CPF Loss

Finally! It seemed the press was deliberately keeping away from this hot potato for the longest time - no matter how many times we highlighted the matter, it just never seemed to get reported in any depth! Thank you, Ms. Cheam for not forgetting the owners who are financial losers in the mythical world of en bloc millionaires; HUDC owners who lose their CPF, their homes and who have no cash for a down-payment on their next house (no money to pay even the removal van!).

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Enbloc Battles

Straits Times - 20 Aug 2008
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In the name of my neighbours, is there no hope for me?

I REFER to the article “Fix bank-or-CPF charge problem” (Aug 20) by Jessica Cheam. She called an en bloc sale “a forced sale in the name of urban renewal”.?

I might add that en blocs are “a forced process in the name of my neighbours”. As my condo tries to go en bloc again for the fourth time, I am now at the mercy of en bloc team No. 4 which has decided, after they formed a year ago, to actually stop short of the Collective Sale Agreement (CSA) signing. As most of us know, this is a technical ploy to keep the collective sale in the estate hanging over our heads like the sword of Damocles, for an indefinite period. Because the clock only starts ticking on the collective sale once the first SP (subsidiary proprietor) has signed the CSA.

So, how long will we live under threat of this and every en bloc? Every year after our 10th year in the condo? Should families be allowed to be unsettled in this way? Did the framers of those en bloc laws consider this?

In my estate, there is a diehard group of pro-en bloc residents. They form about 20 per cent of the owners. Again and again, they call for an extraordinary general meeting to “en bloc” the condo? Because the laws allow this. So far, they have been defeated, yet they are indefatigable! Once one disbands, a new committee rears its head. A committee, I might add, which consists primarily of owners who do not live in the condo and do not call it home. Should my abode, my place of rest, be subject to this repeated unease? Should someone who does not value my estate and looks upon it as an economic tool, who has no roots in my community, be allowed to unsettle those who have nested there? Surely the core values of home and community should outweigh those of “urban renewal”? Should it always be about the money?

Property laws that are created to facilitate urban renewal and allow others to steamroll the nesting urges of ‘Stayers’ will always create dissent and unhappiness. Why should we have to fight tooth and nail to keep our home??

Is there hope for Stayers?
Yeo Li Ying (Miss) 
Straits Times - 27 Aug 2008

There are two points to argue in this matter:-

• Is the first charge /second charge differentiation fair?
• Should loan interest be taken into account when computing financial loss?

Is the first charge /second charge differentiation fair?

 I shall use concrete examples taken from Tampines Court's data f submitted at the STB (Round 1) , to show the inequity of Bank/CPF & CPF/Bank order of charges:-

A) 239 out of a total of 560 owners in TC gave their partial or full financial details to the en bloc lawyer. These details were listed in a Table designated A-2 at the STB.

B) According to the statutory newspaper advertisement of 27 December 2007, listing out all the charges on all the properties in Tampines Court; here is an approximate breakdown as to how many were CPF/bank and Bank/CPF.

(my eyes aren't as good a they used to be, the newspaper print is pretty small, so allow for some error):

Total number of units :560
Total number of double/triple charges: 269

Total number with Bank first charge/CPF second: 150

Total number with CPF first charge/Bank second: 112

C) It was the change in CPF rules which divided home owners into two distinct groups; those who have protection pre-2002 CPF rules (the Winners) and those who have been abandoned and set adrift by post-2002 CPF rules (the Losers)*

* post-2002 - all properties have CPF second charge (except HUDCs phases III and IV, which were uniquely and inexplicably set adrift pre-1996).

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The Losers with CPF as second charge (56% of double charged units):-
1) Full outstanding Bank loan redemption
2) Partial CPF redemption up to the maximum of sale proceeds

From the Table in A-2

This is what some owners would have lost in their CPF accounts (had the sale been approved)

CPF loss (unrecoverable) + Alpha (recoverable)

1. ($260,671) + Alpha $8,083
   
2. ($252,180)
   
3. ($251,063)
   
4. ($222,552) + Alpha $3,298
   
5. ($246,233)
   
6. ($218,264 + Alpha $35,475
   
7. ($206,001)
   
8. ($203,164)
   
9. ($193,534) + Alpha $26,570
   
10. ($186,504)
    
11. ($183,771)
    
12. ($174,729)
    
13. ($172,572)
    
14. ($172,040)
    
15. ($166,387) + Alpha $6,709
    
16. ($165,107)
    
17. ($163,881)
    
18. ($160,474)
    
19. ($144,683) + Alpha $25,687
    
20. ($146,824)
    
21. ($132,772)
    
22. ($131,264)
    
23. ($120,067)
    
24. ($105,486)
    
25. ($103,830)
    
26. ($95,593)
    
27. ($93,504)
    
28. ($74,124) + Alpha $85,603
    
29. ($66,188)
    
30. ($63,921)
    
31. ($52,898)
    
32. ($43,462) + Alpha $21,839
    
33. ($42,248)
    
34. ($38,324)
    
35. ($22,684)
    
36. ($17,808)
    
37. ($13,103)
    
38. ($10,312)
39. ($5,271) + Alpha $48,035 .

Only 9 in this group of owners were considered Alpha owners (i.e. financial loss) by LTSA rules. The CPF loss could neither be reclaimed from the Alpha sum nor from the defeated Beta sum, as the CPF Board had said it would waive any outstanding amount owed to it. The reason why there are so many CPF losers, is that rules changing CPF to second charge for HUDCs phases III & IV were applied between 6 to 9 years earlier than all other properties in Singapore. Also, since only 43% of TC owners gave their financial details, and there are up to 150 units with CPF second charge, there are potentially many more CPF losers out there. 

The Winners with CPF as first charge
1) CPF redemption
2) Bank mortgage redemption

(actually, there's a specific order by which the CPF principle sum and interest is returned. See my post Financial loss and shortfall for an imperfect analysy.)

On top of a full refund to their CPF accounts taking up a mega portion of their sale proceeds; this is what other owners would have received extra, above and beyond the sale price to cover their outstanding Bank charges in full.

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Extra after full CPF redemption, bank charge +

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1. + $248,609
2. + $216,831
3. + $95,916
4. + $44,741 + Alpha $955
5. + $26,311

Because a Bank would never waive any outstanding amount owed to it, money would have had to be scrambled from somewhere to pay off these mortgages in order for the sale to go through. It could not be taken from Alpha, as they did not suffer financial loss according to LTSA rules. In TC, it would have been reclaimed from the failed Beta. In other enblocs, the money would have to come either voluntarily from the other owners or from the developer-buyer. If not, the sale would not get STB approval. Since there are up to 112 such owners with Bank second charge; clearly the A-2 table understates the total amount needed to cover possible payouts.

So, there is an inequality built into the system from the start. Different owners start from an unequal footing and either benefit hugely or are penalised brutally. This inequality is baseless, there is no earthly reason why CPF/Bank should be any different from Bank/CPF. Two owners can buy a similar sized unit at the same price and suffer widely different fates .

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Blk 118 - Buy price $660k - CPF 2nd charge - loses $222,552

Blk 123 - Buy price $580k - CPF 2nd charge - loses $203,164

Blk 119 - Buy price $605k - CPF 2nd charge - loses $172,572

Blk 119 - Buy price $640k - CPF 2nd charge - loses $252,180

Blk 119 - Buy price $655k - CPF 2nd charge - loses $251,063

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Blk 121 - Buy price $580k - CPF 1st charge - gains $216,831

Blk 130 -Buy price $605k - CPF 1st charge - gains $248,609

Blk 122 - Buy price $486k - CPF 1st charge - gains $95,916

Blk 133- Buy price $650k - CPF 1st charge - gains $44,741

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Comparing apple to apple:-

Blk 123 owner would have received $700k in sale proceeds taking a loss of $203,164 to his CPF account. Blk 121 owner would have received $916k. Both bought at the same price yet look at the difference in sale proceeds! The only significant difference between these two units is the ORDER OF CHARGE.

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Comparing orange to orange:

Blk 119 owner would have received $709k in sale proceeds taking a loss of $172,575 to his CPF account. Blk 130 owner would have received $949k.

Remember, all TC units have the same share value and are all around the same size (~1700sqft). The only difference between these two units is the ORDER OF CHARGE.

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If an owner were to sell his property individually on the open market, the order of charge would not matter - both would have to be repaid in full. Ironically, it is only in an en bloc sale that unjustness and discrimination go hand in hand.

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It is doubtful that many owners know what constitutes financial loss and shortfalls before signing the CSA, and naively assume that whatever is owed to the Bank and CPF will be covered automatically. Did so many owners really sign off knowingly on 6 figure sums in Tampines Court? I wonder.

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Actually, this baseless inequality only crystallized in the Waterfront View case in April 2007; before that, there were no reported cases of CPF loss in en bloc sales in the press. No En bloc owners complained of insufficient funds to cover Bank or CPF charges on their property. Perhaps all en bloc sale proceeds up to that point were sufficiently high enough to satisfy all charges AND let the owner walk away with a nice wad of cash, too. This is just speculation on my part; had there been cases, they surely would have been reported in the press. So, I am taking Waterfront View as the first such instance where CPF loss was brought up as a minority objection and tackled by a STB Board panel. They ruled that CPF loss is not financial loss. The Waterfront View couple then brought their case to the High Court where they pleaded that their CPF loss of $106, 244 should be recoverable (see ST articles here and here ). Again, they lost. The case was never brought to the Court of Appeal; so technically, the ruling is not set in stone and is still open to challenge if any future owner decides to take it on.

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Should loan interest be taken into account when computing financial loss?

According to the ST article above, Prof. Jayakumar's rational is that CPF funds that go into repaying bank loan interest should not be taken into account. This is to distinguish between owners who take no loans at all or who take a small loan with little interest and owners who take long-term mortgages with a high component of interest payments. Let me see if I can root out that speech.... (an excerpt of the speech relating to the CPF issue can be found at the end of this post)

On first blush, this is a convincing line of argument and I found myself in agreement, initially.

It is an individual decision whether or not to:-
- take out a small or large quantum loan
- go for a short-term or long term repayment period.
- pay by CPF or cash (or a combination of both)

An owner (A) would chalk up the highest CPF charge with a large, long-term loan, using CPF.
An owner (B) would chalk up the least CPF charge with a small short term loan, using CPF.

An owner (C) might not use CPF at all and pay for his loan on cash
And of course, there is an infinite number of combinations in between.

So why should owner (B)/(C)receive less sale proceeds than owner (A) by virtue of being shrewd or more conservative or just plain wealthier?

The arguent is persuasive but on further reflection, I have two problems with this line of reasoning.

First, conversely, why should owner (A) be penalized for not being as shrewd, not as conservative or just plain poorer than owner B or C? He may be shrewd and conservative in nature but it simply may not be possible for him to take out a smaller, short-term mortgage and may not have the spare cash to service the loan.

Interest payments are part and parcel of servicing a loan. Does it really matter how much interest an owner pays? The fact is he HAS PAID and it should be considered part of the total cost of buying his home. It matters not than owner A has paid $xx + yy interest or that owner B has paid $xx + y interest - they all should get back what they paid to be on an equal footing.

Secondly, and most importantly; SUCH A RULING DISALLOWING INTEREST PAYMENT HAS TO BE APPLIED EQUALLY TO EVERYONE IN ORDER FOR IT TO BE FAIR.

(my understanding)...
As the rules stand now; this rational applies ONLY to those owners who have CPF 2nd charge; these owners have to wave goodbye to their hard earned money as the CPF Board doesn't care and the High Court has said it isn't financial loss. But owners who have CPF 1st charge continue to enjoy having their “high component of interest payments” covered! Not fair!
 

Owners who pay for their loans by cash have also forked out large sums in interest, they also lose out on having their interst payments covered.

Going back to a real life example in Tampines Court; following is one such lucky owner who benefits from this glaring anomoly in the legislation:

Blk 130 – Buy price $605k – CPF 1st charge a whopping $949,583 – no outstanding bank loan!! His top-up from sale price would have been $248,609!!! Sale proceeds are nearly a million bucks altogether!

A not-so -lucky owner:
Blk 123 – Buy price $615k – CPF 2nd charge at only $475k, - outstanding bank balance $194k, - long term mortgage paid mainly by cash. Interest componant not fully reflected in CPF . Sale proceeds S702k . Zip extra as a result.

Parliament should look at the real life negative consequences of this ruling. In their quest to make a flawed system seem fairer, they have instead skewed it to reward one group over another, and without achieving the objective stated by Minister of Law. They can fix this glaring anomoly by reverting to the CPF first, bank second and by allowing paid interest payments (not accrued) to be included in the cost of buying a home (which it undoubtably is).

I have been told the rational behind the 2002 change in order of charge was "a change in the bankruptcy law and the drive to pin personal accountability for financial failures."(The Pariah).

So, untold numbers of ordinary, tax-paying, diligent folk struggling to pay their mortgage have to suffer hundreds of thousands of dollars in losses so that Banks are assured their pound of flesh from a tiny few? In the whole of Tampines Court, there was only ONE reported bankrupt.

Is this a case of the law taking a sledghammer to swat a fly?

Parliament's second reading of the bill: The Deputy Prime Minister and Minister for Law (Prof. S Jayakumar):

"Mr Alvin Yeo asked whether the Bill should go the full way to list in the Fourth Schedule all the permitted deductions, in other words, instead of being inclusive, be exhaustive. The specific point that he made was about CPF monies. He said that there is no reason why CPF monies should not be counted as a financial loss.

Madam, the list in the Fourth Schedule is based on what the STB currently considers as permitted deductions. It is not meant to be exhaustive. Over time, additional items could be added if the STB comes across other permitted deductions while dealing with future applications. On the treatment of CPF monies, I think what Mr Alvin Yeo is, in fact, asking us to amend the law is to reverse the High Court's decision in the Waterfront case. My Ministry has no ground to disagree with the ruling in that case, and hence we have not sought to amend the law.

Perhaps, I should explain. In a property purchase, CPF funds can be used to pay for three components: (1) the lump sum for the initial purchase; (2) monthly repayments of bank loan principal; and (3) monthly repayments of the bank loan interest. I should explain that CPF funds used for the initial purchase - this is the first component - and for monthly repayments of bank loan principal - this is the second component - are factored in financial loss computation as they constitute part of the original purchase price. But CPF funds used to repay bank loan interest - this is the third component - are not taken into account, because if the law were to do that, then there would be no parity between an owner who takes a long-term mortgage with a high component of bank interest and an owner who pays totally in cash or an owner who takes a small loan and pays off the loan faster.

Some have asked if CPF interest forgone for the total amount of CPF money that has been withdrawn should also be taken into consideration. This component is not relevant because there is no actual financial loss in the CPF interest forgone."

Has CPF lost it's mission?

From the CPF website (accentuation and cute pics are my own):

Mission
“To enable Singaporeans to have a secure retirement.”
Vision
“A world-class social security organisation enabling Singaporeans to have a secure retirement.”

Corporate Philosophy

Our Commitment

The Central Provident Fund (CPF) is a social security savings scheme jointly supported by employees, employers and the Government. CPF members are employees and self-employed persons in Singapore.

The basic purpose of the CPF is to help members meet primary needs like shelter, food, clothing and health services in their old age or when they are no longer able to work. Benefits offered are to help meet one or more needs of the CPF member in his retirement. They include withdrawals by the member for retirement, permanent disablement, home ownership and medical care. The amounts available depend on how much the member has saved in the CPF.

The Central Provident Fund Board

The CPF Board is the trustee of members' CPF savings. We seek to protect and preserve the value of the savings. We provide fair market returns at minimal risk, while opening avenues for members to seek higher returns on their own after carefully considering the risks involved. The guiding principle is prudence. And returns should contribute towards the member's well-being in his retirement.

Singaporeans spend their entire working lives contributing to this savings fund in the expectation that the money will be safe from marauders, thieves, mismanagement and the vagaries of the real world. They diligently save (albeit compulsory savings), whether in cash or in property, towards the day when they will be able to draw down on thier lifelong savings to finance themselves and their loved ones in their dotage. CPF was always the conservative protector, protecting members even from themselves, restricting what, when and how much members could utilize their savings. CPF rules are myriad and Singaporeans, by and large, have benefited greatly from this unique Singaporean scheme.

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So what went wrong?

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What happened to this grand scheme and vision when Waterfront View put them in the spotlight? Why were tens of thousands of dollars allowed to disappear from member accounts without so much as a squeak of protest from the trustees? Why did the CPF allow en bloc sales to go through knowing that members would lose large chunks of their precious retirement savings? Why didn't they fight back?

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As trustees of members' savings, can they be trusted with our nest egg anymore?

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Building on the fine decision of Horizon Tower's Court of Appeal, perhaps the pendulum of common sense and justice can swing a littel further to the centre and put right the wrong that sprung up in April 2007, when the CPF allowed LTSA to undermine it's mission statement and surprisingly opened it's doors to en bloc marauders. When the LTSA came in the door, CPF prudence and purpose went out the window.

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Words are just words, facts speak volumes. See again my post CPF LOSS to recap on the numbers and the irrationality of the 1st charge vs second charge ...

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Will CPF reconsider their uncharacteristic and unpopular decision to waive outstanding amounts owed to it should the sale proceeds of an en bloc sale be insufficient? Will they repair the damage that this have done to their reputation as guardians? Will they compensate people for their retirement losses?

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If the Appeal Court can restore order to sale committees, I have faith the CPF Board can still review and revert back to it's primary mission of protecting and preserving the value of the savings even in an en bloc.

Ministry of Law in denial again

Enbloc panels already have a lifetime
Straits Times – 28 Jan 2010
'Ms Prior suggests that a collective sale committee should have a limited lifespan. This is already provided for in the Land Titles (Strata) Act. The committee will automatically dissolve on expiry of the collective sale agreement. The agreement will expire if the requisite consent level is not attained within 12 months from the date of the first signatory.'

Is the Ministry of law telling the whole story here? There are two possible avenues by which the sale committee can extend their lifespan - before and after the signature collection.

1) Before the signature collection begins.
They can delay starting the process for months or even years.* The sale committee members, who were duly elected at the AGM for that purpose, can resign at any time, and their positions either left vacant or filled by others who are neither elected nor vetted by the owners. The LTSA on this matter is shambolic (especially Paragraph 10, Third Schedule  which nullifies most of what went before it!)

  *The LTSA Amendments 2010 have limited this initial period to 12 months - which is exceedingly generous of them and ridiculously long. Why would they need to delay their signature collection and keep the estate on tenterhooks? They are merely holding on to their positions and can sign on the last day to extnd their tenure by another 12 months. If the MInLAw wanted to shorten the time-frame for a collective sale - they could have started here.

2) After the 80% has been reached but there's no sale:
Once the sales committee has reached the 80% mark they then can have an extended tenure - thanks to a recent high court ruling (see Koon Seng House).* Should the SC fail to secure a buyer they need not be disbanded, as the legislation suggests. Instead, all they have to do is collectively sign a SUPPLEMENTAL CSA lowering the reserve price and they have a FRESH 12 months to get another 80% approval! 12 + 12
Then they have ANOTHER 12 months after that to secure a buyer and make an application for sale to the STB (12 + 12 + 12). 

This supplemental CSA is considered a new agreement. Of course, if the CSA can be renewed in this way, it is only logical that the SC tenure is renewed along with it.
The high court judge did not stipulate by how much the majority owners could lower the reserve price - so theoretically it could be by just $1.00.

And there is no limit to the number of supplemental agreements the majority can sign
And what about supplemental agreements changing other clauses in the CSA? What's the word on that?

This is another way the majority can circumvent the time frames and keep the estate in perpetual en bloc mode. Whatever happened to the process being finite? Can 'forever' even be considered a time-frame at all!

I ask the Minister of Law - is this fair?

*The LTSA Amendments 2010 have not made it a 'relevent event' when a buyer cannot be found within the time-frame - opening the door for the CSA and SC's continuance.

A case for 1-for-1 exchange

There should be a provision for a 1-for-1 exchange as an added alternative to cash compensation as is the case now; it would indeed defray a lot of aggravation, heartache and anxiety if an en bloc sale offered two choices instead of a wholly inadequate one.  It's not acceptable that downgrading is considered a viable option. It is not acceptable that giving up our 'old' homes means moving into equally old or even older properties.

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A 1-for-1 is an attractive alternative.   Owners can form a 1-for-1 Group and insist on it being an alternative. They can, and should, engage their own lawyer to look after their interests  on this matter.  It would also require a lot of work on the part of the SC, but the next SC is NOT going to have it easy, anyway. They have to understand the huge disparity of feelings/expectations/financial constraints faced by the residents of our large estate. ONE SIZE DOES NOT FIT ALL.

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Lets look at TC in more detail:

No of units: 560 averaging 1700sq ft each

Site area: 702,162 sq ft

Gross Floor Area (GFA): about 1 million sq ft

Plot Ratio: 2.8

Potential GFA (for any new development): about 2 million sq ft

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"Investment sales director, (name) said the 702,458 sqft site has a plot ratio of 2.8 and a potential gross floor area of at least 2 million square feet"

Business Times -23 Jan 2007

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So a Buyer has double the aggregate strata title area to redevelop. So even if 100% of the owners opted for a 1-for-1 exchange, he would still have 100% of the site left over for redevelopment.

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So from the developer's viewpoint, it's 1-for-2 : buy one; get one free, and if both are sold at double the price then at is effectively 1 for 4

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A developer will subdivide the strata area into units of varying sizes.

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" It can be potentially redeveloped into a new condominium with about 1,589 units averaging 1,300 sq ft"

Business Times - 28 Mar 2007

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"Prospective developers can be looking at building projects with around 1,700 units averaging 1,250 sq ft each"

Weekend Today -27 Jan 2007

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Let's look at Waterfront View (ex-HUDC)
En bloc sale price: $385 million by private treaty
Average sale proceeds/unit:  $660,377/ unit
Developer: Far East, Frasers Centrepoint
Date of sale: May 2006
Land price: $241 psf ppr inclusive of DC/DP
Potential Gross Floor area; over 2 million sqft
Projected break-even cost: $450 psf

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Why is a 1-for-1 exchange an attractive alternative to cash?

• you are guaranteed an equivalent replacement home under whatever market conditions prevail at the time of completion. (remember an en bloc sale can potentially take up to 2 - 3 years before receipt of sale proceeds - unlike a normal sale which takes only 3 months). Add to that another 2 years before you can move into your new home....
• you preserve your special ties with the area
• you maintain the standard of living that you have struggled so hard to achieve by maintaining the size, level and orientation of your unit (if so negotiated).
• by not cashing out, you are in fact maintaining or increasing the value of your home.
• you are not being shortchanged, as was the case in our failed en bloc. [You could only get a new unit at half the size or double the price with the sale proceeds].
• if you are a single home owner (as most of us in TC are) then this is the best way to preserve your modest wealth. 

Why 1-for-1 is attractive to a developer-buyer:

• lower up-front financing with each opt-in unit
• makes for an easier en bloc all round* with fewer objections based on sentimental/financial reasons. 

The vestiges of a failed enbloc

The For Sale signboard:

I'm sure owners want to see this taken down as soon as possible. I believe the managing agent has called the property agent to come and remove it, failing which the MA will remove it and charge them costs.

UPDATE: 09 Aug 2008

The property agent has removed the signboard.

STB Costs

An outstanding issue that has not been fully resolved.

It was unusual for the STB to award costs to the Applicants, the amount is still being worked out and it appears (note, I am not 100% certain here) the burden of payment will fall on the two Applicants. This could be quite a substantial sum of money, and underlines the risks taken by those who put themselves forward as the main applicants in an en bloc sale.

Caveats

There are caveats lodged on our homes. A caveat cannot be removed by a phone call, nor can it be done over the internet.

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UPDATE 13 Aug: ALL CAVEATS WERE REMOVED BY THE BUYER SHORTLY AFTER THE EN BLOC FAILED AT THE STB.

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However, in a Land Titles Search; each of the properties* continue to reflect another Interest/Encumbrance. It appears as Item No. 3: "Application to Register Collective Sale Application IA/970386M ". It lists the two STB applicants by name. Perhaps you should write to the en bloc lawyer to remove the said notification against each of your properties.

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* at least this is the case with my property; I am therefore assuming it is the same for all.

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Forum rather than blog

I believe most of you would prefer a forum setting rather than a blog, where you can post comments to your heart's delight without a moderator watching your language, deleting your comments or holding you back in any way.

Agent blurbs..

So, how are agents describing our estate when trying to sell units?
Example of an advertisement placed by an agent who was involved in our failed en bloc attempt:-

From his initial but now deleted blurb:.

For SaleCondominium
Tampines Court

Tampines Street 11

S$ 750,000Price on Ask

For Sale -Tampines Court (D18)
S$ 750,000 Price on Ask S$ 441.18 psf 1,700 sqft (158 sqm) 3 beds 3 baths
Tampines Court is a PRIVATE APARTMENT in a prime and superb site located in the heart of Tampines Town and is strategically located in the North-Eastern part of Singapore along the Tampines Street 11 residential area. The 23 year old former HUDC development which was privatised in the year 2002 comprises of 560 units -- a mixture of 128 low-rise 4 storey walk up apartments in 8 blocks, and 432 Maisonettes in 6 blocks of 12 storey apartment blocks. The immediate vicinity comprises mainly public housing developments and it is well-served by many facilities including a market, hawker centre, Century Square and Tampines Mall Shopping Complexes, the eastern Regional Financial center, Community Club and a sports complex. IKEA, Courts and Giant supermarket are also located within the 2 KM radius. It is also in close to primary as well as secondary schools nearby and well served by transportation links along Tampines Avenue 2, Simei Avenue the Pan Island Expressway and TPE. The site is situated in between 2 MRT Stations, the Tampines MRT Station and the Simei MRT Station each a short walking distance away. Major Expressways like the East Coast Parkway leading to Ayer Rajah Expressway, and the TPE/SLE also renders it easy access to the Airport and to the north towards Woodlands.

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The truth at last!

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Newspaper articles

They were certain they would win.
New Paper - 26 July 2008

STB No 2 2008 - Tampines Court TAPE TRANSCRIPTS

I have removed the original tape transcripts form my blog and replaced them with versions lacking proper names. 

Opening statement by Senior Counsel for the Majority

 16 June 2008

 Cross examination of Lawyer from Majority legal firm

16 June 2008

Cross examination of Accountant

16 June 2008

A2 TABLE 

A2 at STB (edited for privacy)

Cross examination of Sale Committee applicant
16 June 2008

Cross examination of the Property Agent
16 & 17 June 2008

Cross examination of Managing Agent
17 June 2008

Cross examination of Majority Valuer
17 & 18 June 2008

Interlocutory Application

18 June 2008

Cross examination of Minority Valuer

18 June 2008

21 July was day 4: unfortunately, the tape transcripts were PDF locked so I could not substitute proper names easily and had to retype the body of text slowly. Therefore there may be errors...

Cross examination of Sale Committee Chairman

Cross examination of Minority Witnesses

Newspaper article 5

Strata board rules: It's no go for Tampines sale
Straits Times - 26 July 2008

Factors which led to en bloc failure

Only three factors can be taken into account when the STB decides whether or not to withhold its approval to a sale. 

Lack of good faith in :-

(A) the sale price

(B) the method of distribution of sale proceeds

(C) the relationship of the purchaser to the any of the SPs

Tampines Court failed in two; (A) and (B) which is, I believe, unprecedented.

Countdown to S&P expiry

The S&P has expired
Owners are no longer bound to the terms and conditions of the contract.
Owners are no longer bound by the terms and conditions of the CSA.

TAMPINES COURT MINORITY WIN

Today, the STB Deputy President, Mr. Alphonso Ang, gave the following decision for Tampines Court:-

So, we the minority won on the merits of the case..

A huge thank you goes out to our wonderful legal team:-

To Siva Krishnasamy of Tan Lee & Partners who endured with endless patience, 14 months of emails, sms's and telephone calls from a bunch of housewives, and who gave up many evenings to come and talk with our ever hopeful group. We are forever grateful for his dedication to our cause, his astute legal advice and his genuine affinity for our group . Without him we would not have won. Who together with Mr. Sreenivasan put our case together and saw it through to the end.

To Mr. Sreenivasan of StraitsLaw, our counsel at the STB, who wowed us with his inimitable and flawless, cross-examination style, who ran circles around the opposition before coming to incontrovertible, logical conclusions. Better than anything you ever saw on tv!
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You saved our homes, a big thank you to you both.
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Why I feel the concept of Beta Sum is wrong

If the Beta sum is approved for TC – this could theoretically open the floodgates to potential financial scams in future enblocs. Lump sums could be skimmed off the top and re-labeled to override the controls built into the LTSA rules governing method of apportionment.

Just think about it for a moment.

A Sale Committee need only include the reserve price and the method of apportionment for that sum in the CSA. Other ‘problems’ could be kept under wraps. The CSA would definitely include that nasty cover-all clause that allows the SC to amend, delete, alter, etc the terms of the sale……. blank cheque to do as they will (why oh why don't people read their CSA's before signing!)
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During negotiation, an understanding could be reached with the successful developer buyer to carve a sum out of the sale price and label it, say “Beta Sum”. This can be used to pay for other outstanding issues, including but not limited to financial loss, debts and costs & expenses of sale for some, but not all owners. Some owners therefore would receive an amount above and beyond the agreed collective sale price.
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Why is this bad, some might say? After all, no owner should have to be 'out of pocket' as a result of an en bloc sale, right?
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Well,

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Since this Beta Sum is not governed by the apportionment method stated in the CSA it can be meted out at the discretion of the SC – and there are no checks and balances as to where that money actually goes. A SC cannot give a full and accurate account of how much and where the sum will be distributed at the STB. So how can the STB approve a sale when nobody knows what their final sale proceeds will be! This portends potential scam number one.

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If a Beta sum becomes commonplace, what is to stop its abuse? A few clued-in owners may decide not to pay their privatization costs (if applicable) and manintenace and sinking fund contributions years in advance knowing that these debts would be covered by the owners (whether they agree to it or not). This portends potential scam number two. Diligent owners are penalised, laggards and freeloaders are rewarded.

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Since owners sign on the basis that not more than 1% of their sale proceeds goes to cover losses then are they not being conned out of their rightful share of the full sale proceeds?
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Price skimming warps the whole framework on which a collective sale is built. When owners sign the CSA they also sign for the method of apportionment. The formula is written there in the CSA. They would not sign if owner A gets $xx more dollars than owner B with the same size unit, (other than for financial loss). They sign on the presumption that the sale price is calculable in the same way for all. This is an LTSA requirement. It is no longer a collective sale if everyone is getting different benefits and price after they have agreed otherwise. It really throws a spanner in the works!
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Creative circumvention of LTSA rules should not be encouraged. If there is a "Beta" problem to be covered - then by all means cover it - but it should be done up front and in the CSA. Everyone should know in advance exactly what it is they are giving. If owners are to donate more than the regulation 1% - then a sale committee should have the common decency to ask permission first, and gather their 80% on that basis.

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So, let's hope that Tampines Court's experimentation with Beta fails.

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Beta Sum and TC

The Beta Sum is a major minority objection at the STB.

Facts:
The SC gave $405 million as the Sale Price in their Application.
It comprises of $395 million + $10 million
Stamp duty is paid on $405 million
The distribution of this Beta sum is at the discretion of the SC.
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Only 239 (out of 560) SPs gave in partial or full financial details.
The Tabulation for Alpha and Beta is therefore incomplete and the final figures remain unknown.
SPs do not know what their sale proceeds will be.
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Only Alpha (up to 1% of sale proceeds to cover financial loss) was mentioned in the CSA.
Beta first appeared on 27th March 2007, after the sale.
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The remainder of Beta sum is divided between those owners who did not claim Alpha or Beta (ie Omega owners).
There is over $8 million to be divided amongst the Omega owners.
By this distribution method, if 559 owners claim $1000/- then the remaining owner would get $9.44 million.
The method is clearly flawed, as pointed out by a panel member.
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The Sale committee applicant admitted on cross examination that the Beta sum distribution was "unfair".
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The SC cannot change the method of distribution unilaterally.
The Buyer has refused to amend the S&P to change the method of distribution of Beta.
The SC is stuck with this flawed method of distribution.
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The SC, in it's oral submission, tried to change it's position saying that the Sale Price was actually $395 and that the Beta sum was extra.
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The following is the A2 Table submitted by the majority at the STB showing the partial distribution of sale proceeds to those who had made their financial situation known to the the en bloc lawyer. This table is incomplete as there are many unknowns outstanding.
(The Table has been edited to erase unit identification)

The minority lawyer, N. Sreenivasan, gave a brilliant oral summary this afternoon.

Newspaper report 4

Hope in sight for Tampines Court sale?
Straits Times - 22 July 2008

Minority owners leaving STB




"Is there such a thing as a happy en bloc?"
Jessica Cheam (Straits Times Journalist) blog

Hearing day 4

Today saw the cross examination of the SC Chairman, and one minority witness.

The en bloc lawyer has apparently engaged his third Senior Counsel, Mr. Yeoh. One has to wonder what the cost of this is going to be and who is going to pay. We are only at the STB and already the SC has;
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a) Made 2 applications (one for Beta sum amendment, the other to change the date)
b) Been to High Court
c) Engaged 3 Senior Counsels
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The lawyer for the majority gave his oral submission today.

The lawyer for the minority will give his oral submission tomorrow at 2.30pm.
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My previous questions:
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How many days will they give for written submissions?
Until Wednesday 3pm
Will allowance be made for the independent minority?
No
How many days will the panel deliberate?
Change that to how many hours
Will they rush to a decision before the 25th, midnight?
Decision out by Friday 25th
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Newspaper report 3

July 21 hearing for Tampines Court case
Straits Times - 19 July 2008

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4th day of Hearing

The fourth day of the Hearing will be on Monday 21 July at 9.30am
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Written submissions would usually take up to 3 weeks.
The panel would usually deliberate for up to 3 months
So, how will it be for poor Tampines Court?
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There will only be 4 days before the S&P expiry:-
How many days will they give for written submissions?
Will allowance be made for the independent minority?
How many days will the panel deliberate?
Will they rush to a decision before the 25th?
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Parliamentary assurance;- there are
"safeguards to protect the interests of the minority owners"
and that the
"safeguards are found in the procedures".
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High Court assurance (Choo Han Teck J):-

"That said, fairness requires that the law is applied consistently to everyone in similar circumstances. It gazes upon the horse as it does the horseman. It may be the appellants today who slipped, and tomorrow the respondents. If the majority succeeds it is because it is right not because it is the majority. Likewise, if the minority succeeds it is because it is right and not because
it receives favours granted only to the underdog"
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Have faith