Second Reading Speech on Land Titles (Strata) (Amendment) Bill by DPM Prof S Jayakumar
20 SEP 2007
20 Sep 2007 Posted in Parliamentary speeches and responses
- Mr Speaker, Sir, I beg to move, “that the Bill be now read a second time.”
- Sir, the main purpose of this Bill, which amends the Land Titles (Strata) Act, is to provide additional safeguards and greater transparency for all owners involved in en bloc sales, i.e. both majority and minority owners. The proposed amendments address the concerns of owners over the lack of clarity, transparency and safeguards in the current process of an en bloc sale. They also ensure that the interests of all owners are taken into consideration more adequately. While the amendments are intended to achieve those objectives, we have also borne in mind that the amended law does not make it unduly onerous to bring about an en bloc sale.
- Members will recall that at the Committee of Supply debate in March, I had informed the House of changes we intended to make to the en bloc sale legislation following a review by a Study Team as well as consultations with the President and Deputy Presidents of the Strata Titles Boards (STB). Those proposed changes which I mentioned included:
- Introducing an additional consent requirement by number of units.
- Giving STB the power to increase the sale proceeds in cases where the STB is satisfied that it would be just and equitable to do so.
- Empowering STB to issue guidelines on the allowable expenditures that will be taken into account in the evaluation of financial loss claims.
- Empowering STB to disregard any technical or procedural irregularity if it will not prejudice any owner's interest.
- Various improvements to the en bloc sale procedures to further enhance transparency and certainty of the en bloc sale process.
- After I announced the changes, my ministry conducted public consultations on those proposed changes. In the consultations, we received over 400 suggestions from more than 100 respondents. The vast majority of the suggestions were about making the en bloc sale process clearer, fairer and more transparent. We also held discussions with about 40 industry players experienced in handling en bloc sales. They include lawyers, property consultants, developers, academics and representatives of the Singapore Institute of Surveyors and Valuers (SISV). We also obtained further inputs from the STB.
- The amendments in this Bill have taken into consideration the feedback and suggestions we received. Basically the Bill includes the changes which I mentioned in the House, except for one revision which I shall explain shortly. In addition, we have also included additional changes based on some useful suggestions received during the public consultations.
- Let me now outline some of these changes.
- Additional Consent Requirement
- Currently, an application for an en bloc sale can be made if there is consent from the owners holding at least 80% of share value if the development is more than 10 years old, and 90% if the development is less than 10 years old. We had originally proposed to add a further requirement of consent from the owners forming at least 80% of units if the development is more than 10 years old, and 90% of the units if the development is less than 10 years old. I explained that this was to address a problem, especially felt in mixed developments, where residential unit owners hold lesser share values despite owning a substantial floor area and a substantial number of units.
- However, after considering feedback received, we are revising this further requirement so that it will be based on the area of lots as shown in the subsidiary strata certificates of title instead of the number of units.
- There are two reasons for the change. Firstly, consent by number of units could result in owners of large commercial units subdividing their property into many strata lots so as to “create”, as it were, additional votes for themselves. This will defeat the intent of adding the second consent requirement, which is to mitigate the current bias against residential owners in a mixed development. Secondly, consent by the number of units means that a commercial unit will have exactly the same voting right as a residential unit notwithstanding that the commercial unit may be many times larger in size. This will not be fair to owners with large units. Using the area of lots as the basis for the second condition of consent, we believe, will mitigate the current bias against residential owners in a mixed development; but it will not be to the extent of causing bias against the commercial owners of units with much larger areas.
- Formation and Proceedings of an En Bloc Sale Committee
- Currently, the law does not contain rules to govern the formation and the proceedings of an en bloc sale committee.
- In the light of experience and complaints which we have received, there is clearly a need to enhance procedural clarity in this regard. The Bill now has two new schedules, the Second Schedule and the Third Schedule, which provide for rules to regulate the formation of the sale committee and the sale committee’s proceedings. These rules have been adapted from the provisions in the Building Maintenance and Strata Management Act (BMSMA) 2004 in respect of the council of the management corporation.
- On the formation of a sale committee, the Bill sets out, for example,
- A decision to form an en bloc sale committee will have to be made by ordinary resolution passed at a general meeting. The intention is that there can only be one sale committee per development at any time.
- Members of the sale committee will have to be elected at the meeting. Similarly, a sale committee may be dissolved by ordinary resolution at a general meeting.
- A person standing for election to the sale committee must meet certain eligibility criteria. For example, such a person has to be an owner of a unit in the development; or be nominated by an owner which is a company; or be a member of the immediate family of the owner who is nominating him.
- A person standing for election to the sale committee must declare his interest or relationship, if any, with a property developer, property consultant, marketing agent or legal firm.
- As for proceedings of a sale committee, the Bill sets out, among others, that:
- The sale committee shall convene general meetings to consider key issues such as the appointment of any lawyer, property consultant or marketing agent; the apportionment of sale proceeds; the terms and conditions of the Collective Sale Agreement (CSA); and the terms and conditions of the sale and purchase agreement. These changes will ensure that owners will have the opportunity to discuss such key issues before consenting to them.
- The sale committee shall keep minutes of its proceedings and must, within 7 days after each meeting, either display the minutes on the management corporation's notice board or pass the minutes to all owners.
- Collective Sale Agreement
- Currently, the law does not regulate drafting and signing of the CSA .
- The Bill contains new provisions to address the issue of owners not knowing what is contained in the CSA, in particular the important information, before they sign it or being pressed to sign the CSA under duress or misrepresentation. First, the en bloc sale committee must provide a preface to the CSA listing the clause numbers and page numbers where important information such as reserve price, apportionment method, etc. may be found. Second, when an owner signs the CSA in Singapore, the lawyer appointed for the en bloc sale will have to be present to explain the legal terms and liabilities and address any doubts that the owner may have. Third, an owner can rescind his agreement to be a party to the CSA within a 5-day cooling-off period after signing the CSA for the first time.
- The Bill also requires the Sale Committee to provide updates of the consent level every 4 weeks instead of the current 8 weeks. The updates on the consent level must also be certified by a lawyer.
- Mode of Sale: By Public Tender or Public Auction
- The amendments also seek to enhance the transparency of the mode of sale which at present is not regulated.
- First, every launch of an en bloc sale must be by public tender or auction. Following a tender or auction, especially one which fails to achieve the price acceptable to the sale committee, the sale committee can engage in follow-up negotiations for sale by private treaty with any bidder to get the best deal for the owners. But any sale by private treaty must be concluded within 10 weeks from the close of the tender or auction. Second, the sale committee must obtain from an independent valuer a valuation report on the value of the en bloc sale site as at the date of the close of the tender or auction on the same date. Third, the sale committee will be required to provide the owners with information on the bids received as soon as practicable after the close of the tender or auction or, where applicable, after the sale committee has entered into a sale by private treaty.
- Return of Moneys in Management Fund and Sinking Fund
- Under the current law, the buyer-developer is entitled to the moneys remaining in the management fund and sinking fund upon the termination of the strata scheme following an en bloc sale.
- We have taken into account feedback received, the Bill makes a related amendment to the Building Maintenance and Strata Management Act (BMSMA) to provide that upon the legal completion of an en bloc sale, the moneys in the management fund and sinking fund of a management corporation shall be returned as soon as practicable to the owners of the lots in the development, in shares proportional to the contributions levied on the owners by the management corporation.
- Sir, the changes I have mentioned are but the more major proposed changes in the amendment bill.
- The proposed changes will not apply to developments where the required 80% or 90% majority of owners, based on share value, have signed the CSA as at the date of the commencement of the amendment Act. They will not need to comply with the new requirements set out in the amendment Act.
- The public response to the proposed changes has been largely positive; although some have expressed concerns that the changes are too onerous and others are of the view that there should be even more safeguards. This range of reactions is to be expected.
- I would like to reiterate that the amendments to the en bloc sale legislation maintain a careful balance. They provide additional safeguards and ensure greater transparency for all owners, but at the same time, have been drafted in such a way as not to make it unduly onerous to bring about an en bloc sale.
- Mr Speaker, Sir, I beg to move.
Last updated on 26 Nov 2012