LAND TITLES (STRATA) (AMENDMENT) BILL

2.40 pm

Order for Second Reading read.

The Minister of State for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

I had informed this House on 19th November last year that Government would be amending the law to make it easier for en-bloc sales to take place. The current position is that a single owner, for whatever reason, can oppose and thwart the sale. Government has received many appeals and feedback from frustrated owners whose desires to sell their flats or condominiums en-bloc have been so thwarted. As a result, these buildings cannot take advantage of enhanced plot ratios to realise their full development potential, which would have created many more housing units in prime 999-year leasehold or freehold areas for Singaporeans. A secondary benefit is that these developments, especially the older ones, could have been rejuvenated through the en-bloc process.

I said that the law would be amended to remove the need for unanimous consent. I highlighted the fact that such a practice would not be peculiar to Singapore, as it already exists in some American and Canadian states. I emphasised that in land-scarce Singapore, such an approach was even more imperative as it would make available more prime land for higher-intensity development to build more quality housing in Singapore. In fact, since then, Hong Kong has also passed legislation along the same lines. In February this year, also in this House, I outlined the main features of the new scheme. In particular, I highlighted the fact that safeguards would be put in place to protect the interests of the minority owners.

Let me now highlight the key features of the proposed new scheme.

Firstly, Government will not decide which developments are ready or ripe for en-bloc redevelopment. The owners will decide that for themselves. There are too many factors at play, such as the age and state of repairs of the development, market conditions, sentiments of the owners and the relationship amongst them. As announced previously, what the Bill will do is peg the required majority consent to the development's age - the majority owners must account for at least 90% of the share values for developments less than 10 years old, and 80% for developments 10 years or more. This approach will facilitate the redevelopment of older buildings. It is also in line with the approach in other countries - Nova Scotia, New Brunswick and Ontario in Canada (80%); British Columbia, Canada (75%); Hawaii (80%) and Hong Kong (90%, but where the law also provides that the Chief Executive in Council may specify a lower percentage not less than 80% in certain circumstances). A higher percentage is not practical, a lower percentage not appropriate given the importance of the matter.

The current requirement of unanimous consent is untenable. The case of Kim Lin Mansions which was recently highlighted in the press brings this out clearly. Community living, which is the heart of living in a condominium, all but disappears when owners have to drag out their disagreement in court, incurring huge financial outlays in the process. There is uncertainty; there is delay; there is acrimony. Also, as more developments age and incur large upgrading and repair bills, opting for en-bloc sale will increasingly become a viable option. But the existing law which requires unanimous consent makes it extremely difficult, if not impossible, to realise en-bloc sales.

Sir, the principle of majority rule is evident in other areas of shared social and corporate life. Examples abound. They include decisions relating to managing and maintaining common areas in condominiums under the Land Titles Act; privatisation of HUDC flats; upgrading works under the HDB Upgrading Programme; voluntary liquidation of a company or dissolution of a society.

Developments with 10 or fewer units will still require unanimous consent. With the small numbers, it is not possible to designate a clear 80% or 90% majority. Even if we base it on an approximation, it would not be meaningful, as one owner's disagreement in such small units may constitute a large percentage. For such small developments, the owners should be able to negotiate and agree amongst themselves.

Secondly, there will be adequate safeguards to protect the interests of minority owners. These safeguards are found in the procedures as well as in the substantive powers of the Strata Titles Board.

Let me first touch on the procedures. The majority owners will first enter into a conditional sale and purchase agreement to sell to a purchaser, subject to their obtaining an order from the Strata Titles Board. Thereafter, they must give notice of the proposed en-bloc sale in the newspapers. They must also separately serve notice of the proposed en-bloc sale on all interested parties, including the owners, mortgagees and chargees of the minority owners as well as on the management corporation. This notice must be accompanied by a copy of the advertisement published in the newspapers, the conditional sale and purchase agreement, the valuation report and the buyer's statutory declaration stating his relationship, if any, to the owners. The conditional sale and purchase agreement must state the price and method of distributing the sale proceeds. The majority owners must then apply to the Strata Titles Board for an order of sale, enclosing the documents mentioned earlier. The minority owners and their mortgagees or chargee would then have 21 days to file their objections, if any, with the Board.

These procedures will ensure that all relevant parties will have adequate notice of the sale and its terms, in order to decide whether or not to lodge objections with the Strata Titles Board. I should add that no application needs to be made to the Strata Titles Board if all the owners agree to the sale. In other words, application to the Board is not a pre-requisite to all en-bloc sales but only when there is no unanimous consent.

Let me now elaborate on the role of the Board, in particular, how it acts as a safeguard. The Board will first satisfy itself that the required consent has been obtained and that prescribed procedures have been complied with. It will not review or intervene to determine the terms of sale. Essentially, its role is to determine that the proposed sale is bona fide and an arm's length transaction so that the proposed sale can proceed. It will do this by considering the minority's objections, the interests of all the owners, all the circumstances of the case and the scheme and intent of the en-bloc provisions in the Bill. The Board will look at the sale price, method of distributing the sale proceeds to ensure that the minority owners are treated no less favourably than the majority, and the relationship of the purchaser to the owners, to ensure that there is no collusion. If the Board decides that the transaction is bona fide and an arm's length transaction, the sale will proceed. Otherwise, the sale cannot proceed and the majority owners would have to rework their proposal if they still wish to sell en-bloc. The Board will not rewrite the agreement for the parties.

The Board will consider, as I have said, all the objections filed by the minority owners, their mortgagees and chargees. Some minority owners may raise objections which are personal in nature or peculiar to their own circumstances, eg, he has bought his unit recently at a much higher price than that paid for by the other owners, or he has spent a large amount on renovations. Others may raise objections based on sentimental reasons, eg, he has lived in the development for a long time and does not wish to move out. The Board will mediate in these situations. It is expected that skilful mediation will overcome many of these objections. If mediation fails, the sale will nevertheless proceed as long as the transaction is bona fide and at arm's length, unless there are exceptional circumstances to warrant the Board assuming a more pro-active role; for example, the sale proceeds are lower than the purchase price he had paid for the unit or are insufficient to redeem the outstanding mortgage or charge on the unit. This is based on the underlying assumption that none of the owners in an en-bloc sale should lose out financially.

Sir, the Board's decision will be final. An appeal can be made to the High Court only on a point of law, or where there is alleged irregularity in the process. Owners will be precluded from applying to the court under section 78 of the Act to terminate a strata development if they are not granted an order from the Board for an en-bloc sale or are unable to secure the required majority consent, unless there are exceptional extenuating circumstances such as the majority owners refusing to pay for repairs to prevent a building from being unsafe. In other words, section 78 will remain in the Act but is used for very specific circumstances. There will therefore be finality.

Sir, the new scheme will apply to three types of strata developments: those registered under the Land Titles (Strata) Amendment Act where the owners own their units and share in the common property, which is the vast majority; those not registered under the Land Titles (Strata) Act where the owners own their units and a share in the land but do not have a management corporation framework under the Act; and those not registered under the Land Titles (Strata) Act where the developer still owns the land.

Sir, let me now deal quickly with a few other ancillary matters. The first is strengthening of the Strata Titles Board. The Bill provides for a number of changes to facilitate the expeditious hearing of applications. These include increasing the number of panel members from 20 to 24; appointing two Deputy Presidents instead of one; empowering the Secretary of the Board, to be called the Registrar, to deal with interlocutory applications and empowering the Board to allow any person to represent an applicant before the Board.

One other noteworthy amendment, which is not related to en-bloc sales, is that the Board's jurisdiction will be expanded to enable it to have wider powers relating to the exercise or failure to exercise a power, authority, duty or function imposed by the Act or by the by-laws. For example, it will be empowered to hear and settle disputes arising from a breach or failure to perform any statutory duty or by-laws relating to a strata development. Currently, a subsidiary proprietor or Management Corporation must apply to court to enforce the performance or restrain the breach. On the other hand, the Board will no longer hear cases on the liability of a developer. Proceedings against a developer for defects are based on contract, which is a matter for the courts.

Lastly, Sir, I should add that the new scheme will only apply to strata developments. It will not apply to landed developments. Strata developments, unlike landed developments, are founded on the concept of community living, shared ownership of common property in designated values, and individual ownership of strata title which is essentially air space. All these distinguishing features of strata developments support the new approach based on majority consent for en-bloc sales.

Sir, as the Bill has attracted considerable public interest, Government has decided, as suggested by several MPs, both in and outside the House, including the Chairman of the GPC for Law and Home Affairs, to refer this Bill to a Select Committee. This will also enable interested members of the public to share their views on the provisions of the Bill.

Sir, I beg to move.

Question proposed.

Mr Chng Hee Kok: Mr Speaker, Sir, I rise in support of the Bill. At the peak of the property boom, this Bill or its underlying principles would have been welcomed by most. Minority subsidiary proprietors who choose not to sell their property in en-bloc sales would have been dismayed.

This Bill is controversial. Some say that it is to aid majority subsidiary proprietors who stand to make substantial gains when their apartments are sold en-bloc than they would otherwise not have. It can also be said to oppress the minority who refuses to sell for whatever reasons, whether it is to demand exorbitant prices for their property or for sentimental reasons.

Sir, doing nothing will not be the responsible approach in land scarce Singapore. Whether it is the tyranny of the minority or the oppression of the minority is a secondary concern. The most crucial consideration is in achieving a balance between the two conflicting needs and that there are statutory instruments in place to ensure that ultimately a proposal for redevelopment fits into and blends well with the long term development plans of Singapore.

Without legislation, the redevelopment of old and inefficient land use developments is a costly process. There is presently a case in our courts, and the Minister of State has mentioned the Kim Lin Mansions case, on this very issue and the legal wrangling is causing owners on both sides of the divide a great deal of money. This is not taking into account the human costs of uneasy neighbourhoods and of course sleepless nights for some of the owners. This Bill when passed will go a long way to address this issue.

For whatever reason one wants to remain in a home, there is a need to ensure that the overriding interests of society at large must be met. There must be a mechanism in place to ensure that our city-state does not contain pockets of slums and that sufficiently old buildings are safe and well maintained. Having said that, however, I am of the view that a 10-year old building is still a new building and using 10 years as a yardstick may be too short a benchmark. The stringent requirements of the Building Control Department have resulted in much money being invested to ensure that our buildings will withstand the test of time and more. It will indeed be a waste of money and resources if a building that is less than 10 years old be allowed to be torn down and redeveloped. It may also create uneasiness amongst potential buyers who cannot be sure if an intended purchase will be the target of an en-bloc sale.

Sir, therefore, I urge the Government to reconsider a change in some of the details in the Bill. Hence, as this Bill when passed will have a substantial impact on a majority of private property owners, I welcome the Government's move to commit this Bill to a Select Committee.

En-bloc sale and redevelopment is an excellent way to rejuvenate some old estates which are devoid or lacking in amenities and facilities. This complements what is being done in the public sector. With the Government spending billions of dollars in main and interim upgrading programmes in public housing estates, private housing estates, especially the older ones, should be encouraged to do likewise through en-bloc sales.

Assoc. Prof. Chin Tet Yung: Mr Speaker, Sir, I rise to speak in support of the Bill in principle, and appreciate the opportunity to express a number of concerns that I have regarding its provisions for en-bloc sales, that is, the new sections 84A to F.

Sir, property rights in law are traditionally distinguished from other legal rights because they are of such importance and value to those who hold them. The right to enjoy one's property and to choose a time to dispose of it is regarded very much as a basic right of ownership. People pay higher premiums to acquire interests in land that allow them to enjoy such rights and eventually to pass them down to their successors in title in perpetuity. These rights should be overridden only in the most compelling circumstances, where the public interest requires it, and must be seen to be manifestly beneficial to the public in general, for example, building infrastructural facilities such as roads, MRT lines, stations and airports. In Hong Kong, where they have a similar law - the Land (Compulsory Sale for Redevelopment) Ordinance No. 30 of 1998 - the objective was to redevelop many of the old estates in Hong Kong through private means. In Singapore, the need to do so may not be so obvious, as many estates are fairly new and, in any case, are well maintained, as regulated by law.

The public interest in the proposed law therefore is not so evident. It is altogether different when what is at stake is a purely economic or pecuniary decision. That is, when the decision to take away the right of ownership, albeit with compensation, on pure economic grounds alone - such as the redevelopment of an estate that may just be 10 years old - to make way for a more lucrative development. It is essentially a private deal, between majority owners and developers. In such an instance, there is a need to ensure that all minority owners' interests are well protected.

People acquire property for different reasons - I am not concerned for those who are acquiring property as an investment, since that essentially is a matter of economic compensation, which fits well with the idea of en-bloc sales. For someone else - let us say a retiree - who purchases a property to stay in, and who chooses a particular flat in a particular location to be, for example, near her children or a medical facility, the idea of compensation in pure monetary terms may be a poor substitute. The costs of relocation, the giving up of a home that one has spent many happy years - these are neither easy to quantify nor easily compensated in monetary terms.

The cynical among us may say that there is a price for everything - and so there may be, but in reality, I do not know how these issues are likely to be dealt with in the Act, despite the Minister of State's assurance. Or whether such issues can be dealt with satisfactorily, no matter what the Act says. As it stands, the Act gives no guidance on how such non-material considerations are to be taken into account, if at all. It is interesting to note in this context that the Hong Kong legislation referred to earlier mentions, for example, the age or state of repair of the existing development. The Hong Kong Ordinance also requires subsidiary legislation specifying the grounds on which an order for sale may be made. In my view, it is necessary to enact similar regulations, especially if the decision is left to the Strata Titles Board. This is the next issue to which I shall now turn.

It is stated that these matters may be brought before the Strata Titles Board, and that the Board will have powers to mediate, to call for valuation reports and finally, to make orders. Such orders are binding on minority owners who object to the sale. These are orders that significantly affect property rights. I wonder whether it is not altogether appropriate to have an application made to the High Court instead of the Tribunal.

Sir, the Land Titles Act, sections 77 and 78, actually provides for application to the court in relation to a variation of strata subdivision scheme consequent upon damage to or destruction of a subdivided building, and to termination of a strata subdivision scheme. Surely, the powers of the court can be extended to cover the matter of en-bloc sales. This may at least provide some comfort to minority owners who may be dispossessed by such an order. The judiciary is used to matters involving private parties; the judges are used to quantification of damages, including large amounts of damages. They are used to taking into account non-economic considerations, such as pain and suffering. The Strata Titles Board, talented though it may be in property matters, is not used to this type of work. In any event, it is in my view imperative that if such a Board were to decide on this matter, Parliament should ensure that there be specified grounds on which an order of sale can be made, similar to that provided in the Hong Kong legislation.

There are two other matters that I should like to draw attention to. The first, as has been mentioned by the GPC Chairman, relates to the 10-year rule. That is to say, if a development is more than 10 years old, only 80% of the subsidiary proprietors need to agree (or if it is less than 10 years, 90%). Sir, in the context of estate development in Singapore, where estates are generally well maintained, this seems too early a period to speak of en-bloc sales. Would it not be a waste of economic resources to tear down a development that is only 10 years old or less? Especially, if some subsidiary owners would like to continue to live in it. Would this sort of rule adversely affect the maintenance level of estates? Is there a commitment, for example, to upgrade the lifts if it were known that a developer has been eyeing the estate with a view to redevelopment? Again, it would seem that more specific regulations are needed to control such a situation and a review of the 10-year rule should take place.

Finally, I refer to a technical problem, the issue of notice and objections. This relates to the safeguards that the Minister of State has just mentioned. Under the proposed section 84A(1), majority subsidiary proprietors who have secured a conditional agreement of sale may apply to the Board for an order of sale to be made out. Under section 84A(4), a subsidiary proprietor who does not agree to the sale has to file an objection within 21 days of the date of notice served in the normal case. The failure to file an objection has serious consequences under subsection (6) - the Board is under a duty if it does not receive any objection to order a sale! Nowhere in the section is it provided as to who is to inform those subsidiary proprietors who have not entered into agreements of sale about the application to the Board. Subsection (10) provides for notice by registered post but does not make clear who has the obligation to inform the minority. Would it be the Board or the applicants for the order of sale? Such matters have yet to be clarified in the legislation.

Sir, I am aware that in land scarce Singapore, optimal land use is always a priority. Yet, for the same reason, property interests are so much more important to those who have purchased them, especially on the open market. There is a need therefore for the Minister to reassure this House, and indeed, the people, that encroachment into the proprietary interests of minority owners should be allowed only in the most convincing of circumstances.

Sir, I give my qualified support to this Bill and hope that these issues would be taken up in the Select Committee.

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Mr Speaker, Sir, this Bill was introduced to facilitate the en-bloc sales of certain property. I support the underlying principle of the Bill because I believe that en-bloc sales, if made easier, would prevent old properties from degenerating into slums. In the last few years when property prices were higher and plot ratios in certain areas were increased, we saw many condominiums and apartment owners attempting to sell their properties en-bloc. Some succeeded while others failed. Those that failed owed it to the few owners who held out for various reasons. Some have noble, sentimental reasons, while others just wanted more money than their neighbours. Those that failed to sell en-bloc have missed the boat for the time being and are in danger of degenerating into slums during the trough of the economic cycle as many of these properties are fairly old. In a case like this, one could say that we had a tyranny of the small minority over the majority. I sympathise with the majority of the owners involved.

In debating this Bill, one cannot do so without going into the issue of individual rights over that of society. Although one of our core values is society above self, in this context, we must look at what this larger society is, that self must sacrifice too. In the case of private land acquisition for public roads, highways, drainage or MRT lines, one can understand the need for this as the larger society that benefits would be people one can count in the realm of thousands, if not tens of thousands or hundreds of thousands, who use the public facilities. In the case of en-bloc sales, the larger society that benefits is one's neighbours, maybe 10, maybe 100, who just want more money for their units if sold en-bloc than if sold individually. The question therefore is: should the individual be made to subsume his interest to that of the society so that the latter can make more money?

One could argue that money is not the only issue and that the main reason is really to prevent the condominiums or apartment blocks from degenerating into slums. If that was true, then one could argue that en-bloc sale is not the only way to prevent this from happening. One could go for upgrading programmes and refurbishment as in the HDB major upgrading programmes. In this case, under the current law, only 75% of share values in the estate need to approve for such upgrading to proceed. Since the larger society that benefits from self-sacrifice is not as noble in the case of en-bloc sales of private properties for redevelopment as in the case of acquisition for public projects, I contend that we should maintain a balance of individual rights over that of the other neighbours. The question then is: what is that correct balance? I suggest we should then go back to the fundamental reason for which this Bill was meant to achieve and, that is, to prevent the degeneration of old private properties into slums.

This Bill proposes that, in the case of properties less than 10 years old, 90% of the share values would suffice for an application to be made to the Board for an order for sale of all the lots in common property to proceed. In the case of properties above 10 years old, 80% of the share values agreeing would suffice. My question is: are properties less than 10 years old in danger of degenerating into slums? To me, the answer is obviously no. In my view, the age of properties should be the key deciding factor here which determines whether the individual's right to hold out should be ridden roughshod over. For older properties, the danger of degeneration into slums becomes more real. In this case, we should give greater weightage to the needs of the majority of the other owners.

I agree that some judgement and subjectivity is involved. However, in my own view and judgement, I propose that for properties less than 10 years old, 100% of share values should still be maintained for en-bloc sales to proceed. For properties between 10 and 20 years old, 90% of share values could suffice, and for properties above 20 years old, then 80% of share values could suffice.

In addition, tearing down of fairly new buildings is a waste of national resources and should not be encouraged. I believe my suggestion is more equitable and maintains a better balance between individual rights and the good of the larger society. And with this, at least the individual has the peace of mind that in the first 10 years of the life of his new property, he would not wake up one morning to be rudely told that he has to move out, because his neighbours have decided to cash out in an en-bloc sale.

Mr Chuang Shaw Peng: Mr Speaker, Sir, as everybody is aware, the emergence of en-bloc sales in Singapore is mainly due to the present Development Guide Plan (GDP), where the usage of land is capable of being intensified from that which is currently being used. This Land Titles (Strata) (Amendment) Bill is meant to facilitate the redevelopment of land for more intensified use, and I think it covers most of the possible situations.

However, in my opinion, there are two situations which have been missed out and should be considered. Situation 1. The Bill deals with a case where the subsidiary proprietors of the lots holding not less than 80% or 90% of the share values wish to sell to the purchaser. But it does not, however, appear to deal with a situation where one subsidiary proprietor of the lots already owns 80% or 90% of the share values and wishes to purchase the remaining 10% or 20%. If the said subsidiary proprietor wishes to sell to the purchaser, it would be possible under the Bill to apply to the Board for an order. There is, however, no provision to allow this subsidiary proprietor to apply to the Board for an order to purchase the remaining 10% or 20%. I feel that the Board, in the spirit of the Bill, should assist such a subsidiary proprietor. Of course, some safeguards must be built in for such a situation, for example, the appointment of two independent valuers or the said subsidiary proprietor must acquire the remaining 10% or 20% only for the purpose of redevelopment. If this situation was not covered, the said subsidiary proprietor who meets with objection from the remaining subsidiary proprietors of the building would then not be able to redevelop the land to its fullest potential. This situation is similar to an en-bloc sale which has resulted in this Amendment Bill in the first place.

The only recourse for such a subsidiary proprietor would be to sell to a purchaser. Of course, one can argue that he can always set up a company to be the purchaser, but the procedure would attract more stamp duties, more legal cost, etc. And I feel that the spirit of this Bill should be to facilitate the en-bloc sale and not to collect more revenue for the Government if the situation does not require it.

Situation 2, and this is a more complicated one. Currently, there are some land developments on sizable plots of land in Singapore where the DGP allows for more intensified use than its current use. But the intensification is not to the extent that it warrants the demolition of the existing buildings on the land, particularly if they are still quite new. And in some cases, due to the layout of the existing development, there is no need to demolish any building and an additional building can actually be erected on the site. But it means that the consent of 100% of the subsidiary proprietors of the lots in the development have to be obtained, and some objections would definitely be raised. I would like to ask the Minister whether in such a situation the same approach as taken by the Bill for en-bloc sale can be adopted, ie, if the subsidiary proprietors of the lots in the development holding not less than 80% of the share value consent to such a proposal, an application can be made to the Board for an order to allow the proposal.

Mr Speaker, Sir, so far I have spoken about the benefit of the majority of the subsidiary proprietors of the lots. The interests of the minority, of course, cannot be ignored. I came to understand that some subsidiary proprietors object to en-bloc sale because of their desire to send their children to a school within 1-2 km or their need to look after their elderly or sick parents nearby or they have just recently completed extensive renovations to their premises. I see a need for the Board, as defined in the Bill, to be empowered to consider these intangible factors in their mediation or arbitration between the disputing parties and possibly make adjustment to the share values to achieve an equitable distribution of the values. It will not be wise to pass this Bill to facilitate the development of land and ignore its possible detrimental effects on the other ongoing good policies which are meant to encourage stronger family ties and equitable treatment of our people. As pointed out by Prof. Chin, the Bill is not clear on this. I would call for more details on these issues to be addressed in the Select Committee.

Sir, in principle, I support the Bill.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.45 pm.

Sitting accordingly suspended at 3.18 pm until 3.45 pm. Sitting resumed at 3.45 pm