"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."
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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.

No Sale No Fee

It is no surprise that lawyers and marketing agents readily agree to an arrangement whereby they are not paid until after the sale has been approved and after the buyer has deposited the sale proceeds into the owners' bank accounts. After all, the chances of the sale NOT being approved are minimal and the rewards of a successful en bloc are great indeed. It is almost a certainty that they will be generously recompensed for their costs and expenses at the end of the day. The substantial reward is therefore worth the minor risk. The owners have agreed to a minimum sale price in advance which becomes the target price at which they can sell. It is in the en bloc lawyer and marketing agent's best interest that the sale be swift and trouble free.

It is no surprise that owners also readily agree to this arrangement for delayed payment for obvious reasons:-
  • No money up front means a small group of owners can set the ball rolling with nothing more than a wing and a prayer.
  • If the sale does not go through  no signatory to the sale is out of pocket (bar the disbursement fee, if any)...... or so they say.
Can you think of any other situation where a professional would expend a large part of his time and  money on the off-chance (no guarantee) that he would be compensated 24-36 months down the line? 

The legal profession in Singapore in general does not work on the American style contingency basis - that is, lawyers getting paid only if they win the case. It is forbidden in order to discourage frivolous litigation and inflated claims; and it works. The Law clearly understands how a client's best interests cannot be served well if the lawyer has a financial stake in the outcome of the case. Basically, it keeps people honest and their motivation pure.

But the Law does allow a 'form' of contingency payment in en blocs. Granted, it's not quite the same as the en bloc lawyer's fee is set out in advance in the CSA (see First Schedule 3.(c)) - the only unknowns are the disbursements and possible extra costs such as High Court expenses, Senior Counsel fees etc. But it's still No-Sale-No-Fee, and provides a powerful reason d'etre to push a sale through.

In the past, the en bloc lawyer, as stakeholder, would have been entitled to the interest derived from the moneys held - and when you are talking about multi-millions, you are talking about a very large sum indeed. The longer he held onto he money, the more interest accrued. A reason to stretch out the process, perhaps. But no more.

And in the First Schedule, the CSA must state:
(e) the person entitled to any interest derived from moneys held by any stakeholder; and
Nevertheless, owners should be very wary of the vested interests of the en bloc lawyer and marketing agent and take each step with caution. No one is on your side but yourself, and it is wise not to put too much faith in the integrity of strangers where money matters are concerned. The temptation to cut corners, devise ways to concentrate control, manipulate sentiment on the ground and ply pressure especially in the final stages is strong and are all means to an end - the end being securing their own fees and commission.
Let me cite from the transcripts of the Tampines Court STB Tribnal proceedings, dated 16/17 June, 2008. (cross examination of marketing agent by minority lawyer, names are deleted)
Q. I’m putting it to you that all you were interested in was closing some deal to get your $1.9 million in commission; agree or disagree?
A. Ultimately, yes.
Q. I’m putting it to you that you did not help the sales committee get an independent valuation that would give them a chance to assess your reserved price of $389 million; do you agree or disagree?
A. It’s not necessary to do so.
Q. I’m suggesting to you the only reason why it was not necessary to do so was in your interest, (property agency)’s interest.
A. Interest, ultimately, yes, upon the sale completion of the en bloc sale.
Marketing agents and serial en bloc lawyers have an ongoing professional relationship with buyer- developers, both big and small. They have only a fleeting, one-off relationship with an en bloc estate. No cigar to anyone who knows which relationship is more important in the long run.
But I have to admit to being on the side of the en bloc lawyer and MA on the matter of disbursements, and who should pay for them.  This No-Sale-No-Fee scenario is willingly entered into by both parties; the majority as well as the professionals. The majority have a contractual agreement to pay for the disbursements regardless of the outcome and they should thus honour their agreement.

At the outset of an en bloc, owners have two choices in the matter:
  1. Stick to the status quo and beware or
  2. Pay full/partial legal fees up front
CHOOSE 2!. How else are you to ensure your best interests are being served? How else can a lawyer not find himself betwixt and between his clients' best interests and his own? The marketing agent always works from commission so he can be left to the end. The lawyer is de-linked from the MA* , has no pressing reason to sell fast and low. Having an un-compromised lawyer drawing up an owner-friendly CSA, keeping a watchful eye on the process, being present at the negotiation table and at the signing of the S&P can only be to the owners' advantage.

*In the early stages, the marketing agent will suggest law firms to the sale committee for their consideration. The de-linking should start from here - the lawyer should be independently chosen and not be part of any legal/marketing agent package.

Feed the sharks, and maybe, maybe they won't eat you.

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