HUDC Housing Estates (Amendment) Bill

Order for Second Reading read.

The Minister of State for National Development (Mr Lee Yi Shyan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, allow me to give Members some background on HUDC estates and the HUDC privatisation programme before I bring Members through the Amendment Bill.

HUDC flats were built in the 1970s and 1980s to provide a more affordable alternative to private homes and to meet the aspirations of middle-income households. HUDC estates were developed under two different frameworks − Phases I and II and then Phases III and IV.

The Phases I and II HUDC estates were built and sold by the former Housing and Urban Development Company (or HUDC in short) in the mid-1970s. In 1982, HDB assumed the responsibility for the development and management of these HUDC estates. In 1984, the HUDC Housing Estates Act, which we are now proposing to amend, was enacted to allow the Phases I and II HUDC flat owners to take over the maintenance and management of their estates.

The Phases III and IV HUDC estates were built and sold by HDB, which is different from the Phases I and II, in the 1980s under a different Act, the Housing and Development Act. Like HDB flats, these estates are maintained by the Town Councils.

In 1995, HDB announced the privatisation programme for HUDC estates. This was to meet HUDC residents' aspiration to own private housing and have control over the management and maintenance of their estates. Under this programme, HDB converts the existing flat leases to strata titles under the legal framework of the Land Titles Act. HUDC estates must obtain 75% support level before HDB can proceed with the privatisation works.

To-date, 17 out of the 18 HUDC estates have been offered the privatisation programme. The only exception is the Braddell View Estate.

The Braddell View Estate is one of the six Phases I and II HUDC estates developed in the late 1970s. It was the only estate to be completed in two phases, on two land parcels under two State leases each with different expiry dates. The flat owners of both land parcels share common facilities such as swimming pool, tennis courts and a clubhouse. The estate is self-managing under the HUDC Housing Estates Act; there is a corporation (which the Act calls a body corporate) managing and maintaining Braddell View Estate.

Unlike all other HUDC estate residents, the residents of Braddell View Estate do not have the easy option of privatisation under existing law because of the different expiry dates in the leases for their estate. Three options were explored. The first is to privatise Braddell View as two separate estates based on the two leases. The second is to reduce the lease tenure of the land parcel with the longer lease to align it with the land parcel with the shorter lease. The third option is to do the reverse: top-up the lease tenure of the land parcel with the shorter lease to align it with the longer one.

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Over the last few years, HDB has explored all three options with the Braddell View Estate body corporate's management committee and residents. The first option – to privatise the estate as two separate estates – is not feasible because there are shared facilities straddling the land parcels, and dividing these facilities, as well as shared financial accounts, will be highly challenging. The second option is not attractive because all the owners on the land parcel with the longer lease have to agree to reduce their lease tenure without compensation. The most feasible is the third option.

To implement this option, the Braddell View residents will need to pay premium to top up the lease term for the land parcel with the shorter lease so as to align its terminal date with the lease of the other parcel. The Chief Valuer will assess this lease top-up premium. The privatisation of the Braddell View Estate can then be effected through the transfer of the common property and its residual interest in the housing estate by HDB to the owners of all flats in the Braddell View Estate after the HDB obtains a topping-up of the lease for the estate. Process-wise, the Braddell View body corporate will levy contributions on the flat owners who are the sub-lessees of HDB to cover the lease top-up premium, and pay over to HDB, being the lessor under the head State leases, as part of the costs for privatisation before the legal documentation for the estate's privatisation is lodged with the Land Registry.

Currently, the HUDC Housing Estates Act only empowers the Braddell View body corporate to levy contributions from residents based on their respective share values. The Braddell View body corporate's management committee, representing the residents, has approached HDB to amend the Act, so that the Braddell View body corporate has the flexibility to vary the basis of levying contributions for the levelling-up of lease tenure. Braddell View residents need to have the autonomy to decide how best to apportion the cost amongst themselves, taking into account the potential benefits of privatisation, particularly between residents on the land parcel with the longer lease vis-Ã-vis residents on land parcel with the shorter one.

The Bill before you today is in response to this request, so that Braddell View residents, like other HUDC residents, can have the option of privatisation, should they decide to do so. At this point, I would like to acknowledge the efforts of the current and previous Advisers and management committees of the Braddell View body corporate in working with HDB to explore ways to resolve the issue and helping to get the process to where it is today.

Sir, I will now move on to the amendment of the Bill.

Clause 2 of the Bill amends section 8 of the HUDC Housing Estates Act to allow Braddell View body corporate to levy contributions on the flat owners in order to pay HDB the lease top-up premium.

Clause 3 amends section 13(1) to empower the Braddell View body corporate to convene a general meeting to determine the apportionment of the contribution among the respective flat owners for the lease top-up premium. The decision is to be made by way of special resolution. This means a resolution passed at a general meeting against which not more than 25% of the owners of all the flats in the housing estate concerned have cast their votes.

The new sections 13(4), (5) and (6) provide that the Braddell View body corporate must pay HDB the lease top-up premium it has collected and the related expenditure incurred by HDB. Payment must be made within 30 days of HDB's written request for payment, or within such extended time as HDB may allow, but before the legal documentation for the estate's privatisation is lodged with the Land Registry. Any sum unpaid by the due date will attract interest.

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Sir, the amendment of the HUDC Housing Estates Act will facilitate the harmonisation of the tenure in the two leases of Braddell View Estate, so that its residents, like all other HUDC estate residents, can have the option of privatisation, if they choose to do so. Braddell View Estate is the only HUDC estate left governed by the HUDC Housing Estates Act. The amendment has no impact on other HUDC estates. The HUDC Housing Estates Act will be repealed only if Braddell View Estate is privatised. Sir, I beg to move.

Question proposed.

4.50 pm

Mr Hri Kumar Nair (Bishan-Toa Payoh): I rise in support of this Bill. The residents of Braddell View have waited a long time for this move.

They have for a number of years, functioned as a private estate in all but name – they have the facilities of a private estate; they have their own Management Committee; they levy and collect their own maintenance fees; they manage and maintain their estate independently. It is a beautiful estate, with green areas and wide-open spaces – a throw-back to the days when the value of a house was not measured by the amount of built-up space you can squeeze from your land.

But because of a historical quirk, which was in all fairness not anticipated by anyone, they were unable to take the next logical step and be legally privatised. It was not for the want of trying. Previous Management Committees, together with my predecessor Members of Parliaments, and I have held countless dialogues and discussions with MND and its agencies to find a workable solution. Many options were explored and polls taken from the residents, all to no avail. The legislative framework simply did not allow for viable solution. It has been the source of much frustration for the residents, who could not understand why nothing could be done to help them resolve an issue which is not of their doing.

This Bill now allows them to take a major step towards privatisation. No doubt it comes at the time when all other HUDC estates have been privatised or in the process of completing that process, but its passage is nonetheless welcome. As Rousseau once observed, "Patience is bitter, but its fruits are sweet."

On behalf of the residents of Braddell View, I would like to thank the Ministry and the Minister for taking this step to help residents realise their dreams of privatisation.

But this Bill is only the first step. It remains for the residents to collectively decide how it can be achieved fairly, and there will no doubt be some who may not see this as being in their interest. That is their choice to make. From my interactions with residents, it is clear to me that most, however, do favour. However, there is a real risk that many of them may nonetheless feel constrained to vote against privatisation because of practical difficulties. Chief among these will be the premium they will have to pay. This will be exacerbated by the sum some of them will have to pay to top up the lease for Phase 1 of the estate to make up for the two-year difference between the two phases.

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The Braddell View estate has been in existence for over 30 years. Many of its owners are retirees. They will have difficulty forking out thousands of dollars it will cost to privatise. The values of their homes have no doubt appreciated greatly over the last 30 years, but the real issue is their cash flow. They may not be able to take out loans as they may not qualify or have no or insufficient income to service it. If privatisation goes through, some may even be forced to sell and move out. A failed privatisation attempt may lead to acrimony within the estate, as we have seen in others in the context of en-bloc sales. That surely cannot be an intended consequence.

But the difference here is that it is only logical for the Ministry to want the privatisation to succeed because it makes little sense for the HUDC Act to remain in force because of this one estate. As the estate gets older, there will be greater challenges in respect of its maintenance and management. Future housing policies may also have to take into account the existence of this once remaining HUDC body.

I therefore hope that the MND will help the residents of Braddell View overcome the hurdles in the privatisation process, in particular the financial hurdles. I also look forward to working together with the Ministry and its agencies in helping residents navigate this journey and allow them to reach the destination they seek.

4.55 pm

Mr Lee Yi Shyan: Mr Speaker, Sir, I thank Mr Hri Kumar who has spoken in support of the Bill. Clearly, he has a very good understanding of the issues at hand and has reflected the sentiments of the residents. Let me now respond to the issues raised.

Mr Hri Kumar is concerned about the amount of premium flat owners have to pay to top up the lease tenure of the land parcel with the shorter State lease. As I explained earlier, the top-up premium will be determined by the Chief Valuer. It will take into account factors such as the state of the property, the prices of the properties sold in recent transactions and other determining factors. This approach is consistently applied to all requests from land owners for topping up their existing leases. The premium paid will go into and form part of the past reserves which is constitutionally protected.

The flat owners will have sufficient time to prepare for the payment as this payment is due only after the estate has obtained both the requisite support to privatise and to top up the lease. Between the time the requisite support and the decision are obtained to the time to the premium becomes payable, is an estimated of six months. The Bill also makes provision for HDB to grant further extension, if necessary.

Mr Hri Kumar is also concerned that some flat owners may need help to finance the payment. Privatisation will allow Braddell View flat owners to own private housing and have control over the management and maintenance of their estate. However, there is also cost involved. Hence, it is important that the Braddell View flat owners, as individuals and as a group, consider the benefit of privatisation against its cost and decide whether they wish to take the next step to privatise.

Nonetheless, HDB has worked with the CPF Board on the use of the flat owners' CPF funds to pay for their share of the lease top-up premium. The CPF Board has agreed to allow the flat owners of Braddell View Estate to use the savings in their CPF Ordinary Account to pay the lease top-up premium and the related stamp, legal and survey fees incurred in the privatisation of their estate. If an owner is aged 55 and above, he may use the savings in his CPF Retirement Account that is in excess of the Minimum Sum required cash component for the payment. Flat owners can also add in their children as owners of the flat; so they may use their children's CPF. In addition, the Braddell View body corporate can also use the estate's sinking funds to pay the premium, but it must first pass a resolution approved at a general meeting to expressly provide that the premium to be paid to HDB for the lease top-up may be paid using monies in the sinking fund.

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Sir, I hope I have addressed the Member's concerns. Let me conclude by thanking the Member again for his support of the Bill.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. − [ Mr Lee Yi Shyan ].

Bill considered in Committee; reported without amendment; read a Third time and passed.