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"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.

REGENT GARDEN

Just read the recent High Court decision for Regent Garden (OS 54/2008, 90/2008) . You may remember the case as being the one where extra payments were given to 6 minority owners by the Developer-Buyer Allgreen to withdraw their objections at the STB. Like the Energiser battery; this case just keeps going on and on and on....

Sequence of events:
23 July 2007 - application to the STB
23 July 2007 - URA informed Allgreen and SC that the development charge was $6.6m less than the estimated $7.6m in the ISO.
4 Sept - 15 Oct 2007 - mediation failed. Hearing set for 30 Jan 2008
26 Nov - 28 Nov 2007 - minority owners consent to the sale for an undisclosed sum of money from Allgreen. Minority owners withdraw their objections at the STB.
10 Jan 2008 - SC sues Allgreen on behalf of majority owners in OS 54/2008

Owners sue Regent enbloc buyers
WeekendToday -19 Jan 2008
Straits Times -19 Jan 2008

Regent owners deny trying to back out of sale
MAJORITY owners at Regent Garden have denied that they are ‘greedy’ and trying to back out of a collective sale they are challenging in court.
The 25 owners told The Straits Times that they only want the court to clarify if the agreement with Allgreen Properties can proceed even if the price undervalues their property.
They want to know whether the contract is still binding in a case where the development charge is wrong.
The owners are also upset that Allgreen paid more money to the six minority owners, who did not vote for the sale, than it did to those who backed it.
The 25 owners inked an agreement last April to sell their property in West Coast Road to mainboard-listed Allgreen for $34 million.
One of these owners is former MP Aline Wong, who stepped down from the chairmanship of the Housing Board last year.
But the owners are claiming that the price is too low as the actual development charge - which is much lower - was not obtained. They want damages of between $5.7 million and $6.685 million from Allgreen.
The damages claim is based on two revised valuation figures that use the correct development charge.
The owners wrote to Allgreen last month, claiming that the sale price of $34 million was a ‘mutual fundamental mistake’ as it factored in a far higher development charge.
Allgreen said last Friday that it intends to ‘vigorously contest this action, and the claims and allegations made by the majority vendors’.
The Straits Times understands from the majority owners that they are only ’seeking clarification and fairness’ from the courts.
They want to know if the sale can go ahead at this ‘undervalue’ and not at ‘market value’.
They also query if minority owners can be entitled to additional payments from Allgreen but not share them with the majority owners.

Straits Times -24 Jan 2008
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30 Jan 2008 - STB Hearing. The STB concluded that the transaction was not in good faith taking into account the sale price and dismissed the sale.
Straits times- 31 Jan 2008

26 Feb 2008 - Appeal to High Court in OS No 254/2008
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Court directs Regent garden sale to Allgreen to proceed
THE stop-start en bloc sale of Regent Garden, a 31-unit West Coast Road condominium, to Allgreen Properties looks set to finally go through after the High Court yesterday directed the majority owners to complete the agreement.
The court also ruled that the Strata Titles Board’s decision in January to reject the deal was irrelevant and ordered the majority owners to pay costs to Allgreen, the developer.
The agreement with Allgreen, originally signed in April last year, was first delayed when six owners out of the 31 held out.
When the dissenting six finally agreed to sell out by November, the majority owners, who together own 25 units and over 80 per cent of the share value in Regent Garden, did an about turn and tried to abort the deal, arguing that the $34 million sale price was too low partly because of a wrongly estimated $7.2 million development charge.
They wanted the High Court to void the agreement, or alternatively, to award damages or an addition to the sale price.
Allgreen, represented by Davinder Singh of Drew & Napier LLC, itself went to the High Court in mid-January to ask for an order requiring the majority owners to complete the sale deal. The six minority owners joined in the proceedings as well.
But on Jan 30, the Strata Titles Board ruled the sale had not been done in good faith because Regent Garden’s valuation was wrong and well below the market price.
Yesterday, Allgreen said in a statement that ‘the decision by the High Court is a victory for the sanctity of contract and is a strong message that owners will be held to their bargain’.
‘The court’s decision is very good news for the entire industry,’ said Allgreen.
The majority owners were represented by Molly Lim of Wong Tan & Molly Lim LLC.

Business Times-17 April 2008

18 Sept 2008 - OS 54/2008, 90/2008
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This really sets things in stone (subject to Appeal) with regard to extra payments being made to minority owners. It is an interesting 22 page decision but I will deal with just two important points.

On the Development Charge issue, Justice Lee Seiu Kin said:
41 "In any case, the key point is that the majority owners had assumed the risk that the actual development charge would be higher than the estimated development charge by consciously deciding not to make a development baseline enquiry and by not making the sale subject to any development baseline. They had chosen to enter into the Sale and Purchase Agreement in the knowledge that the figure of around $7m was an estimate of the development charge and cannot now be allowed to escape their contractual obligations merely to escape what has turned out to be a bad bargain."

On additional payment to minority owners:
45. "I found that there was no express provision made against the making of the additional payments to the minority owners in the [CSA or S&P]. Clause 24 of the [S&P] clearly provides that the method of apportionment set out in Schedule C pertains to the Purchase Price."

51. ".....I found there was no express or implied term in the [S&P], [CSA] and the ACT prohibiting the additional payments tp the minority owners. It follows that there was in fact no wrongful repudiation of the [S&P] and [CSA] by Allgreen to be accepted by the majority owners and thus I did not order any damages to be paid to the majority owners. It also follows that the minority owners are entitled to retain these additional payments and are under no obligation to share the additional payments they have received from Allgreen with the majority owners."

My 2 cents:
What this all means is that the High Court has found that it is all right for the developer-buyer to pay off objecting minority owners directly with undisclosed sums of money. They would of course have no need to do this unless;-
  • the minority objections were substantial and a direct threat to the sale at the STB
  • there was a necessity to expedite the process for some reason
  • if it were financially the lesser of two evils (pay every owner or just 6)
Buyers do not give away money for nothing. If the majority have their requisite 80%, and the sale was done in good faith in all matters then there is no reason why the objecting minority would be paid off. They have no case, are not a hindrance to the sale going through and can be safely ignored.
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I suppose it will go to appeal - they always do.
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APPEAL OUTCOME: 30 May 2009
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The majority lost. The minority gets to keep the lolly all to themselves.
Way to go guys!
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A lesson to the majority - stay vigilant and DO A BETTER JOB.

2 comments:

  1. I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


    Sara

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    ReplyDelete
  2. And you posted all the way down here!

    ReplyDelete