Second Reading Speech by Law Minister K Shanmugam on the Land Titles (Strata) (Amendment) Bill

18 May 2010 Posted in Parliamentary speeches and responses

1. Sir, I beg to move, “That the Bill be now read a second time”.

Background

2. Since the amendments in 2007 to the Land Titles (Strata) Act, the Ministry of Law has continued to consider public suggestions on how to improve the Act further. As part of our review, we have also consulted with industry experts such as academics, lawyers, property consultants, REDAS (Real Estate Developers’ Association of Singapore) and representatives from the Strata Titles Board (STB). This Bill is the result of this exercise.

Context of amendments to the LT(S)A

3. In 1999 the LT(S) A was amended to provide for En Bloc sales to be completed with majority consent. Depending on the age of the development, the criteria for majority consent is now pegged at 80 per cent, or 90 per cent, based on share values and floor area.

4. More than 10 years have passed since we made this amendment to the Act. There have been a variety of completely opposing viewpoints expressed on this as well as other aspects of this Act. Some have criticized that the policy of allowing en bloc sales undermines the property rights of individual owners, resulting in home owners being evicted from their homes, against their wishes. There have been calls for a reversion to the pre-1999 regime where unanimous consent was required for an en bloc sale. Others have called for restriction of en bloc sale by majority consent to only much older buildings or if there are structural defects. And yet others have argued the opposite: that the consent requirements for en bloc sales are too onerous and that we should in fact lower the requirements further. There have also been calls for the procedural requirements to be relaxed further. For example, there have been strong calls to scrap the five-day Cooling Off period, and the requirements to have a lawyer witness the signing of the Collective Sale Agreement (CSA) by the flat owners.

5. Our approach has been to do what we believe is right as between the competing interests. Each owner has the right to live undisturbed in his flat, and has the right to decide whether to sell or not to sell his flat. At the same time, majority views on whether there should be a sale of the development should be recognised as well. And there is public interest in intensifying developments and rejuvenating older developments.

6. These different interests need to be balanced. The proposed amendments seek to achieve that balance, further to the 2007 amendments.

7. The Land Titles (Strata) Act serves as a framework for all strata owners, be they pro-sale or anti-sale, to jointly decide whether to carry out an en bloc sale. The Government monitors the en bloc sale market and where necessary, will refine the Act, as we are proposing to do today.

Salient Features of the Bill

8. I will now highlight the key amendments in this Bill.

Role of the Strata Titles Board (STB)

9. First, is the amendment to have the Strata Titles Board, or “STB”, focus on its mediatory role for en bloc sale applications.

10. Currently, the STB assesses all en bloc sale applications that have achieved the 80 or 90 per cent majority consent requirement. This is to ensure that each en bloc sale transaction is done in good faith and complies with the provisions under the LT(S)A. The STB executes this role by both mediating and adjudicating on objections, filed by minority owners, who are against the sale applications.

11. In recent years, a number of en bloc sale applications have become highly contentious, with objectors raising questions on points of law ranging from fiduciary to constitutional law. Despite the best efforts of the STB to mediate and adjudicate, a significant number of these cases have ended up in the High Court and even the Court of Appeal.

12. These complex cases have resulted in protracted proceedings at the STB. This has strained the STB’s resources, and has also affected its ability to consider other applications promptly.

13. We therefore propose that the STB focus on its mediatory function for en bloc sale applications. This will allow the STB to devote its attention to mediate on the relatively “straight-forward” cases. If mediation is successful and all objections to an en bloc sale application have been withdrawn, the STB can proceed to issue an en bloc sale order.

14. To prevent undue delays and to give greater certainty to the mediation process, it is proposed that the STB will be given up to a maximum of 60 days from the first day of mediation to try and resolve any objection for each application.

15. For contentious cases, when it becomes obvious that any further mediation is not going to be useful, the STB may issue a “stop order” to conclude the mediation process. Majority owners can then choose to apply to the High Court for adjudication.

16. There has been some public concern that this amendment will make it more difficult and costly for minority owners to file objections to an en bloc sale application.

17. The fact is that in contentious cases, the process is likely to be long drawn and parties may have to seek legal representation, if they want to pursue every avenue. That is already the position now. After the amendments, minority owners can continue to file their objections to the STB, and the STB will then try to resolve any disagreement through mediation. If there is no resolution at the STB mediation stage, the STB will issue a “stop order” as mentioned earlier.

18. If the majority owners do not proceed to bring the case to the High Court for adjudication within 14 days of this “stop order”, the en bloc sale application will lapse. If the case is brought before the High Court, objectors can then decide whether they wish to continue with their objections to the sale.

19. This new regime will apply to applications that are made to the STB after the new Act has come into force.

20. Other than this set of amendments, we intend to also amend the Land Titles (Strata) Act Schedules which are subsidiary legislations. Some of them are of considerable public interest and I will refer to them.

Two-year restriction period requirement

21. We will amend the Land Titles (Strata) Act Schedules to impose stricter requirements for owners to restart en bloc sale attempts if there has been a preceding failed attempt.

22. In recent years, there have been growing complaints against pro-sale owners, especially “en bloc raiders”. These raiders will repeatedly try to initiate en bloc sale attempts, even when they have failed to get sufficient support from other owners in previous attempts.

23. Our view is that such repeated attempts, especially frivolous ones, should be discouraged. If there is no prospect of an en bloc sale succeeding, then owners should not be harassed. Nor should owners be sought to be worn down or be subjected to attrition tactics. The owners’ right to live in peace, and not be subjected to repeated attempts, should be respected. We therefore propose to introduce a two-year “restriction period” starting from the date of a failed en bloc sale attempt.

24. Currently, an en bloc sale attempt can be initiated by convening a general meeting, where owners will decide whether to form a Collective Sale Committee and to elect members to the Committee.

25. The Act already stipulates that such general meetings shall be convened as long as there is sufficient support from at least 20 per cent of the owners by share value, or 25 per cent of the total number of owners within the development. Currently, this 20 or 25 per cent requisition rule applies even if there have been prior failed en bloc sale attempts.

26. Hereafter, if a strata development encounters a failed attempt and the two-year restriction period is imposed, the first re-try to convene a general meeting to form a new Sale Committee will need to meet a higher requisition level of 50 per cent, either by share value or total number of owners.

27. If there is a further failed attempt within this same “restriction period”, subsequent re-tries to convene a general meeting to form a Sale Committee will need to meet an even higher requisition level of 80 per cent, either by share value or total number of owners ie there must be a high degree of certainty that the proposal will succeed before a general meeting can be convened.

28. The 50 and 80 per cent requisition levels will only apply to general meetings to form a Sale Committee. For all other general meetings convened for the purposes of the en bloc sale, the existing requirement for a 20 or 25 per cent requisition level will continue to apply.

29. At the end of the two-year “restriction” period, the requisition level will revert to the original 20 or 25 per cent requisition level requirement.

30. These new rules will apply to all strata developments in which there is a failed attempt, after the new Act has come into force and the Schedules are amended.

Disclosure of interest requirements

31. We will also amend the LT(S)A Schedules to expand the requirements for owners to declare their interests, if they are standing for election to a Collective Sale Committee.

32. Currently, candidates must declare if they have interests in any property developer, property consultant, marketing agent or legal firm that may constitute a conflict of interest with the proposed en bloc sale attempt.

33. Hereafter, it is proposed that candidates will also be required to declare the extent of ownership that they have in the strata development. In addition, they will have to declare any ownership interests held by “connected persons” related to them. Such “connected persons” include immediate family members; as well as companies in which the candidate and/or his family collectively hold more than five per cent voting power.

34. The aim of these additional disclosure requirements is to enhance the transparency of the Sale Committee election process and help other owners make a more informed decision on whom they intend to elect to their Sale Committees.

35. Such disclosure requirements will not be restricted to the Sale Committee election phase. Serving members of established Sale Committees will also be required to update the chairperson of their respective Sale Committees within seven days of knowing any changes to their declared interests. Consequently, the Sale Committee will be required to put up notices in the strata development to notify other owners of such new declarations within seven days.

36. These disclosure requirements will apply to all Sale Committees which are formed after the new Act has come into force. However, we recognize that there may already be existing Sale Committees during this interim period. For such Sale Committees, members will have to make any additional declarations to their respective chairpersons within 30 days of the Amended Schedules coming into force.

Other amendments

37. There are, in addition, a few other ancillary amendments to the LT(S)A Schedules. These amendments seek to clarify and streamline the en bloc sale procedures.

38. The first amendment will provide that once a Sale Committee has been formed, it will have up to one year to prepare its Collective Sale Agreement and obtain the first signature for its Agreement. If the Sale Committee fails to do so, it will automatically be dissolved. This ensures that a Sale Committee cannot remain dormant after its formation and drag out the en bloc sale process indefinitely.

39. A second amendment will provide that a general meeting convened for the purposes of the en bloc sale shall be dissolved if the meeting quorum is not met within an hour of the designated start time of the meeting. This amendment will help to provide certainty on whether such general meetings can proceed.

40. Thirdly, currently Sale Committees are required to hold general meetings to provide updates to owners on issues such as the consent level obtained on the Collective Sale Agreement, the number of bids and bid amounts obtained on the sale tender, and the terms and conditions of the sale and purchase agreement with the eventual buyer. The requirement for Sale Committees to hold such general meetings will be removed. Instead, Sale Committees are to hold simple meetings to inform owners of these issues.

41. The intention is to avoid making the process of updating owners too onerous. This will also minimise the drawing-down of management funds by Sale Committees to convene general meetings.

42. However, not all general meeting requirements will be removed. Sale Committees will still need to convene general meetings when owners are required to decide on critical issues, such as the appointment of lawyers and property consultants, the approval of the method to apportion sale proceeds and other terms and conditions under the Collective Sale Agreement.

43. Lastly, Sir, I would like to touch on suggestions which have been raised by some but which we have decided not to adopt in our regulations.

44. There have been calls to disallow Management Corporation members from being members on the Sale Committee concurrently. This is due to concerns over a potential conflict of interest. We have considered this issue carefully and conclude that we should not institute such a legislative requirement.

45. Each strata development has its own unique set of circumstances. Decisions on who should be eligible to stand for election to the Sale Committee are best left to the owners of each development to decide. For example, in smaller strata developments, there may simply be insufficient owners who are willing to volunteer and serve separately on the Management Corporation council and Sale Committees.

46. There would also be owners who prefer to appoint a trusted and long-serving member of the MC council to represent them in the Sale Committee as well.

47. I should add that even if a Management Corporation council member becomes a member of a Sale Committee, he or she still has the responsibility to uphold the duties charged to the Management Corporation council.

48. Any dereliction of duty should be reported to the Building and Construction Authority.

49. We have also not removed two other requirements which those who are pro En Bloc, as well as some industry professionals have been asking for:
    1. the five day cooling off period after the CSA is signed; and
    2. the need for the owners to sign the CSA in the presence of a lawyer.

50. The property which is to be the subject of a CSA may often be a very significant asset for the owners. It is important that the owners understand the CSA and it is important to avoid arguments as to what was or was not said to them.

51. It is therefore best to continue to keep the requirement that a lawyer must be present when the CSA is signed. The importance of ensuring the integrity of transaction, outweighs the administrative issues of having a lawyer present for each owner’s signature.

52. We also want to ensure that the consent that the owner gives is informed, genuine consent. Owners will be contracting to sell their flats, in multi million dollar transactions. In that context, it is appropriate to give them a few days to reflect on their decision after they have signed.

53. That imposes some uncertainty for those seeking consent, but all things considered, it is difficult to argue against giving house owners more time to reflect on their decision, on the sale of their homes.

Conclusion

54. Through these amendments contained in this Bill, we hope to improve the regulations governing en bloc sale transactions and ensure a fair environment where the interests of all strata property owners are balanced, be they pro-sale or anti-sale owners.

55. Mr Speaker, Sir, I beg to move.

Annexes:

Response to questions by Law Minister K Shanmugam on the Land Titles (Strata) (Amendment) Bill (0.1MB)
Press Release: Proposed amendments to the Land Titles (Strata) Act to be tabled in Parliament

Last updated on 25 Nov 2012