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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.

Opinion on LTSA Amendments 2010

Amendments to 84A
  • STB has a maximum of 60 continuous days and emphasis is on mediation, disputes will go to High Court for adjudication. 
  • Objections at High Court must be the same as for the STB 
  • STB/High Court is empowered to request for any information or documents with regard to the sale application **
  • High Court can refuse a collective sale if SC does not agree to increase the sale proceeds of an affected objecting minority owner (by Order).
  • SPs can no longer apply to STB to determine compensation regarding a leased unit.
60 continuous days: this is down from the 6 months previously that the STB had to deal with each case. Since the Board is now only occupied with mediation, and is no longer determining whether a sale was done in good faith etc, then 60 days is quite enough. Mediation previously was only scheduled for 2 days (nonconsecutive) and very unproductive they were, too. I suspect sales committees from now on will stick to their guns and refuse to budge an inch - knowing full well the onus is on the poor minority owner to take the matter to the High Court. Justice is never free. I hope the STB will look upon their mediation role more seriously, and wring a few arms if need be.

Don't expect mediation to succeed - only for the clear-cut financial loss and compensation cases. Once there is a whiff of a stalemate between objecting owners and the sale committee over matters of good faith then I suspect the STB will issue a stop order and let the whole shebang proceed to High Court regardless whether or not the minority can afford it or even want it. I do not see them wasting their time going through a tedious tribunal when they cannot adjudicate on it anyway.

UPDATE ** July 2011: I heard that the STB will only look into minority concerns (eg request for a Valuation)  if the minority first drop their objections at the STB!!!!! What is going on here???

On the plus side, this ruling also saves on the pointless ricocheting between STB and HC. It's a uni-directional approach, legal fees can be moderated, and there is a finality at the end.

What I see is that  cases will go to High Court sooner and matters resolved faster. What I don't see is a reduction in disputed sales.

 Objections to the High Court must be the same as for the STB: well, what about those revelations that may pop up during discovery?  It looks like an objecting owner will have to include every objection under the sun - regardless of whether or not he can prove it- in case he finds incriminating evidence at a later stage. The inquisitional powers given to the STB will come to naught otherwise. Either that, or word the objections so vaguely that they can cover every contingency  along the way.

Amendments to First Schedule:
  • Notices to be sent by ordinary mail.
Well, things get lost in the post, don't they.
.
 Amendments to the Second Schedule:
  • Constrictions imposed on repeated en bloc attempts. A second requisition less than 2yrs after the first failed attempt (called a relevant event) must have 50% support of SPs . A third requisition within 2 years must have 80% support. 
 A clarification of "relevent event" is defined. It is :

  1. No quorum of proprietors present at a general meeting. (quorum = 30%)
  2. The CSA expires at any time on or after the date of commencement of the LTSA Amendment Act 2010
  3. Motion for the constitution of a SC is defeated at a general meeting
  4. The SC is dissolved any time on or after the commencement of the LTSA Amendment Act 2010. This is going to be June 2010.
  5. Every member of the SC is removed from office on or after the commencement of the LTSA Amendment Act 2010
This might make a Sales Committee think twice before starting an en bloc as they have to be very sure of the support of the masses. A failure will send them to the back of the class for 2 years. Frivolous attempts and 'testing the waters' might be curtailed.

What is not specified is considered allowed, so, the list of relevant events does not include:


  • When an estate has reached 80% but has failed to find a buyer. But so long as they can keep the CSA active (ie through supplemental CSAs) the estate can be maintained in perpetual en bloc mode. This surely is a loophope and/or oversight made by the MinLaw- unless it was intentional. There can be no end until the estate is in shambles and a buyer is eventually found. I would hate to be a minority owner who has no choice but to stay until the very end in such an estate. It could be a slum by then.
  • If the collective sale failed at the High Court.
 .
Amendments to the Third Schedule:

PRETTY MUCH ALL HOGWASH - because there is no mechanism for verification or enforcement. What is the point of having speeding limits when there are no traffic cops. This schedule isn't worth the paper it is written on. 
  • Elaborates on types of interest and circumstances that may give rise to a conflict of interest between would-be members of a collective sale committee, eg how many units they/their family have in the estate and when they were bought
  • Deleting most of the previous EGMs
  • SC can remove a minority owner from serving on the SC once the 80% has been reached and an application for sale has been made to the Board. 
  • Dissolution of SC if no signatures within 12 mths after it is constituted
If he declares at a later date, post-EOGM,  the chairman has to put up a Notice on the notice boards about the declared interest. What? Why? Covering their backsides? What about AUTOMATIC DISMISSAL? Why not sue the guy for withholding information? What purpose does a piece of paper on the Notice Board serve other than to mock the hoodwinked owners?

Surely this is the reason why Clause 10 in the Third Schedule has been left in - silently sitting at the bottom, attracting no attention, waiting to spring into action if a contract looks like it may be in danger from a sale committee member's malfeasance or outright lies. He may be a crook - but the LTSA puts the sanctity of  contract before transparency and 'doing right' by owners.

10. "Any act or proceeding of a collective sale committee done in good faith shall, not withstanding that at the time that the act or proceeding was done,taken or commenced, there was:
(a) a vacancy in the office of a collective sale committee
(b) any defect in the appointment, or any disqualification of any such member, be as valid as if the vacancy,  defect or disqualification did not exist and the collective sale committee were fully and properly constituted"

So, all this clamoring and brouhaha about electing sales committee in the end doesn't mean a thing.  Believe me, it's hogwash.Also, in my humble opinion, this clause 10  is in contradiction to paragraph 150/151 of the HORIZON TOWERS APPELLATE COURT DECISION 2 APRIL 2009 dealing with disclosure of interests, which states:-

"150  This provision mandates the discliosure of a particular type of conflict of interest at a particular stage of the collective sale process (viz, the formation of an SC). In our view, it has certain important implications. It shows that Parliament is aware that a conflict of interest, if not disclosed to the subsidiary proprietors, may affect the good faith of the actions or decisions of the SC member who is in such a position of conflict. Disclosure is therefore mandatory so that, if the person in the position of conflict is elected as a member of the SC by the subsidiary proprietors, they are deemed to have taken into account the potential conflict of interest and are deemed to be prepared nevertheless to be bound by any decision the SC member may make on their behalf.

151    The statutory requirement of disclosure does not spell out the legal consequences of a failure to comply with it. However, since it is a statutory requirement, non- compliance with it has to have some legal effect on any decision made by the SC member who is in a position of conflict in relation to the sale. In our view, any non-disclosure of a conflict of interest of the type specified in this provision may affect the requirement of good faith in the transaction, especially if the SC member has played a decisive, influential or leading role in an SC’s decision to enter into the transaction. Each case of a failure to disclose a conflict of interest must be examined closely to determine the significance and consequences of the breach in relation to the transaction as a whole.

Amendments have been made to the Third Schedule reversing the amendments made in the last round of revisions. The last round of amendments tried to fix the steamrolling tactics  of the sales committee and put a little power (albeit without much teeth) back into the hands of the owners. Some of that has been taken away

OLD EGMS (up to 7):
  • a) to consider the appointment of en bloc lawyer and property agent
  • b) to consider the apportionment of sales proceeds
  • c) to consider the terms and conditions of the CSA
  • d) to give an update on the total number of SPs who have signed the CSA
  • e) to provide information of the sale proposal and sale process
  • f) to provide information of the number of offer received and their collective amounts
  • g) to consider the terms and conditions of the S& P.
Instead we now have:

NEW EGMS (up to 4): 
The collective sale committee shall convene one or more general meetings  of the MC in accordance with the Second Schedule for the following purpose
  • First EGM to constitution iof sale committee and it's powers, duties or functions
  • a) to appoint any advocate and solicitor, any property consultant or marketing agent in connection with a collective sale where the collective sale committee is not already authorised at  a general meeting to make such apppointments".
  • b) to approve the apportionment of sales proceeds; and
  • c) to approve the terms and conditions of the CSA
The other EOGMs will be replaced by simple subsidiary proprietor meetings - given with a 7 day notice. I can see this being abused no end.

Basically we are back to how it was in TC enbloc Round 1. There will be virtually no meetings for months and months on end,  - and then a quick one if you can catch it. Only an update, though. And another quick one after the game is over.  It is simply not enough. I would want the SC to hold MONTHLY meetings with SPs. Why didn't the MinLaw understand that people who have put their homes on the line want to be given regular face-to-face updates?

I see the new amendments are in direct conflict with the Duty to Consult the Susidiary Proprietors set out in the Horizon Towers Appellate Court Decision.

(2)    Duty to consult the subsidiary proprietors
166    Finally, whenever there is reasonable doubt as to the proper course to adopt, the SC ought to seek fresh instructions or guidance from the consenting subsidiary proprietors from whom it draws its mandate. It is true that the LTSA and most collective sale agreements do not contain any specific provision requiring an SC to obtain approval from the consenting subsidiary proprietors of the sale price before the SC issues an option to the potential purchaser (para 7(1)(g) of the Third Schedule to the LTSA provides that an SC shall convene a general meeting for the purposes of considering the terms and conditions of the sale and purchase agreement, but para 7(4) states that this need only be
convened after the close of a public tender or auction or after the SC has entered into a private contract for sale). However, an SC’s duty to consult with the consenting subsidiary proprietors arises out of its fiduciary obligations, independently of its contractual obligations (see [109] above).


167    An SC cannot rely on a mechanistic or literal compliance with its statutory and contractual obligations to escape indictment for breach of its obligations as fiduciary of the subsidiary proprietors. The first principle is that an SC has to work for the benefit of all the subsidiary proprietors. This will no doubt involve going beyond just paying lip service to the relevant procedural rules under the LTSA and its mandate under the collective sale agreement. Indeed, in evaluating the conduct of an SC, the contextual conditions in which the power of sale is exercised is everything.


It is even more vital that owners set things in stone AT THE FIRST EOGM under duties of the sale committee - force them to hold meetings and to TAKE DIRECTION from the owners. Do not sign your rights away in the CSA as the road to en bloc is long; keep your keys in your pocket. 

On a practical side, without a clubhouse, where in TC can such a meeting be held on such short notice. In the activity room, where you can squeeze, maybe, 30 people in?  In the carpark?

As for the dissolution of the SC if no one signs the CSA....... well, even if no one else signs, the SC members will, thus ensuring the continuity of their tenure and en bloc process for at least another 12 months (from date of first signature). They will have 12 months to twiddle their thumbs before their second 12 months begin.

So the time line now looks like:

12 + 12 + 12 + (12)m + 2 + Y  = 3 to 5 years for en bloc sale

Whereby:

12 = 12 months for SC to twiddle their thumbs/ CSA
12  = 12 months to gather the requisite 80%
12 =  12 months to find a buyer and make an application for sale to the STB
(12) = supplemental CSA should there be no buyer and majority wish to lower the RP
m = any number of multiples of supplementary CSAs to lower the price
2 = 2 months max at the STB
Y = Time taken at the High Court/Court of Appeal

1 comment:

  1. Thanks for the in-depth analysis. Frankly I understand the new rules better with your post.

    I'm actually contemplating if I should sell my unit now or wait and see if there will be another round of en bloc. But with this, well..

    ReplyDelete