Source: First published on www.storm.sg 04th December 2017
IT WOULD seem the en bloc fever has returned. Or certainly the hype around it.
Whether you are for or against it, as a subsidiary proprietor (SP) or owner of a strata apartment unit, you should get involved by participating in all the meetings to understand the deal that is being put together.
In addition to being an active observer, as and when invited by the Sales Committee for updates and discussions, you could also engage in the process by exercising your rights as an SP.
You could participate in the vote to appoint an experienced property consultant and an experienced lawyer. Depending on the size and value of your condominium block, the current market fee for the property consultant and lawyer totals about 0.5-1.0% of the en bloc value.
Paying the property consultant and lawyer an attractive fee will motivate them to stretch themselves to secure interests from several credit-worthy developers to fight tooth-and-nail to make attractive price-offers for your en bloc sale.
During the previous en bloc wave 10 years ago, a handful of sales involving weak developers were aborted as they could not raise sufficient capital and loans to complete the transactions.
That proved quite disappointing, for all the hard work put into the process. Some of the SPs had even committed to purchasing their next homes before the en bloc deals were aborted.
Keep Track Of Milestones
While the Sales Committee is going through the en bloc sales process, e.g. setting up the Extra Ordinary General Meeting (EOGM), getting the signatures from the SPs, providing regular updates, etc, you might like to keep track of the milestones and timeline.
The en bloc process is strictly regulated and the rules have tightened over the years. This is to ensure that past mistakes are not repeated and that each en bloc sale takes into consideration the needs and the views of all SPs, dissenting ones included.
The powers and responsibilities of the Sales Committee and their members, the property consultant and the lawyer are well defined. The strict guidelines enhances transparency of the en bloc process, keeping everything above board for the SPs and the bidding developers to enter into the sale of the properties.
Crossing The Finish Line
When a qualified developer has made a bid at or above the reserve price, and the Sales Committee has agreed to accept the bid on behalf of the SPs, the transaction is considered done. Well almost.
If less than 100% of the SPs agreed to the en bloc sale, the dissenting SPs are allowed to present their cases at the Strata Titles Board (STB). If the dissenting SPs have good reasons, such as if there were evidence to show that the Sales Committee did not abide by the correct procedures, the STB could stop the en bloc transaction from proceeding.
If the en bloc sale is given the go-ahead by the STB, the winning developer will likely allow you and your family at least 6 months to move out to your new home.
The 6-month period is sufficient time for you to allocate your finances and find a comfortable home, be it rental or purchase.
Allocating The En Bloc Windfall
A part of your receipts might be used to pay off remaining bank loans and another significant sum will have to go into you and your spouse’s CPF accounts. The rest of it will be cash in your bank accounts.
How you might want to allocate the cash and CPF monies to purchasing your next home will be dependent on your family’s needs, your age, your lifestyle and perhaps your retirement plans.
You might consider renting a home while you take your time to look around for options, including overseas properties.
If you decided to buy another home and you need to take a bank loan, do note that there are restrictions depending on your age and the loan servicing capacity your current income allows you.
After all we have all aged 10 years since the last en bloc wave and mortgage restrictions have tightened since.
Others may opt purchase a smaller, lower priced property without tapping on bank loans, just using cash and CPF funds. Those who opt to downsize your property and hold cash might even be in a position to enjoy semi-retirement and take that much dreamed about round-the-world trip!
Based on my observations, the profile of the recent en bloc beneficiaries are generally middle-aged or older, most of them will be purchasing smaller-sized properties with little, say $300,000, or no loans. They are likely to put aside some of their cash for their children and for their retirement.
Consider All Options
As the private residential resale market seems to be hotter now, given the en bloc wave sweeping us, many will find that the asking prices in the resale market have gone up. However, HDB resale prices have been dropping gradually and for the retirement-minded en bloc sellers, moving into a HDB flat for retirement might be a financially prudent option.
It is essential for potential en bloc beneficiaries to carefully think through the next steps for yourselves and your loved ones.
With a clear idea of the en bloc process, you can begin speaking with trusted property advisors to consider your next move such that once the en bloc sale goes through, you can quickly put your plan into action!