En bloc law to change in early October 2007

The current statute that governs en bloc sale will be made more transparent and fairer for the various stakeholders. Among the proposed changes to take place in early October include:

Sales committees must be properly formed and elected.

The signing of Collective sales agreements (CSAs) will be witnessed by lawyers who can clarify doubts and explain terms and liabilities.

Cooling-off period

Potential sellers will have a five-day 'cooling-off period' after they have signed the CSA.

Majority consent to include area of development

The definition of majority consent has been changed to mean 80% of share value as well as 80% of the areas of the development. Currently majority consent means 80% or 90% of the project’s share value, depending on whether it is more than 10 years old or less. In the new rule, the first condition still applies but now a second condition is required which include 80% or 90% of the area of the development, again depending on whether the project is more than 10 years old or less.

Requirements for general meetings.

A sales committee will have to be elected by more than 50% of owners present at a general meeting of the management corporation before signing of the CSA may begin. Likewise, property consultant and lawyer will have to be appointed at a general meeting. Key issues such as apportionment of sales proceeds and the terms and conditions of the CSA will also need to be discussed and formalised during general meetings.

Monthly updates by Sale Committee

The sales committee will also have to provide monthly, instead of bi-monthly updates of the consent level to keep all owners in the loop.

Requirement of tender or auction

Every launch for sale must be through a public tender or auction which means that the majority consent would have been obtained prior to that. The sales committee can engage in follow-up negotiations with any bidder, when the tender/auction fails to attract the reserved price. But a sale by private treaty must be concluded within 10 weeks of the close of the tender/auction. Otherwise, the tender will have to be relaunched for sales efforts to resume.

Market Reaction to proposed changes

As it is, many potential en bloc projects may speed up the signing of CSA to avoid doing everything all over again when the new law comes into effect. But in the longer term, there may be fewer en bloc sale sites as it would take a longer time to launch a site for sale unless the market is booming.

Lawyers' fees for collective sales, usually $3,000 to $4,000 per unit, could double or triple because of the additional duties thrust on lawyers. The lawyers will be required to witness signatures and certify the monthly updates on the consent level. The whole process of requiring lawyers to witness signatures will slow down the speed of putting en bloc sale sites onto the market.