"I am a BLOGGER NOT an expert. This is a BLOG not a 'go-to' website for official information. I represent no one's view save my own. I have neither legal nor financial training, nor do I have anything to do with the real estate industry. My understanding of the Collective Sale Process is from a layman's position only. My calculations, computations and tables are homespun and may contain errors. Please note that nothing in this blog constitutes any legal or financial advice to anyone reading it. You should refer to your lawyer, CSC or financial adviser for expert advice before making any decision. This disclaimer is applicable to every post and comment on the blog. Read at your own risk."
Drop Down MenusCSS Drop Down MenuPure CSS Dropdown Menu
There is one thing worse than an Enbloc ----- and that is an Enbloc done badly. Since the majority have the necessary mandate to sell, then they owe it to all SPs to make a success of it. Minority SPs can only watch and wait, if they sell then lets pray it's at a price we can move on with, if they don't sell, then we are happy to stay for a few more years.

Incentive Payments

WARNING: OLD POST (before Thomson View High Court case Decision 2016)

Since 'conditional signing' has been unmasked, I believe there will be a change in language form now on. Instead of conditional signing, perhaps there will be 'supplemental agreement' or some other new terminology which will be employed to continue the practice under a different guise. 

Conditional signers are owners who sign for a different minimum selling price  than that stated in the CSA, or they may sign the CSA with the condition that they get a top up sum from somewhere; as can be seen from the following excerpt of a seminal High Court Case on the matter. In this instance all owners received the higher sum and so the judge approved the sale:-

Rainbow Gardens High Court Decision (30 May 2009).
Third issue: The CSA was not signed by subsidiary proprietors holding at least 80% of the share value of RG.
62 Clause 14(b)(i) of the CSA had stipulated that the MSP [Minimum Selling Price] was not to be less than S$68.5 million. The close of an EOI exercise was on 18 April 2007 and it was learned then that Premier’s offer of $76.8 million was the highest. The Conditional SPs then signed the CSA and inserted a condition that their signatures would not be valid if the MSP was lower than $76.8 million. [Minority Lawyer] submitted that as this was a different sum from the MSP stipulated under clause 14(b)(i), the Conditional SPs had not agreed with all the terms of the CSA..
63 [Minority lawyer]also submitted that although clause 14(b)(ii) of the CSA had stated that the SC might raise the MSP without seeking the consent of those who had signed the CSA, the SC was required under that provision to notify the Majority of the decision to raise the MSP by a written notice. The SC did not do this until late July 2007, just before the Application was submitted..

65 As for any breach to notify the others who had signed the CSA about the higher revision of the MSP, [majority lawyer] submitted that it was for the other signatories to complain about such a breach.
66 In Liu Chee Ming v Loo-Lim Shirley [2008] 2 SLR 764 (“Liu Chee Ming”), I had said at [50]: The appellants were not parties to the CSA even though eventually, by virtue of the decision of the Board, they were bound by its terms. Accordingly, their complaint about a breach of cl 6.1.1 was from the angle that such a breach established an absence of good faith. The vendors who had signed the CSA were not opposing the application to the Board.
67 Understandably, none of the other signatories had objected to any breach of clause 14(b)(ii). They had obtained a price higher than the MSP stipulated in clause 14(b)(i). However, Mr Liew’s argument was that there was no consensus ad idem among all the Majority at the relevant time. Looking at clause 14(b)(ii) in a common-sensical way, I was of the view that there would be consensus ad idem if the SC did not object to the condition, which was the case. The MSP had been effectively raised to $76.8 million. This condition was met. The notification to the others was an additional step that should have been taken but the omission to do so did not vitiate the CSA as between all the Majority.
68 Hence, I was of the view that by the time the Application was made (on or about 3 August 2007), the requisite percentage of share value had been obtained.

See * at end of post

At what point in the sale can conditional signers sign on?
Anytime. As can be seen in Rainbow Gardens above, they signed on only after the Expression of Interest  exercise - because the marketing agent was able to do and EOI without having the requisite 80%. Also the 80% only applies at the time of application for sale at the STB and not at point of sale.  

So, when the SC announce that they have reached the initial milestone of 80%, you have to wonder how many of them are actually only conditional signers?

Are conditional signers subsequently dropped if their desired selling price is not achieved?
They can be, if there is no 'party' to pay for their top up.  But they did serve a useful purpose to the collective sale by helping the MA/SC reach the initial target 80%. This first 80% is necessary in order to embark on stage 2 - go for sale. They can always add more people to make up for the shortfall and present a new 80% at the STB.   They must seek legal advice though on what there position will be UNDER THE LAW. They may not be 'majority' anymore, but do they revert to being  'minority' with full minority rights? Or are they in legal limbo? These are legal questions that should be asked in advance.

What if there is a 'party' to pay for their top up?
Well, lets look at an actual example of a unit that signed conditionally. This is the conditional page which is not the same as the execution page which they also signed :
Note how if the 'party' agrees in writing to top up the their sale proceeds to their target price, then their Agreement to the CSA is valid - and unconditional... and I think that means hidden and unrecorded! There are legal ways to get around anything, and if such things happened in the past (and they certainly did) the new ways will be a tad more sophisticated.

Maybe there will be a clause in the CSA saying the owners agree to the Purchaser entering into Agreements with individual units, well, that would be a case of hiding in plain sight.

Maybe the lawyer will take care of the CSA Agreement and the MA will take care of the 'top-ups'. The left hand need not know what the right hand is doing, correct?  

Who can the 'party' be?
Other owners? (unlikely), the MA? (too greedy),  I'd say most probably the Purchaser.

Can  payments  be made to the objecting minority by the  developer-buyer?
According to the Regent Garden Condominium High Court Decision, yes.
In the Regent Garden case,  6 minority owners were paid an additional sum AFTER the 80% had been achieved in order for them to withdraw their objections to the sale at the STB). The Court of Appeal (28 May 2009) ruled that such inducements were legal.

So, if they are a threat of some kind to the sale not being approved, or if it is cheaper to pay off a few minority to withdraw their objections  rather than all owners, or simply to expedite the sale.

Regent Garden Condominium
Chua Choon Cheng and Others v Allgreen Properties Ltd and Another Appeal[2009] SGCA 21
90 Allgreen has not breached any express or implied terms in the CSA or SPA by giving the Additional Payments to the Minority Owners. The SC sowed the seeds of their present unhappy predicament when, to save a mere sum of $11,000, it made a deliberate decision not to accurately ascertain the development baseline of the Property. While one should be slow to take issue with their decision by coldly equating hindsight with foresight, the stubborn facts that cannot be lightly erased are that, acting in the interests of the Majority Owners, the SC, firstly, inappropriately opted to save costs and then, secondly, preferred the comfort of having the certainty of a binding contract with Allgreen to the uncertainty of re-negotiating the Sale Price upon the ascertainment of the actual development baseline. Since they opted to seize and keep the proverbial bird in the hand, it is only just that they cannot now be allowed to complain that the bird is not what they thought it was. While we can understand the appellants’ dismay in relation to how events have unhappily conspired against them, that is not in itself a basis for implying novel new terms in fact or in law into the Agreements. The present circumstances have without doubt been precipitated largely by their own deliberate conduct.
91 We acknowledge that the practice of some developers in making direct payments to minority owners to secure their consent can be potentially divisive and may even sometimes be ethically challenging. This, nevertheless, does not mean that the law, as it now stands, prohibits such incentive payments. The Act itself, while comprehensively dealing with a host of contractual issues, plainly does not proscribe such payments. It is also probable, that not infrequently, the majority owners will have no real complaints about such payments, as their overriding interest will be in ensuring that the collective sale is successful (and to collect the sale proceeds early) rather than to quibble about incentive payments made on the sidelines."

No comments:

Post a Comment