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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.

The prickly 5% (or 10%)

A sale is usually completed about three months after the STB /High Court order.  The sale proceeds are deposited into an owner's accounts when he gives vacant possession of his unit. (Sometimes, the sales proceeds are not deposited into the owner's account until after everyone has vacated their units. If you see this clause then run!) The S&P should state clearly the owners can stay in their apartments for 6 months before they have to vacate. This is the norm.  The buyer will usually withhold 5% of the sale proceeds until vacant possession is given (or 10% or any amount so stipulated in the CSA/S&P).



This is all well and good if, after the bank mortgage and CPF charge have been fully redeemed, there is sufficient cash left over to cover the 5%. Owners run into trouble when the remainder in cash is insufficient or zero* and they then have to scrabble to find extra cash to cover the 5%. Not an easy task if you are also house-hunting and need cash for the down payment / cash-over-valuation for your new home.

This letter was copied from the government's Reach Discussion Corner
Posted : 07/05/2007 4:42 PM (the thread closed July1)

“I am one of the co-owners of Waterfront View. I have just been informed by the lawyers today that CPF does not allow deductions for the various expenses related to the en-bloc sale of the property. We have already incurred CPF losses of close to $90,000.00. On top of that we now have to pay $19,000.00 in cash for the various legal, marketing expenses, compensation fund etc. Under the terms of the sale, $50,000.00 has to be withheld from the sale price until vacant possession is given. In our case, since there is a shortfall where the sale proceeds are fully utilised to pay the loan and CPF refund, we are told to pay the $50,000.00 in cash upon completion date if we cannot vacate the flat. We still have to incur significant cash losses, on top of our CPF losses. We were not aware that CPF will not allow deductions of the various expenses/required payments from the balance sale proceeds before the refund to CPF accounts. I am sure that there are other owners out there who suffer the same fate”

So, it was the Waterfront View enbloc sale in 2006 that put the cat among the pigeons. In that sale, the CPF Board made a ruling that in cases where the CPF is second charge and there are insufficient sales proceeds to fully redeem the CPF charge including interest, then the CPF Board would waive the outstanding amount if no other charge (other than the bank charge) is deducted before it.
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The solution here is to make sure the terms in the S&P are owner friendly, and the  prospective buyer must waive the retaining sum requirement if the owner suffers such a shortfall.
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Of course, if owners find themselves in this situation to begin with then the sale price is definitely too low! No owner should ever walk away from an enforced enbloc sale with no cash to move forward.

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