportionment?
A: The Singapore Institute of Surveyors and Valuers (SISV) recommends five methods of apportionment:
Share value
Strata area
Average of share value and strata area
Valuation and share value excess
Any other method
The guidelines provide for any other method - so any combination of the above methods is acceptable, as long as it is fair and equitable. There are no distinct pros and cons of one method over the other. But owners should consider various factors including the individual unit size.
For example, the share value method favours small units while the strata area method favours units with large areas. Share values and strata areas are facts that are available in your title deeds, so any method involving these two values is less contentious. Usually the property consultant will advise the sales committee on an appropriate method depending on each development’s unit composition.
Q. How are owners of mixed developments apportioned their share?
How complicated is determining apportionments for owners of mixed developments over residential developments?
A: The number of collective sales for mixed developments is limited to date. The share of apportionment is a bit more complicated to determine in mixed developments where there are retail and office components. One needs to consider factors such as frontage of units and human traffic.
Q: Under what circumstances may disputes arise?
A: For example, if you have a collective sale of a shopping mall, the ground floor shops command a higher price than other floors, but others on the second floor beside the escalator will demand the same or a higher price than the ground floor back corner unit.
Q: How important are valuations in the settlement of disputes?
A: Valuations are subjective and different people will have different views on it. An owner may have three different valuers which give similar values but an owner may still disagree with it.
Q: Can CPF funds be included as financial loss?
A: Based on the latest Strata Titles Board (STB) judgment for the Waterfront View case, interest on CPF funds cannot be included as financial loss. If the board waives or does not require the owner to top up the account, it is not considered financial loss.
Q: What are the steps involved if you’d like to do an en bloc sale in your estate?
A: A group of interested owners can get together to form the pro-tem sale committee (PTSC). They can contact a property consultant to evaluate the potential. Then, the PTSC can appoint the property consultant and lawyers, who will then advise them on the process forward. (Note: The government is proposing that en bloc sale committees be formed only at extraordinary general meetings convened by management corporations.)
Q: How does one select a good agent?
A: A collective sale is a complex process and there are many pitfalls to be avoided. A good agent should help you to:
Confirm the development potential of your property
Assess accurately the land value and compare it with the value of the individual apartments, houses, shops or offices
Recommend a minimum price
Aggressively market the property in Singapore and internationally, to maximise the sale price
Advise on and coordinate the signing of the collective sale agreement
Help owners find replacement properties
Advise on the legislation and how to apply to the Strata Titles Board for approval of the collective sale.
Q: How long does the entire process take?
A: By legislation, the sale committee has 12 months to obtain the 80 per cent and a further 12 months to make an application to the STB for approval. The STB usually approves the application within four to six months. Thereafter, the owners will receive their payments within three months. They will have another four to six months to vacate the premises.
The writer is executive director, investment properties, at CB Richard Ellis
More FAQ can be found at http://www.redas.com/HTML/ePropFAQs/en-bloc.html
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