EN BLOC SALES FOR FLATS AND CONDOMINIUMS (Status of review)

Mr Lew Syn Pau asked the Minister for Law what is the status of the review to make en bloc sales for flats and condominiums easier for owners.

The Minister of State for Law (Assoc. Prof. Ho Peng Kee) (for the Minister for Law): Sir, the Government has completed its review. As I indicated in November last year, the requirement that all the owners must agree will be removed. The main features of the new scheme to facilitate en bloc sales in strata developments will be as follows:

Firstly, the required percentage of majority agreement will depend on the age of the development. If the development is less than 10 years old, there must be at least 90% agreement; for developments 10 years old or more, there must be at least 80% agreement. Both figures are based on share values.

Secondly, this majority consent will apply only to strata developments with more than 10 strata units. For developments with 10 or fewer units, there will be no change and all the owners must agree.

Thirdly, certain checks and safeguards will be introduced. For example, the majority owners must advertise in the local press their intention to sell. The notice to be served on all the owners must enclose a copy of the sale and purchase agreement and the buyer's statutory declaration stating his relationship, if any, to any of the owners in that development.

Fourthly, the Strata Titles Board will be given the role of hearing appeals from minority owners.

The main task of the Strata Titles Board will be to satisfy itself that the proposed en bloc sale is a bona fide `arms length' transaction, to ascertain, for example, that there is no coercion of the owners or collusion between buyer and majority owners. In this regard, the Board can take into account factors such as the sale price, relationship between buyer and majority owners, and distribution of the sale proceeds. If necessary, the Board can call for an independent valuation report. If there are non-price issues, the Board will help to have them resolved through mediation.

Sir, this is the broad outline of the new scheme. The details, including the procedures to be followed, will be set out in the amendments to the legislation which are now being prepared.

Mr Shriniwas Rai (Nominated Member): Mr Speaker, Sir, may I ask the Minister, in view of the interest shown by the public in the press, whether he would consider sending the proposed Bill to a Select Committee when the time arises.

Assoc. Prof. Ho Peng Kee: Let us see how the Bill shapes up first. We are working on the details. We will take into consideration the suggestion by the Member at the time when the Bill is finalised by the Government. We will then look at the magnitude of the Bill and decide whether or not to send it to a Select Committee.

Mr Lew Syn Pau (Kreta-Ayer Tanglin): Mr Speaker, Sir, if I remember, the objective of this exercise is to prevent very old developments from degenerating into slums. So if you put the age as 10 years, does he not think that it is a bit too early? Because many of the developments below 10 years old are still in very good condition. Does he not think that maybe 20 to 30 years would be a much better age, before they are subject to this law?

Assoc. Prof. Ho Peng Kee: Sir, essentially, the decision now is left to the owners. Of course, partly it is in the national interest, if older developments are rejuvenated, and enhanced plot ratios are realised. But if the owners decide in a development that is less than 10 years old, they must get 90%. If they decide to come together for community living, and after all, strata title living is community living, and if circumstances change, and a significant majority, 90% agree that they should all sell to a developer who will then develop the property, then I think we should make it possible for them to do so. So we have taken age as this criterion: below 10 years, 10 years and above, because we feel that, as rightly pointed out by Mr Lew, for older developments you may have more owners who are interested in selling. If we peg the percentage for these older developments too high and if it is not attained, then a larger group of owners' interest will be thwarted. That is why we have decided that age will be the criterion and 10 years will be a reasonable time-frame for this distinction.

Mr Simon S C Tay (Nominated Member): May I ask the Minister of State how many sales have been aborted because of such a small minority? In other words, how many sales would otherwise have gone through if the new law was already in place?

Assoc. Prof. Ho Peng Kee: We really cannot say. We do not have a fix on that. But certainly we can look at the reports that come from the ground, in the press, and I think many of our Members here would also have contacts with people who have had sales which have been thwarted because one or two owners have refused to go along, and this can be big developments. So the current law really is a situation where there is tyranny of the minority and for whatever reason, if one or two owners hold out, then the rest of the owners' wishes to redevelop the property cannot be realised.

Mr Simon Tay: May I ask the Minister of State, of these so-called instances which people have heard of, what are the reasons which the property owners, minority interest, have refused to sell for commercial reasons?

Assoc. Prof. Ho Peng Kee: Sir, I think the reasons for holding out are very variable. Some could be because of price, some could be because they have recently renovated their flats, and therefore they feel they should get a higher price. Some might have bought the flat more recently, compared to the others who bought a long time ago, and therefore feel that, based on the formula of distributing the proceeds, they ought to get a higher price. Some may just want to live in that area for a longer time. Some who are retirees may be very used to living in the area.

The approach is that we want to provide a mechanism so that these concerns can be addressed. But the way to address it, at least the best way that we feel we should take as an approach, is that the Strata Titles Board will look at objective criteria. Basically it will look at factors such as the sale price and the relationship of the parties. I think that is important because we want to prevent collusion and therefore ganging up by the majority on the minority who may be in cahoots with the developer, and also this question of distribution of proceeds. These factors will be taken into consideration by the Strata Titles Board in deciding whether or not to intervene. But if there should be non-price factors, other points that I have mentioned - 1.30 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 18, 20-21, 23-24, 26, 28-31, 36-37 and 39-40 on the Order Paper are reproduced in the section, "Oral Answers to Questions Not Reached" (Cols. 405 - 422). Question Nos. 16-17, 19, 22, 25, 27, 32-35, 38 and 41-43 have been postponed to the sitting of Parliament on 27th February 1998.]