Sunday, May 2, 2010

New en bloc rules stricter but fairer

Proposed changes will cut time wastage and add more checks and balances

Last week, the Government proposed changes to the Land Titles (Strata) Act, making the process of selling an estate enbloc stricter but also fairer than before. The changes are expected to take effect next month.

This came after the Ministry of Law received further feedback and suggestions on the Act. These range from requesting more procedural controls to loosening the regulations, as well as proposals to streamline and clarify the sale process.

The ministry had previously amended the Act in late 2007, when it introduced a raft of changes that made the process more transparent and regulated but also more complex and lengthy.

Here's a look at the changes this time round.

Role of the Strata Titles Board (STB)

Currently, STB both mediates and adjudicates on the objections filed by minority owners in en bloc sales.

But in recent years, some enbloc sale applications have become highly contentious, and have ended up in the High Court and even the Court of Appeal.

The proposed changes will reduce STB's role to only a mediatory one. This allows disputing parties to head straight for the courts without having to go through STB's adjudication process, thereby saving time and costs.

STB will be empowered to stop the mediation process if it is clear the parties are headed for the High Court.

'Any resolution at a mediation session is at the absolute discretion of the parties,' said the ministry.

'Any party that does not wish to proceed further with mediation may make known his intention to the STB and the STB shall decide if a stop order should be made.'

Another proposal stipulates that STB can spend no more than 60 continuous days mediating each case, to prevent undue delays and to give greater certainty to the mediation process.

STB can request any information or documents from any party related to the collective sale application, if deemed relevant, and order minority owners to share in the costs of the en bloc sale.


Currently, extraordinary general meetings (EGMs) are required to elect a sale committee, appoint lawyers and consultants, and approve the apportionment method and the terms and conditions of the collective sale agreement.

During the sale process, EGMs are also required to be held to update owners on consent levels, sale proposals, bid amounts received, or the terms and conditions of the sale and purchase agreement.

One of the proposed changes will be to do away with those EGMs held to update owners as no decision-making is required.

Another change will enable an EGM to be dissolved if the quorum of 30 per cent (by share value of the development) is not reached within an hour of the start of the meeting.

If the quorum is not attained, the meeting will be considered a failed attempt.

This will address some concerns on lack of certainty when the sale committee convenes EGMs and owners are made to wait for an inordinate amount of time for the meeting to begin, said the ministry.

Failed attempts

There have been complaints about owners trying again and again to restart the en bloc sale process when previous attempts failed.

To discourage such repeated attempts when there is insufficient interest, a two-year restriction period will be imposed after a failed en bloc sale attempt.

This will give owners peace of mind and prevent the depletion of management corporation funds.

During these two years, the first retry to convene an EGM to reappoint a sale committee will require the agreement of 50 per cent by share value or of the total number of owners. This is up from the current level of 20 per cent by share value or 25 per cent of the total number of owners.

Any subsequent attempts to convene EGMs within this period will need 80 per cent by share value or the total number of owners. If there is another failed attempt, the stricter rules will apply for another two years.

A failed attempt occurs:
  • If the quorum for an EGM convened to elect a sale committee is not met within an hour;
  • When a resolution to elect the committee at an EGM is not passed;
  • When the sale committee is dissolved or terminated; or
  • When the collective sale agreement expires.

Sale committees

Currently, sale committee members have to disclose their interest in any property developer, property consultant, marketing agent or legal firm.

With the proposed amendments, sale committee members will also need to declare the extent of ownership that they or a connected person - either an immediate family member or a firm in which they have at least 5 per cent voting power - has in the development and when the purchase was made.

The additional disclosure requirements will allow owners to make a more informed choice on whom they want to elect into their sale committee.

Also, a sale committee member who does not consent to the sale can now be voted out by the other committee members by a simple majority when an application has been made to STB.

A sale committee will have one year to obtain the first signature for the collective sale agreement, failing which it will be dissolved automatically.

Source: Sunday Times, 2 May 2010

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