Business Times - 15 April 2008
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What if my condos's en bloc sale fails?
Defaulting parties stand to lose their deposits and can be sued for non-completion of the sale; it’s also risky to buy a new home before a collective deal is closed
Some owners of condominium units may still be keen on selling en bloc, but developers’ interest in collective sale sites has more or less dried up.
No residential sites have been sold en bloc in recent months. And given the market uncertainty these days, completion may not be a given for sites that have been sold.
Several collective sales have fallen through, with a few – Tulip Garden, Makeway View, Finland Gardens and Pender Court – already axed, regardless of whether approval from the Strata Titles Board (STB) was obtained.
A collective sale requires an 80 per cent minimum consent from owners before it can be sold. Unless there is unanimous consent, owners will have to get an order from the STB for the sale after they find a buyer.
After getting the order, they will have to wait for the buyer to complete the sale, which is when they will get their sale proceeds.
They have six months after the sale completion date to move out of the property.
The Sunday Times takes a look at what happens if your collective sale deal falls through.
If the STB throws out your sale
The onus is on the majority owners – those who have signed off on the sale – to obtain the STB order.
‘If they do their part and get the STB order, they are not in breach of contract,’ said Credo Real Estate’s managing director, Mr Karamjit Singh.
If they cannot get the STB order, they have failed to fulfil their part of the sale agreement with the buyer. The buyer can thus take back his 5 per cent deposit, a sum he had to pay when he inked the deal.
Most sale and purchase agreements have a standard provision that stipulates that if the purchase fails to be completed, the deposit or option money will be forfeited.
The buyer can also ask the majority owners to appeal against the STB decision in the High Court, said Mr Singh.
If they are not satisfied with the High Court decision, they can proceed to the next and last level, the Court of Appeal.
This is where the Airview Towers case went. The Court of Appeal overturned the High Court’s decision to reject the sale, putting the case back in the STB’s court.
In another collective sale, that of Finland Gardens, the buyer and sellers decided to withdraw their case in the High Court and terminate their agreement.
But as the sale had been thrown out by the STB, the developer remained entitled to keep its deposit.
It was a unique situation, and both sides negotiated on the terms, with the developer agreeing to bear most of the costs such as the litigator’s fees and advertisement costs.
If the buyer defaults on the deal
Whether owners can or cannot get back some money depends on which party is the one which has not fulfilled the contract.
Last year, developers were frantically buying sites and pushing to complete them.
But as the market slowed this year, it has so far seen a buyer, Bravo Building Construction, let go of three collective sale deals – Tulip Garden, Makeway View and Pender Court.
As it was the buyer that did not fulfil its part of the agreement to buy Tulip Garden for $516 million, it had to forfeit its 5 per cent deposit of $25.8 million.
The same developer also did not go ahead with the purchase of Makeway View and had to forfeit its option deposit of 1 per cent.
Owners from the 48-unit Pender Court got to keep the buyer’s 10 per cent deposit of $8 million, as well as a $4 million payment for granting a deadline extension. They had negotiated for an additional payment of $4 million to extend the deadline as the buyer had missed the completion deadline.
‘If the buyers default, sellers can sue them if the sale and purchase agreement does not contain a clause that limits the buyer’s liability to forfeiture of the deposit,’ said Mr Henry Heng, a director from law firm Tan Peng Chin LLC.
Or they could sell to another buyer and then go after the original buyer for the losses incurred, if any, again provided the agreement does not have the above clause.
While going after the buyer may sound logical to some, it depends on whether the company has enough funds to pay up, property consultants said.
Few would consider it as developers usually create shell companies for their property purchases, said DTZ executive director, consulting & research, Mrs Ong Choon Fah.
If you have committed to a property purchase
Last year, many owners bought replacement properties way before their collective sales were completed, in an attempt to beat the rising market.
This can get tricky. If the collective sale fails, the owners are basically left to their own devices. The risk is certainly much greater if the owners are dependent on the sale proceeds to finance their new property.
‘It’s a commercial risk, which is why property consultants and lawyers always advise owners not to take the risk,’ said Mr Singh.
All collective sellers have a six-month rent-free period after the completion of their collective sales, during which they can safely source for a property.
While it is uncommon, an owner could try to negotiate a deal with the seller of the new property where it becomes a done deal only if his estate’s collective sale is completed, said Mr Singh. The other party may agree if he is offered a higher price, he said.
DEALS EASING OFF
The market slowdown has resulted in one buyer, Bravo, giving up three collective sale deals – Tulip Garden, Makeway View and Pender Court.
Sunday Times - 27 April 2008Some owners of condominium units may still be keen on selling en bloc, but developers’ interest in collective sale sites has more or less dried up.
No residential sites have been sold en bloc in recent months. And given the market uncertainty these days, completion may not be a given for sites that have been sold.
Several collective sales have fallen through, with a few – Tulip Garden, Makeway View, Finland Gardens and Pender Court – already axed, regardless of whether approval from the Strata Titles Board (STB) was obtained.
A collective sale requires an 80 per cent minimum consent from owners before it can be sold. Unless there is unanimous consent, owners will have to get an order from the STB for the sale after they find a buyer.
After getting the order, they will have to wait for the buyer to complete the sale, which is when they will get their sale proceeds.
They have six months after the sale completion date to move out of the property.
The Sunday Times takes a look at what happens if your collective sale deal falls through.
If the STB throws out your sale
The onus is on the majority owners – those who have signed off on the sale – to obtain the STB order.
‘If they do their part and get the STB order, they are not in breach of contract,’ said Credo Real Estate’s managing director, Mr Karamjit Singh.
If they cannot get the STB order, they have failed to fulfil their part of the sale agreement with the buyer. The buyer can thus take back his 5 per cent deposit, a sum he had to pay when he inked the deal.
Most sale and purchase agreements have a standard provision that stipulates that if the purchase fails to be completed, the deposit or option money will be forfeited.
The buyer can also ask the majority owners to appeal against the STB decision in the High Court, said Mr Singh.
If they are not satisfied with the High Court decision, they can proceed to the next and last level, the Court of Appeal.
This is where the Airview Towers case went. The Court of Appeal overturned the High Court’s decision to reject the sale, putting the case back in the STB’s court.
In another collective sale, that of Finland Gardens, the buyer and sellers decided to withdraw their case in the High Court and terminate their agreement.
But as the sale had been thrown out by the STB, the developer remained entitled to keep its deposit.
It was a unique situation, and both sides negotiated on the terms, with the developer agreeing to bear most of the costs such as the litigator’s fees and advertisement costs.
If the buyer defaults on the deal
Whether owners can or cannot get back some money depends on which party is the one which has not fulfilled the contract.
Last year, developers were frantically buying sites and pushing to complete them.
But as the market slowed this year, it has so far seen a buyer, Bravo Building Construction, let go of three collective sale deals – Tulip Garden, Makeway View and Pender Court.
As it was the buyer that did not fulfil its part of the agreement to buy Tulip Garden for $516 million, it had to forfeit its 5 per cent deposit of $25.8 million.
The same developer also did not go ahead with the purchase of Makeway View and had to forfeit its option deposit of 1 per cent.
Owners from the 48-unit Pender Court got to keep the buyer’s 10 per cent deposit of $8 million, as well as a $4 million payment for granting a deadline extension. They had negotiated for an additional payment of $4 million to extend the deadline as the buyer had missed the completion deadline.
‘If the buyers default, sellers can sue them if the sale and purchase agreement does not contain a clause that limits the buyer’s liability to forfeiture of the deposit,’ said Mr Henry Heng, a director from law firm Tan Peng Chin LLC.
Or they could sell to another buyer and then go after the original buyer for the losses incurred, if any, again provided the agreement does not have the above clause.
While going after the buyer may sound logical to some, it depends on whether the company has enough funds to pay up, property consultants said.
Few would consider it as developers usually create shell companies for their property purchases, said DTZ executive director, consulting & research, Mrs Ong Choon Fah.
If you have committed to a property purchase
Last year, many owners bought replacement properties way before their collective sales were completed, in an attempt to beat the rising market.
This can get tricky. If the collective sale fails, the owners are basically left to their own devices. The risk is certainly much greater if the owners are dependent on the sale proceeds to finance their new property.
‘It’s a commercial risk, which is why property consultants and lawyers always advise owners not to take the risk,’ said Mr Singh.
All collective sellers have a six-month rent-free period after the completion of their collective sales, during which they can safely source for a property.
While it is uncommon, an owner could try to negotiate a deal with the seller of the new property where it becomes a done deal only if his estate’s collective sale is completed, said Mr Singh. The other party may agree if he is offered a higher price, he said.
DEALS EASING OFF
The market slowdown has resulted in one buyer, Bravo, giving up three collective sale deals – Tulip Garden, Makeway View and Pender Court.
- In the case of Tulip Garden, Bravo had to forfeit its 5 per cent deposit of $25.8 million.
- It also did not go ahead with the purchase of Makeway View and had to forfeit its option deposit of 1 per cent.
- Owners from the 48-unit Pender Court got to keep the buyer’s 10 per cent deposit of $8 million, as well as a $4 million payment for granting a deadline extension.
Goodbye, en bloc sales
Sunday Times - 27 April 2008
He's glad the 2 year saga is finally over
Mr Micky Sim was overseas when he first heard that his estate, Finland Gardens, was going to be sold en bloc two years ago.
The first thing he did was to call his contractor who was renovating the unit he had recently bought there.
‘I cut back by at least 30 per cent. Forget about partitions. And we made things movable, rather than fixed,’ said Mr Sim, 38.
He bought the apartment before the deal was announced.
Two years on, he can finally go ahead and finish the renovations.
As one of the minority owners who contested the sale of Finland Gardens, he is delighted that the estate will no longer be sold.
But he feels that most of the majority owners will not be unhappy either, as the deal was made before the upswing in the property market last year.
Mr Sim, who works as a director in a shipping company, thinks that even if the owners sell the apartments themselves, they can do better than the $504 per square foot price offered by the en bloc buyer – even though the market has since been cooling.
Still, he is happy to stay put at his home and will sell only if the price is right.
The two-year saga has hurt the spirit of the community somewhat, he conceded.
But he feels that most neighbours are still on good terms.
“It’s time for everyone to move on. Let bygones be bygones,” he added.
Sunday Times - 27 April 2008
Couple's dream turns to nightmare
Sunday Times - 27 April 2008
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Deals off but she still lucked out
For housewife Jane (not her real name), the no-go on the en bloc deal at Tulip Garden, where she has a flat, proved a blessing.Worried about spiralling home prices when talk of a collective sale started last year, she liquidated all her stocks in August to help pay for a $3 million apartment near Holland Road.
‘Prices in the area were going up by $200,000 every month. I got scared,’ Jane, 58, told The Sunday Times.
But selling her stocks was the right move – she cashed out before the stock market took a hit late last year.
If there had been no en bloc push, she probably would have held on to the stocks, she admitted.
Her family got a $120,000 share of the deposit the buyer had forfeited for Tulip Garden.
She noted that she was lucky. Her finances allowed her to buy another home without depending on money from the collective sale.
‘Those who do – and I know a few residents in this situation – may have some problems,’ she said.
Jane thinks Tulip Garden is still a good property because Farrer MRT station will be up in a few years. That could drive prices even further up, she said.
She will keep her unit and rent it out and move to her new home. She has an added reason to do so.
‘This en bloc issue has soured relationships between myself and some of the neighbours here because I didn’t want to sign for it initially. So I don’t want to stay here any more,’ she said.
Sunday Times -27 Apr 2008
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