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.

Collective Sale Agreement : EGM4 Draft (9 Dec)

The following list of changes to the draft CSA may not be complete:
*Additions in New Draft
*Deletions in Old Draft

Definitions
"Agreement Date": seller  changed to Seller
"Completion date" : , whichever is the later date
"Date of Vacant Possession":  or Clause 9.2  (Actually, I think this is an error)
"Encumbrance": .... or other statutory charge,
"Gross Sales Proceeds": to be
"Land": 65,232.40 , 589, 67
"Net Sales Proceeds": to be
"Outgoings": in respect of each unit
"Purchaser" : and common property of the Development
"Sale Contract" : to be, and  arising from .........contract
"Sale Contract Date" : deletion of (which is the date of ..... as the case may be)
" Sale Price" and common property of the Development
"Sales Proceeds" : that would have been, and  on the Completion Date

Agreement
2.5 : (in terms of.....Strata Act) and the terms of the Sale Contract and  treaty changed to contract
2.11 : or the Court of Appeal
2.12 : such Owners and   and and shall be bound by this Agreement. There is also a switch from Sellers to Owners and Owners to Sellers
2.13 : new clause

Cooling-off Period
3.1 : in accordance with the provisions of
3.3 : new clause 

Sale Committee
4.4.1 :  [up to a maximum of ...]
old 4.4.2: removed: referring to the appointment of other professionals as the SC deemed fit
4.4.7 : or against any Owner......where applicable
4.4.10 : new clause
4.4.12  : in the Collective Sale

The Representatives
No change

No Liability
No change

Solicitors and property Consultants
No change

Sale Terms
8.1 : under a .... which shall include
8.1.1 :  any other mode of sale deleted
8.1.2 : and common .... Development and or is further ..... the Development
8.1.3 (b) : party changed to parties and deletion of be
8.1.4 :  on
8.1.7 :  or such other.... Clause 9.2; deleted
8.1.11 : treaty changed to contract and sale of the Development changed to Collective Sale

Sales Terms - Contingencies
9.2 deleted in Aug 23 draft which referred to Owners vacating their units at 3 months instead of 6 months as a condition of Sale
9.4 deleted in Aug 23 draft which referred Units to be delivered simultaneously as a condition of sale
9.4 :  (including but not limited....Agreement) deleted

Representatives and Warranties
No change

Covenants and Agreements
11.10: vote for changed to in respect of
11.11 :  'in his possession' deleted
11.14 : or such other document 
11.18 :to
11.21 : deletion of if the same has not been done and addition of and he will
11.22 :  he agrees deleted
11.24 : in accordance with......Sale proceeds and removal of against the Units 
11.31 : : and deleted
11.32 :  ;and 

Application of Sale Proceeds
No change

Duration of Agreement
No change

Enforcement of Agreement
No change

Taxes and Charges
No change

Miscellaneous
16.8 ; a numbering change

Schedule 1 (Strata Area of units) : complete though no total of strata area given
Schedule 2 (Method of Apportionment)
Schedule 3 (Terms of Appointment of Solicitors)
Schedule 4 (Terms of Appointment of Property Consultants
Schedule 5 (Members of the Sale Committee)
Schedule 6 (The Representatives)
Schedule 7 (Form of Appointment of representative to attend and vote at sellers meeting
Schedule 8 (Notice of Rescission)
Execution page (page / 30)

These are the basic changes, as far as I can ascertain.  It is for you and you alone to decide whether or not the CSA to be presented in the coming EGM 4 is good enough to pass ,and by extension, good enough for you to sign.


Itshometome's  interpretation 
Whatever follows is just my own opinion, I could be completely wrong. Don't expect me to be totally neutral because I will bear the consequences of this collective sale as much as anyone. If I have reservations then I have them for good reason. The devil is always in the details.

Looking back at the 23 Aug Draft I can see that some of my points have been addressed. I suspect my post (Collective Suicide Agreement) spooked them into tightening up their language and removing what could have been major stumbling blocks for many.  But did they go far enough? Have they managed to produce a document that wary owners are likely to welcome and trust?

The amendments: most of the changes were about filling in the blanks, dotting the i's, crossing the t's, and generally cleaning up an initial sloppy drafting. The tone, drive and substance of the document remain largely the same. The  major concessions/additions were:
  1. Land -  valuation - close of tender (8.1.2)
  2. Limiting the number of valuations  (4.4.1)
  3. Doing away with appointment of 'other professionals'
  4. Sellers meetings (4.4.10)
  5. Deleting any reference to owners vacating their units in 3 months
  6. Deleting any reference to owners having to vacate their units simultaneously
  7. Addition of extra words to 11.24
1) Take a look at clause 8.1.2 and note the new wording.  I believe this concession was a result of a battle won by the vice-chairman. If they had left it at that then we could rest easy in our beds, but they didn't. Linked clauses  can be separated by a few pages... so go take a look at clause 8.3. You will now see that this concession has been watered down, and that the SC can indeed sell at below the valuation at close of tender if it is with sellers approval.  The mechanism / timing  of this 'sellers approval' is nowhere clearly defined and I have a suspicion that owners are going to be asked to approve a lower sum long before any valuation is done. Apart form that, I have to query how it is even legal to sell at 'below the valuation' anyhow. Surely sellers cannot 'approve' to sell the land at an undervalue- that would be a grave disservice to the minority owners and in breach of their duty to sell at the best price (HT).

2) A way for the sale committee to get around a high valuation at close of tender is to quickly do another one.
It is often said that valuations are not science, there is an element of subjectivity involved.  Naturally, this argument is only employed by property consultants when it suits their purpose; low valuations are never wrong, only high ones. Nevertheless, they are important guides and a must-do before any sale of property. They are especially important in a collective sale as up to 20% of homes are being expropriated and at the very least, the 80% should not be able to sell the land for less than the 'independent' valuation.  It is supposedly meant to be a safe-guard against rogue owners/property consultants who would sell to the highest bidder regardless. If the independent  valuation turns out to be lower than the bid price, then all is well.  It is only when the valuation is high and the developers have underbid that the sale committee, under advice of the property consultant, will want to redo the valuation either by asking the valuer to reappraise his valuation or doing a completely new valuation with a second valuer. Do you agree with this kind of manipulation? Do you think that the LTSA valuation at close of tender was meant to be corrupted in this way? By agreeing to X valuations back-to-back and 'sellers approval' to sell at an undervalue,  (not to mention the supplemental agreement  to lower the RP),  are we just setting ourselves up like sitting ducks?

3) It is no longer explicitly written that the sale committee can engage limitless other professionals to enable the proper performance and discharge of its powers, duties and functions. But this won't necessarily stop them; because they will have to use their best endeavors to carry out their duties and give fulfillment to any of the terms or purposes of the Agreement or the Sale & Purchase Agreement.  For example, Clause 4.4.7 still allows for the engagement of solicitors or any consultants. They still might just go hay-wire on the spending.

4) 4.4.10 is a new clause showing their intention of inviting only the sellers (80%) to the meetings in the 3rd schedule 7(3),(4)
Here is the law:

Now this is where ambiguity comes in. There are 'subsidiary proprietors' meaning all SPs and 'the subsidiary proprietors' meaning a sub-group of subsidiary proprietors, in this case at least 80% SPs who have signed the CSA. The en bloc lawyer has chosen to make no distinction between the two even though they appear in the same sentence 7(3). Had the intention been that only Sellers (the 80%) were to be invited to these meetings then the definite article 'the' would have been employed at the second instance.

What is the rational for excluding up to 20% of the home owners in the estate? Do they not have a right to know what is going on?  Their homes are as important to them as they are to the 80%, do they not warrant some consideration?

May I remind the sale committee of their duty of even-handedness: (HT Court of Appeal)

136      The duty of even-handedness is a duty of impartiality that is implicit in Parliament’s recognition of the need to safeguard the interests of the minority in a collective sale (see [3] and [106] above; see also the 1998 Second Reading (at [127] above) at col 604). An SC’s position may be likened to that of a trustee who has to hold an even hand between the interests of different classes of beneficiaries under a trust (eg, capital and income beneficiaries) (see Philip H Pettit, Equity and the Law of Trusts (Butterworths, 9th Ed, 2001) at p 405).
and
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 strata units. At the point when an SC is appointed to carry out the collective sale (inter alia, obtaining consent to the collective sale agreement; advertising, negotiating and finalising the terms of the collective sale with potential purchasers; and completing the sale), there is no question of it being appointed to represent the consenting subsidiary proprietors only, since at that point the process of signing up to the collective sale agreement has not yet begun. The SC therefore carries out the collective sale process on behalf of all the subsidiary proprietors collectively and has the power to affect the legal relations of all the subsidiary proprietors with third parties. The common law requirement of express or implied assent by the principal (see [114] below) is not relevant in the context of a statutory scheme, the very purpose of which is to allow the sale of the strata development against the wishes of the objecting subsidiary proprietors.


5) and 6) : Hurrah to this. These clauses were so appalling they just had to be removed. The Sale Terms- Contingencies have been reduced from 6 to 4. The remaining 4 ought to have been ejected as well.

7) 11.24 needs to be explained fully. Why? Because it is opaque.
We understand what Solicitors' costs, Property Consultants' costs are about (by the way, why the plural? we only have ONE property consultant and ONE Solicitor) and we can find out what Other Costs are from the  Definitions.
Here's the problem;  the Definitions lists Other Costs as  all moneys to  'any party'

This same worded clause reappears in the list of deductions found in Schedule 2 (Method of Apportionment) page 63 under #Contribution pursuant to Clause 11.24 and since the Solicitors' and property Consultants' costs are already accounted for, that just leaves contributions under 'Other costs'.

I am still very leery of Owners signing for unspecified 'supplemental agreements' other than that ordered by the STB or HC order under 2.11.
How many will sign up?
How much will they get? and
Who is going to pay for them?
Does clause 11.24 envisage these under it's 'contributions'?

I am equally leery of 8.1.12 for it's provision for  'separate agreements' with the purchaser. Our vice-chairman has written in a previous post that it means
8.1.12 : This clause is mean to provide “separate sale contracts with buyers by each seller” (if so required by buyer) but the terms of sale will be what has been agreed upon as collective sale – it would not lead to any seller getting a better deal.
but there should be no need for this. This is a collective sale, the law does not require separate agreements to the S&P. If the buyer thinks he can lower his property tax bill this way he will be disappointed to find that in a collective sale, there is just one property tax to pay.

Note at the bottom of 63 indicates that the list is not exhaustive ... and so we really have no clue  how much of our sales proceeds will be deducted to pay for miscellaneous items, big and small.

We need to have a more comprehensive breakdown of the Method of Apportionment Part II

What has not changed:
Owners are still agreeing to:
  1. Make the negotiating team's life easier by acceding to Purchaser demands in advance.   Compare  these concessions to the purchaser with our old 'S&P' whereby the sale committee in that instance not only got the Purchaser to pay for all outgoings but also secured a nominal $1 rental /mth for the 6 month duration. (8.1.8)
  2. Agree to let the Solicitors retain x% of their Gross Sales Proceeds for payment of outgoings they ought not be paying for in the first place (12.5)
  3. Pay a retention sum twice that of round 1 (8.1.10)
  4. Pay an even greater retention sum if the other sellers agree  (9.2) 
  5. Try for  more than 1 valuation  ( 4.4.1)
  6. Search for a buyer immediately and not wait for the 80% requisite majority. (8.4)
  7. Allow owners to sign separate agreements with the Purchaser (8.1.12)
  8. Allow owners to sign supplementary agreements other than that ordered by the STB or High Court (2.11)
  9. Go above and beyond the duties of a vendor and what is required by them in the LTSA  and help the purchaser in the redevelopment of the land (4.4.6).
  10. Further to this,  authorise the management council to aid the purchaser in the redevelopment of the land as it is the MC,  I am told, who may grant permission for the developer to enter into the estate to start demolition/digging/building of show flats etc (11.26) 
  11. Continue to pay full maintenance, even though the estate may be now dirty, dusty, noisy and dangerous. (8.1.8) 
  12. Bind themselves with 33 covenants (11)
  13. Surrender their liberty (and common sense) and sign any piece of paper shoved in front of them sight unseen. (11.7 & 11.21)
  14. Render themselves powerless with the most pernicious of clauses (second half) which  has been used successfully against other owners in other collective sales in a court of Law.  (11.21)
  15. Gag themselves (11.8)
  16. Accept full liability (11.4, 11.5, 11.6, 11.23, 11.29,14.1, 15,)
  17. Indemnify the sale committee (11.29)
  18. [The sale committee, in turn, indemnifies the Solicitor (Schedule 3)]
  19. Make the sale committee all powerful and themselves vassals (4.4 & 11.9 & 11.21) 
  20. Spend thousands from the estate's sinking fund to hold any number of EGMs for any reason relating to the sale (4.4.9)
  21. Sanction all possible High Court actions using their gross sales proceeds in the defense of the sale (5.2.6, 11.29)
  22. Require only the sale's committee approval to raise the RP.  They look forward to repeating the mistakes made by other estates (eg HT) (8.1.2)
  23. Allow the reserve price  to be lowered without knowing the time frame or the mechanism involved in securing sellers' approval (8.1.3(a))
  24. Be put in legal limbo if they withdraw their consent to the lower RP ((8.1.3(b))
  25. Continually inform the Purchaser of any change in address and telephone for seemingly nothing more that their own data collection.  (8.1.14)
  26. The fact that the completion date is wide open. Best endeavors necessitates Sellers approval. (HT, Gillman Hts). Extensions to extensions are routine  (9.1)
      THE EXECUTION PAGE
      I am rather disappointed by this scrappy looking page. The NOTICE OF RESCISSION page is so much better and why should that be?

      There is only provision for ONE owner. (and not much space for even that). So if a unit has two or more owners then they will have to sign separate pages.

      I would like to see a different kind of page with the names of the respective owners printed on one sheet (see the rescission page/29) to which they can put their signatures/dates /Place etc - so that the sale committee can see at a glance that this or that unit has been fully signed for and that everything is in order. We do not want to have half-signer 'mistakes' mucking up the Notices. 

      If an owner signs a supplemental agreement - where on the page can this be recorded?
      Where is the Place of signing?

      I would hope that any  owner interested in viewing the signed execution pages would be allowed to do so after each and every 4 week Notice.

      In Conclusion:
      I have highlighted in red my major areas of concern. There is insufficient legal protection for owners (indeed there is none at all), the covenants are too burdensome, the RP is too low and not guaranteed, the inclusion of a provision to lower the RP is worrisome,  the mechanism for lowering RP is vague and open-ended. Owners can sign for unspecified supplemental agreements. I worry that I might not get what is declared in the Method of Apportionment and that the actual gross sales proceeds will be lessened significantly. Multiple valuations at close of tender is tantamount to price fixing. There is no re-affirmation from owners. There is no fixed completion date once the S&P is signed. 

      I have said enough. I will join the silent 70% and will not register until after the quorum has been reached on the day. Then I will register and vote No.  

      From the management office:

          6 comments:

          1. I wish to join the 70% but also want to vote NO to the CSA. If I reach the school at 2pm, I will not be able to collect the voting slips, any suggestion?

            ReplyDelete
          2. It's up to you.

            I, for one, will hang back until if and when the quorum has been reached.

            ReplyDelete
          3. I am a resident of TC since 1988 and have been thru enbloc round 1.

            If you have read the tape transcript of TC enbloc round 1, it should clear you doubt of why residents asking so much questions and giving so much comments. It is not entirely due to RP. The verdict of round 1 was EnBloc sale not done in good faith.

            Once bitten, Twice shy.

            ReplyDelete
          4. I am sorry if i'm wrong but I think you missed my point.The real reason that the minority who objected to enbloc sale in round 1 was 'underpriced' and the reason minority gave ( not in good faith) was only to back up the their argument.

            ReplyDelete
          5. "not in good faith" was not the reason suggested by the minority but the verdict by Strata Titles Board after 3 days of hearing.

            ReplyDelete
          6. @I am a resident of TC since 2001..

            Were you there at the STB hearing for first round?
            If you did, like I did, then you should see the faces of all sale committee members/chairman, evaluator, representatives from DW, lawyers, etc. how they changed when their acts of 'not done in good faith' was uncovered by the minority lawyers.
            The Beta sum became a huge problem to the sales team that it became a trap to themselves. You should hear the questions by the Tribunal on this! At the end, it's 'not in good faith'. PERIOD.
            En-bloc round 2. It's not about RP.
            It's about 'not in good faith' again.
            For those of you who been through round one with minority and moved to join or support en-bloc, if you see 'not in good faith' again. I think it is wise to back out. No one gains from things done the wrong way.
            People on earth do, God in heaven watches.

            ReplyDelete