Numerous successful en bloc sales (collective sales) have been boasted of on newspaper headlines recently. The common en bloc involves all the units in a condominium (strata-titled development) being sold to a developer and the proceeds being divided amongst the unit owners.[1] During the collective sale, some condominium unit owners (subsidiary proprietors) have been awarded additional sale proceeds at the expense of other unit owners. This article answers the question “why is this allowed”, and provides an introduction to the laws concerning en bloc sales in Singapore.
General process of en bloc sales[2]
The first step in the collective sale process is for owners to elect a Collective Sale Committee (CSC) at a General Meeting. A general meeting will only be convened with the request of subsidiary proprietors with at least 20% of the aggregate share value or 25% of the total number of subsidiary proprietors’ votes. When electing the CSC, all candidates are to make full disclosure of any actual or potential conflicts of interest.
The CSC is to seek advice from property consultants and lawyers. Property consultants help to market the property to potential developers, and the lawyers help to prepare the necessary documentation relating to the collective sale. An independent valuer is also appointed to make a valuation of the entire development.
Once a price is proposed, the CSC will then collect votes from all subsidiary proprietors who agree to the sale. Under Section 84A of the Land Titles (Strata) Act (LTSA), if the en bloc sale is supported by 80 per cent of the development’s owners (in terms of both share value and strata area) and the development is at least 10 years old, owners can apply for an order of sale from the Strata Titles Board or the High Court. If the development is less than 10 years old, a 90 per cent majority vote for the collective sale is required.
After a majority vote is obtained, the CSC will invite interested developers to submit their bids through a public tender exercise.
After a buyer is found, unless there is a unanimous decision to sell, the CSC has to apply to the Strata Titles Board for an order for sale.
If there are no objections raised to the Strata Titles Board, the Board will approve the en bloc sale application if it is satisfied that the sale was conducted in good faith and does not require a minority owner to be a party to an arrangement for the development of the lots and the common property.[3]
An order for en bloc sale is binding on all the units and land owners of the development.[4]
What if I refuse to sell my apartment?
- Do not sign the Collective Sale Agreement
You can choose to vote against the en bloc sale during the voting exercise. The en bloc sale must be supported by the requisite majority of at least 90 per cent by share value and strata area if the development is less than 10 years old, or at least 80 per cent by share value and strata area if the development is more than 10 years old.[5]
- Raise an objection to the Strata Titles Board
Under section 84A(4) LTSA, unit owners who do not want a collective sale of the development in question may file objections with the Strata Titles Board.
Valid objections include the situation where, you, as the subsidiary proprietor, will suffer a financial loss from this collective sale.[6] This means that, for instance, the money you receive from the collective sale is S$2m, but you initially bought the unit at $2.2m. You will need to prepare documentation to prove that you will suffer a financial loss. Financial loss does not refer to the situation where you would profit less from the en bloc sale than other owners.
Another valid objection you could make is where the transaction was not made in “good faith” after taking into account the sale price obtained for the development, the method of distributing the proceeds of sale and the relationship of the purchasing developer to any of the subsidiary proprietors.[7] In the landmark decision of Ng Eng Ghee and others v Mamata kapildev Dave and others,[8] the Court of Appeal clarified the meaning of the words ‘transaction’ and ‘good faith’ in section 84A(9)(a) of the LTSA. The Court opined that ‘transaction’ embraces the entire sale process, including the marketing, the negotiations and the finalization of the sale price culminating in the eventual sale of the property.[9] The concept of ‘good faith’ is not confined to whether the sale price was a fair one or not, but also how the sale price is arrived at.[10]
Upon receipt of such objection, the Strata Titles Board would set up a mediation session and have the objection first resolved through mediation between the objectors and the representatives from the CSC. If the situation can be resolved in mediation, the collective sale will proceed. The CSC must not secure the majority requisites by making additional payments to the objectors’ sale proceeds.
- If mediation fails, take it up to the High Court
Where 60 days has passed from the first day set aside for mediation, or where mediation has proceeded as far as it reasonably can, the Strata Titles Board can issue a “stop order”.[12] A “section 84A stop order” is an order that discontinues all proceedings before the Strata Titles Board in connection with collective sale application.[13]
When a section 84A stop order is issued, the CSC has to apply to the High Court within 14 days to seek approval for the sale.[14] You can file your objection officially with the High Court.
The High Court will then decide on an order to be made if it finds that the objector would suffer a financial loss from the sale,[15] or that the transaction was not conducted in “good faith”.[16] The High Court may, in ordering the collective sale to proceed, order that the sale proceeds to be received by the objector be increased if it is satisfied that it is just and equitable to do so and the CSC agrees.[17]
Where the High Court directs that the objector should be allocated more sale proceeds, the sum ordered is to be paid from the proceeds of sale of all the subsidiary proprietors and is capped at a maximum of the aggregate sum of 0.25% of the proceeds of sale for each individual unit of the objector or S$2,000 for each unit, whichever is higher.[18]
However, if your objection fails, you will still have to sell your apartment at the proposed price for the collective sale, together with the rest of the subsidiary proprietors in your estate.
- Receiving additional sale proceeds from the purchasing developer
While the CSC is not allowed to allocate more sale proceeds to certain subsidiary proprietors, the purchasing developer may offer to pay more to the objecting subsidiary proprietors in order to incentivize them to agree with the collective sale.[19]
As mentioned above, the CSC is not allowed to allocate more sale proceeds to certain subsidiary proprietors, and the property consultants, because they owe a duty of good faith to all the subsidiary proprietors of the estate, however, the court in Chua Choon Cheng and others v Allgreen Properties Ltd and another appeal [2009] 3 SLR(R) 724 found that the purchasing developer does not. The purchasing developer can thus make such an offer to objecting parties.
Though this is rare, in the above mentioned case, the purchasing developer offered to pay more to the objecting subsidiary proprietors in order to convince them to go ahead with the collective sale. Since their objection was based on financial loss, they accepted the money and withdrew their objections. The court however stated that such additional payments would not be acceptable if they were disallowed under the sale and purchase agreement entered between the purchasing developer and the CSC.
Conclusion
Both CSC and subsidiary owners should understand the laws surrounding collective sales before committing to it. CSCs may engage a lawyer to assist with their contracts and correspondence with potential purchasing developers.
On the other hand, subsidiary owners looking to seek clarification on, or dispute the sale of their property, can also engage a lawyer to help them explore different arguments and avenues to express this objection. A lawyer would also be more familiar with communicating with other stakeholders such as the Strata Titles Board and filing for the relevant High Court proceedings.
[1] https://www.stratatb.gov.sg/applicant-steps-relating-to-ltsa.html.
[2] https://www.stratatb.gov.sg/applicant-steps-relating-to-ltsa.html.
[3] https://www.stratatb.gov.sg/hearing-ltsa.html.
[4] Section 84B Land Titles (Strata) Act; https://www.stratatb.gov.sg/hearing-ltsa.html.
[5] https://www.stratatb.gov.sg/applicant-steps-relating-to-ltsa.html.
[6] Section 84A(7) Land Titles (Strata) Act.
[7] Section 84A(9)(a) Land Titles (Strata) Act.
[8] [2009] 3 SLR 109.
[9] [2009] 3 SLR 109 at [130].
[10] [2009] 3 SLR 109 at [131].
[11] Chua Choon Cheng and others v Allgreen Properties Ltd and another appeal [2009] 3 SLR(R) 724.
[12] Section 84A(6A) Land Titles (Strata) Act; https://www.stratatb.gov.sg/mediation-ltsa.html.
[13] Section 84A(6A)(b) Land Titles (Strata) Act.
[14] Section 84A(2B) Land Titles (Strata) Act; https://www.stratatb.gov.sg/hearing-ltsa.html.
[15] Section 84A(7)(a) Land Titles (Strata) Act.
[16] Section 84A(9) Land Titles (Strata) Act.
[17] Section 84A(7)(a) Land Titles (Strata) Act.
[18] Section 84A(7B) Land Titles (Strata) Act.
[19] Chua Choon Cheng and others v Allgreen Properties Ltd and another appeal [2009] 3 SLR(R) 724.
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This article is written by Joel Loh from Chiu Cheong LLC and edited by Gladys Yeo from Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.