Disclaimer






"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.

The First EOGM

THIS IS A SECOND SCHEDULE MEETING - AND THUS IS AN EOGM FOR THE PURPOSES OF A COLLECTIVE SALE. MCST FUNDS USED.

First of all, the eligibility requirements that follow are all bosh and bunkum, non-compliance brings no penalty, Sure, it says in clause 2 sub-clause (2) of the Third Schedule that an owner who fails to disclose his conflict of interest shall have his election voided - but there is no actual mechanism for this to happen.  Who is going to verify information or lack of information?  Who will declare the member's election void? Who has the power? The LTSA is silent on these matters. It's like there are rules for speeding but no traffic cops. The onus is on owners themselves to stand up at the EGM with a list of questions they want to ask each and every candidate one by one. Never mind the heckling or calls for you to sit down - just keep on asking whatever question you require in order to reveal the nature and depth of interest these particular owners have in the estate. No one else will - not the managing agent, not the pro-enbloc crowd, just little you. So stand up and fire away.


The first time most residents will hear about an en bloc attempt will be when they receive a letter from the MC informing them of a pending EGM. An EGM can be requisitioned by 20% of units by aggregate share value or 25% of total number of units in the estate. Once the Secretary of the MC receives the request for an EGM then it has to be held within 6 weeks (see SECOND SCHEDULE).

Convening of general meeting on requisition
2. —(1) Subject to sub-paragraph (1A), the council of a management corporation shall, on receipt by the secretary thereof of a requisition for a general meeting signed by —
(a) one or more persons entitled to vote in respect of one or more lots, the share value or the total share value of which is at least 20% of the aggregate share value of all the lots whose subsidiary proprietors comprise the management corporation; or
(b) not less than 25% of the total number of subsidiary proprietors of the lots whose subsidiary proprietors comprise the management corporation,
immediately proceed to convene a general meeting of the management corporation to be held as soon as practicable but in any case not later than 6 weeks after the receipt by the secretary of the requisition.

Relevant Event
(1A)    If a relevant event happens, the council of the management corporation shall not, on receipt by the secretary thereof of another requisition for a general meeting, proceed to convene another general meeting of the management corporation for the purposes of a collective sale unless —
(a) a period of 2 or more years has elapsed since the happening of the relevant event; or
(b) the requisition is signed —
(i) in the case of the first requisition after the happening of the relevant event — by at least 50% of the total number of subsidiary proprietors of lots that comprise the management corporation or by one or more persons entitled to vote in respect of one or more lots, the share value or the total share value of which is at least 50% of the aggregate value of all the lots whose subsidiary proprietors comprise the management corporation; and
(ii) in the case of the second or subsequent requisition after the happening of the relevant event — by at least 80% of the total number of subsidiary proprietors of lots that comprise the management corporation or by one or more persons entitled to vote in respect of one or more lots, the share value or the total share value of which is at least 80% of the aggregate value of all the lots whose subsidiary proprietors comprise the management corporation.

What is a Relevant Event?
(8)    For the purposes of sub-paragraphs (1A), (2A) and (3A), a relevant event occurs when —
(a) no quorum of proprietors is present at a general meeting —
The quorum is 30% of the aggregate share value  for all lots comprised in that strata title plan are present at the meeting, either in person or by proxy.

(4)If at the end of 60 minutes after the time appointed for holding a general meeting of a management corporation referred to in sub-paragraph (2) or the proprietors of flats referred to in sub-paragraph (3), no quorum as specified in sub-paragraph (2) or (3), as the case may be, is present, that general meeting shall immediately stand dissolved.

(b) the motion for the constitution of a collective sale committee, notice of which was given in accordance with paragraph 3, is defeated at the general meeting referred to in sub-paragraph ( a)(i), (ii) or (iii);

(c) the collective sale agreement executed among the subsidiary proprietors that comprise the management corporation, or the collective sale agreement executed among the proprietors of flats referred to in section 84D(2) or 84E(3), as the case may be, expires at any time on or after the date of commencement of section 9(i) of the Land Titles (Strata) (Amendment) Act 2010;

(d) the collective sale committee constituted for the purposes of a collective sale of all lots and the common property in a strata title plan to which section 84A or 84FA applies, or a collective sale of all the flats and land in a development to which section 84D or 84E applies, as the case may be, is dissolved at any time on or after the date of commencement of section 9(i) of the Land Titles (Strata) (Amendment) Act 2010 by virtue of the operation of paragraph 12(2) of the Third Schedule; or

( the paragraph 12(2) of the Third Schedule states: (b) in any other case, at the end of a period of 12 months after the committee is constituted, there is no collective sale agreement for that collective sale or no subsidiary proprietor or proprietor, as the case may be, has executed a collective sale agreement for that collective sale.)

e) every member of a collective sale committee constituted for the purposes of a collective sale referred to in sub-paragraph (d) is removed from office on or after the date of commencement of section 9(i) of the Land Titles (Strata) (Amendment) Act 2010 and no other collective sale is constituted in replacement for the purposes of the same collective sale.

Since 20% by aggregate share value has already signed the requisition for an EGM you can be sure they have already got a pro-tem sale committee lined up and waiting.  If the remaining 80% are not careful, they will find power has once again slipped into the hands of a few in a matter of hours, and all the wishy-washy safeguards of the new LTSA rules turn to dust. It takes 20% to requisition an EGM and 30% to reach a quorum on the day. So, since the 20% are already a numerical majority on the day itself, a Yea to en bloc will be a shoo-in if most owners decide to stay away.  

I will divide this FIRST EOGM into 5 subsections

The How: the First EOGM proper
The Who: the make-up of the sale committee
The How Many: determining the optimal number of SC members
The What: powers, duties or functions of the SC
The What if: surprises that may be sprung

THE HOW
Please refer to the SECOND SCHEDULE of the LTSA
EOGMs are horrible mediums of mass communication, especially in cavernous, un-air conditioned school halls! It is preferable that residents come prepared and understand what is going on and not "leave it in the hands of God", as someone unwisely commented anonymously. This initial meeting will set the tone for the entire process to follow. If it is done badly, warring sides will emerge, If it is done well, tentative trust can be established.

Who chairs the meeting(s)
?


The Chairperson of the MC shall preside at any general meeting of the MC at which he is present - and in his absence, the SPs present at the meeting and entitled to vote on motions submitted at the meeting may elect one of their number to preside and be the de-facto chairman of the MC.
The Chairperson decides the manner in which a poll is taken and the declaration of the chairperson of the result of the voting shall be conclusive.
 
(4) A poll shall be taken in such manner as the chairperson thinks fit.

(6). At a general meeting of a management corporation, its chairperson may rule that a motion submitted at the meeting is out of order if he considers that the motion, if carried, would conflict with this Act or would otherwise be unlawful or unenforceable.
(11). The declaration of the chairperson of the result of the voting on any proposal submitted at a general meeting of the management corporation shall be conclusive.


What is the meeting about?
According to the Second Schedule
3. Every notice for a general meeting shall -
(a) specify the place, day and hour for the meeting;
(b) include each proposed resolution to be considered at the meeting
(c) specify any other business to be transacted at the meeting.
(d) inform each person to whom the notice is addressed that he may vote in respect of each proposed resolution and, where relevant, on election of members of the collective sale committee — 
(i) in the case of a subsidiary proprietor of a lot subject to a first mortgage shown on the strata roll, only if the mortgagee fails or neglects to exercise the voting power  conferred upon him by this Schedule; and 
(ii) either in person or by proxy at the meeting. 

(3) No motion shall be submitted at a general meeting unless — 
    
(a) notice of the motion has been given in accordance with this paragraph; or 
    
(b) the motion is a motion to amend a motion of which notice has been so given. 
 
(4) A motion for the constitution of a collective sale committee and its powers, duties or functions shall be decided by ordinary resolution passed at the general meeting.

For details on the different types of resolutions in the BMSM Act please click here
Ordinary resolution: the motion can be passed by a simple majority of SPs present (in person or by proxy) at the meeting. This is where the danger lies - in under-attendance. The quorum is only 30%. The danger of under-attendance is that an overall numerical minority can claim to be the legitimate majority. This is entirely misleading  but it serves to deceive the masses and it happens all the time.

Who is entitled to vote?

The Secretary of the MC shall put up a list of the names of the persons entitles to vote at a general meeting on the notice board at least 48 hrs before the general meeting. At the EOGM it's one vote per unit. If the unit is jointly owned and both want to cast votes, then the vote of the senior who casts the vote (in person or by proxy) takes priority. Seniority is determined by whose name stands first in the Strata Roll.

Quorum
No business shall be transacted at any general meeting unless a quorum of 30& of tall SPs are present (by share value). If no quorum is reached with 1 hour of the schedule start time of the meeting then the meeting is cancelled. This is a 'relevent event'.

The Voting process
Two possible methods: - (a) by ballot (b) by show of hands
The LTSA is silent on the method and it is up to the Chairperson of the MC to decide on which method to adopt. This first EGM to elect the sale committee and to decide it's duties etc is the ONLY EGM where voting is stipulated to take place by ordinary resolution in the LTSA. There is no mention of 'ordinary resolutions' in the other EGMs.

Everyone should make a supreme effort to be present at this First and foremost EGM. If not physically present, then find a proxy (your neighbour) who can be trusted to vote in your stead. Remember, abstaining or not turning up does nothing but skew the numbers and is responsible for all the false positives (or negatives).Don't be apathetic, it's your home, your investment, your greatest asset , your future - turn up and vote. 

THE WHO
Please refer to the THIRD SCHEDULE of the LTSA
The members of a Sale Committee (SC) (between 3 and 14 members) must
1) be elected at an EGM
2) be an SP of a lot or
3) be an immediate family member of a SP or
4) be nominated by a SP which is a company
5) be over 21 yrs old
6) disclose direct or indirect interest in any property developer, property consultant, marketing agent or legal firm at a general meeting*.

A member must NOT :
7) be the joint SP of another candidate
8) be an un-discharged bankrupt (unless declared in writing at the time of nomination)*
9) be in arrears to the MCST (unless declared in writing at the time of nomination)

*Note: the rules only direct that such arrears be disclosed / declared in writing; they do not forbid them per se.


Disclosure of conflict of interests
2. —(1)   If a person standing for election as a member of a collective sale committee is aware of any conflict of interest or potential conflict of interest, if any, with his duties or interests as a member of the collective sale committee (should he be elected) arising from —

(a) his holding of any office;

(b) his interest in any contract, whether alone or together with any of his associates;

(c) his possession or ownership of any lot or common property that may be the subject of the collective sale, whether alone or together with any of his associates;

(d) any direct or indirect relationship he or any associate of his has with any property developer, property consultant, marketing agent or legal firm;
(
e) the holding of any office by any of his associates;

(f) his associate’s interest in a contract; or

(g) his associate’s possession or ownership of any lot or common property that may be the subject of the collective sale,
he shall, before his election, declare at the general meeting convened for such election, the nature and extent of all such conflicts of interest or potential conflicts of interest.

(2)   The election of any person who fails to comply with sub-paragraph (1) shall be void
(3)   If a member of a collective sale committee becomes aware of any conflict of interest or potential conflict of interest, if any, with his duties or interests as a member of the collective sale committee arising from —

(a) his holding of any office;
(
b) his interest in any contract, whether alone or together with any of his associates;

(c) his possession or ownership of any lot or common property that may be the subject of the collective sale, whether alone or together with any of his associates;

(d) any direct or indirect relationship he or any associate of his has with any property developer, property consultant, marketing agent or legal firm;

(e) the holding of any office by any of his associates;

(f) his associate"s interest in a contract; or

(g) his associate"s possession or ownership of any lot or common property that may be the subject of the collective sale,
he must, within the relevant period, declare in writing to the chairperson of the collective sale committee, the nature and extent of all such conflicts of interest or potential conflicts of interest.

(4)   The collective sale committee whose member has made any such declaration under sub-paragraph (3) shall, within 7 days after the making of the declaration, give notice of the making of the declaration by causing a copy of the declaration to be affixed to a conspicuous part of each building comprised in the strata title plan or development, as the case may be. 
So, the consequences of disclosure of conflict of interest is different BEFORE and AFTER a person is elected to the sale committee.

The MinLaw has remained mum as to why it should be so. I mark this as a potential pitfall and possible avenue of abuse.

It is a general view that volunteering oneself onto a committee is a selfless act…....... or is it? With en bloc there is a considerable degree of self interest not present in more benign committees such as the Management Council. A MC member does not gain personally from anything he/she does during his/her tenure, but an en bloc is all about money, and vested interest, personal gain, quiet desperation tend to be hidden in personal motivation. No candidate deserves total and unmerited trust simply because they have put themselves forward. Singaporeans choose fruit in the market more carefully than choosing their SC members!! It is frequently the case that new owners in the estate spring at the chance to sit on the sale committee. They are termed Flippers because they buy a unit (or more) in the estate and immediately want to sell it through a collective sale. They want to turn a quick profit on their investment. Flippers are the very worst kind of person to have on the SC and are mostly property agents. Worse, these flippers can turn out to be working for the eventual marketing agent... now there's a conflict of interest of ever there was one!
In theory, those seeking to join the SC must expect to be thoroughly vetted. If one is honest and forthright then answering probing questions should not pose any special problems. 
An ideal sale committee should be composed of similar persons as far as possible, who can apply their expertise and evaluate positions without relying totally on ‘expert’ advice from parties with vested interest (PA and enbloc lawyer). From the "Summary of Case" for Horizon Towers Appellate Court decision dated 02 April 2009:-
 
 (9) .... It was not the law that a fiduciary was entitled to rely on legal advice alone to exonerate itself from any breach of duty. While a trustee of a power of sale was entitled to obtain advice from experts on matters that were not within his competence or knowledge, ultimately the trustee has to make his own decision in good faith, responsibly and reasonably; at[197],[203] and [210].

Clearly, the person(s) entrusted with this fiduciary duty must also be intelligent. 
Educational qualifications are important. When one is entrusted with a deal worth millions of dollars. Mathematical ability, ability to read and understand legal documents without using a dictionary, business acumen, negotiation experience, someone who can do independent research.

Integrity is down to gut instinct.


The en bloc process is complex, the stakes high. The importance of the quality in the composition of a SC cannot be underestimated. Tampines Court will demand a greater degree of professionalism, integrity and accountability from those who dare put this estate through another en bloc exercise.
BUT all this hoop-la over the first EGM to elect SC members is pointless anyhow:

WHY? BECAUSE OF A LOOPHOLE IN THE LTSA SCHEDULE:
If Any defect or disqualification is later found in the appointment of any such member - the acts or proceedings of the sale committee is still valid and deemed to be done in good faith regardless.
(See paragraph 10. Third Schedule)

THE HOW MANY
The rules specify between 3 and 14 members are to be elected onto the sale committee.
Third Schedule 
Members of collective sale committee
1. —(1) Subject to sub-paragraph (2), a collective sale committee shall comprise such number of persons as may be determined in a general meeting convened in accordance with the Second Schedule, but in no case less than 3 members or more than 14 members who are natural persons.
So what is the ideal number? I suppose it all depends on quality. It's better to have 5 good members than 14 average to dim.  Worse to have 3 solid members being outvoted on key points by 10 others executing their own agenda. Those who want to join in order to ‘oversee’ are vote blockers and tend to go with the flow. Don’t let them join, they wont do any work.

For the purposes of application to the STB, according to Part VA of the LTSA rules:-

(2) The SPs shall appoint "not more than 3 persons from the collective sale committee referred to in section (1A) to act jointly as their authorised representatives in connection with any application made under that subsection. 

These authorised representatives will be the spokespeople at the STB, should there be a hearing.
Those elected to the sale committee at the first EOGM, need not necessarily be the same people who make an application to the STB.

THE WHAT
The 'powers, duties or functions' of the sale committee are rarely decided upon at the first EGM because they are usually omitted from the Notice.



The Horizon Towers Appellate Court Decision 02 April 2009 defines the duties of the Sale Committee


"(2) An SC was the agent of all the subsidiary proprietors in relation to the collective sale of their strata units as a result of which a fiduciary relationship arose between the SC and the subsidiary proprietors. Since under the statutory collective sale scheme, an SC had the power to sell the units of objecting subsidiary proprietors against their wishes, the need for the imposition of high standards of conduct upon the SC, not only in relation to the consenting but to the objecting subsidiary proprietors as well, was even more pressing than in the case of an ordinary common law agency relationship. Given that the SCC owed fiduciary duties qua agent to the owners of the units in a strata development collectively, the SC had obligations akin to that of a trustee with a power of sale. The SC's duties included (a) the duty of loyalty or fidelity; (b) the duty of even-handedness; (c) the duty to avoid any conflict of interest (d) the duty to make full disclosure of relevant information; (e) the duty to obtain the best price for the subsidiary proprietors; at [104],[108],[113],[124] and [134]." 
Source;-Summary of Case


and again since it bears repeating......


9) .... It was not the law that a fiduciary was entitled to rely on legal advice alone to exonerate itself from any breach of duty. While a trustee of a power of sale was entitled to obtain advice from experts on matters that were not within his competence or knowledge, ultimately the trustee has to make his own decision in good faith, responsibly and reasonably; at[197],[203] and [210]. Source:-Summary of case



The relationship between an SC and subsidiary proprietors.


104 In our view, the SC is the agent of the subsidiary proprietors collectively in relation to the collective sale of their starta units.



105 Section 84(1A) of the LTSA constitutes statutory confirmation of an SC's agent status for all subsidiary proprietors collectively.



107 As the SC is an agent of the subsidiary proprietors collectively, there is no point in which the SC may act solely in the interests of any group of subsidiary proprietors, whether they are consenting or objecting proprietors. When an SC is first appointed, it is with a view to achieving a collective sale for the benifit of all subsidiary proprietors.



However once the requisite consent is obtained and the interests of the objecting subsidiary proprietors become distinguishable from those of the consenting subsidiary proprietos, the SC's role becomes that of an impartial agent acting for both camps. In other words, the SC must hold an even hand between the interests.



The SC as a fiduciary


108 A fiduciary relationship between an SC and the subsidiary proprietos arises from the underlying agency relationship.



113 An agent may affect the rights of his principle in various degrees of detriment to the principle.



There would naturally be an inbuilt inclination (or bias) on the part of an SC to sell rather than not to sell. The need for the imposition of high standards of accountability and conduct upon the SC vis-a-vis not only the consenting, but also the objecting subsidiary proprietors is therefore even more pressing than in the case of ordinary common law 
 agency.



A "trustee' of the power of sale


118 Unlike a typical property agent which has only one principle, an SC has for principles a large number of subsidiary proprietors divided into two main groups if they cannot agree to sell their properties collectively. As mentioned above (at [107]), the SC cannot simply carry out the letter of its instructions from the consenting principles and disregard the interests of the objecting principles altogether.



The duties of the SC


134 ....... the duties of an SC include (but are not limited to) : (a) a duty of loyalty and fidelity; (b) the duty of even-handedness; (c) the duty to avoid any conflict of interest; (d) the duty to make full disclosure of relevant information; and (e) the duty to act with conscientiousness. As, under s84A(9)(a)(i) of the LTSA, the price of the collective sale is an ingredient of good faith in the transaction, the SC must act with conscientiousness to obtain the best price reasonable obtainable for the property- in short, to behave as a prudent owner would.



Duty of loyalty or fidelity


135 The distinguishing obligation of a fiduciary is th obligation of loyalty, the principle is entitles to the single-minded loyally of his fiduciary.



The duty of even-handedness


136 The duty of even handedness is the duty of impartiality that is implicit in parliament's recognition of the need to safeguard the interests of the minority in a collective sale
Duty to avoid any potential conflict of interest

1
38 It is important to note that these prospective duties are targeted against potential (not merely actual) conflict. A fiduciary should not even contemplate procuring a personal advantage, let alone secure one.

The law only requires that there is a reasonable perception of a conflict of interest,



Duty of full disclosure


147 The fiduciary must disclose the personal interest as as soon as a possible conflict arises, or as soon after as practicable. An "interest' may be constituted by "the presence of some personal concern of possible significant pecuniary value in a decision taken, or transaction affected, by the fiduciary"


151 In our view, an SC member who acquires additional units in the strata development (especially if they are financed by bank loans) before or after he becomes a member of the SC must disclose such interest to all the subsidiary proprietors including the objecting owners.



 Duty of conscientiousness



Duty to obtain the best price 

Source: Horizon Towers Appellate Court decision 02 April 2009 (draft copy)
Clearly there should be FORETHOUGHT and ESTATE-WIDE DISCUSSION before springing an EGM on the unsuspecting 80% of owners. Owners should hold informal meetings to hammer out the details of the powers, duties or functions of any future sale committee. I cannot see a proper EGM being done any other way; it would be impossible for owners to come up with a comprehensive list of do's and don'ts in an ad hoc manner at a noisy EGM.

THE WHAT IF?
What surprises can be sprung at this first EGM?

What if a pro-tem sale committee has already been set up by a few keen residents?
What if they refuse to answer questions regarding their suitability, or reveal personal information? 
What if the there is no individual selection process?
What if a SP is disallowed 'a motion against a motion' tabled at the EGM?
What if owners requests are ignored? 

Well, stand up every time and request that your name, block and unit number be reflected in the minutes and that your question/request/complaint be reflected fully in the minutes, too. It is important than an objection to the improper procedure be minuted - if the MC and SC want to ignore the concerns of owners then it shall to be recorded as doing so.



Independently tape the proceedings or get the MC to make a tape transcript. If this is not possible, or your request is denied, you can always ask for a copy of the recording from the managing agent  by making a written request and paying the stipulated fee. 

I

f you really want an issue included in the agenda then write to the Secretary of the MC in time and request for its inclusion.  Proper procedure and order can only be guaranteed with a non-partisan management council and MC Chairman.

2 comments:

  1. It is not true that members of SC can be replaced without the need to go through a general meeting. To circumvent the need for replacement, the general meeting should elect more than 3 members committee. For big estates such as TC, it is preferred to elect 10-12 members as it helps to have a minimum of 3 to represent a mandate of the SC to endorse a tender/auction or filing of applications to STB. It also facilitate the resignations and/or disqualifications of any members without calling for another EOGM. The pro-tem committees seem to be filled with property agents(who are SPs of TC) with potential for conflict of interest if their companies were to bid as property consultants.

    ReplyDelete
  2. Alas, it is true.

    The LTSA lists out why a person is to vacate his office in Third Schedule ,paragraph 5.

    It is silent, however, on how his place is to be filled. There is no mention of a new EOGM and in law, and if it does not specifically say so - then it does not exist.

    ReplyDelete