Current rules hold back the redevelopment of ageing buildings. Should they be changed?
NOV 18, 2014
BY CHIA YAN MIN
BUILT in the 1960s, Cairnhill Mansions is one of several properties in the Orchard Road area that has seen better days. Age and rising maintenance costs are taking their toll on the apartment block: a resident was recently trapped in the lift for four hours due to a malfunctioning lift motor.
Many of the development's 61 owners are keen to sell their units and move on. They would prefer to do so in a collective sale, where the whole building and the land it sits on are bought by a single buyer for more than the sum of the individual units.
But going en bloc has proven difficult for such old properties.
Last month, Cairnhill Mansions started its fourth collective sale bid, after earlier attempts in 2005, 2007 and 2011 fell through.
In August, another ageing building, the 44-year-old Tanglin Shopping Centre, failed in its second try to go en bloc.
While the current dismal state of the property market is one problem, there is also the issue of gathering enough sell votes from each building's myriad owners.
Many of Singapore's oldest properties, including offices and malls, are strata-titled, which means their individual units are owned by different people.
Tanglin Shopping Centre, for instance, has 173 owners. Only 70 per cent of them agreed to go en bloc in August, far below the 80 per cent minimum threshold.
Mr Charles Ho, the sale committee chairman of Cairnhill Mansions, said it is "not a major hurdle" to obtain 70 per cent of owner agreements but tough to reach the 80 per cent consent level.
Other old buildings that have tried but failed to be sold en bloc include Ming Arcade and Far East Shopping Centre in the west Orchard Road area.
On the one hand, this shows that some owners still see value in their ageing properties.
But others argue that the peeling facades and outdated infrastructure in these old buildings make them eyesores and even health hazards.
[If they are health hazards report the hazards to the authorities. If they are eyesores, poke out your eyes. Or don't go there.]
Given their escalating maintenance costs and underutilised land area, often in central locations, they are prime targets for refurbishment and redevelopment. However, majority consensus among the owners of a strata-titled property can be difficult to obtain because of the collective action problem: when a large group of people have to act together, it becomes tougher to agree.
[And this is a problem because...?]
Some strata-titled property owners and property consultants have called for consent thresholds to be lowered for older buildings.
They say this would aid urban rejuvenation - a priority in land-scarce Singapore - and breathe new life into ageing properties that face escalating maintenance costs and, especially for malls and offices, struggle to compete with their glitzier counterparts.
Making it easier for commercial buildings to go en bloc could also spur the redevelopment of the sleepy western end of Orchard Road, which has dwindled in popularity as shoppers flock to newer malls further down the shopping belt.
Weighing tradeoffs
THE benefits of urban renewal, however, must be balanced against the interests of the owners of older buildings who are reluctant to sell their units.
Ms Elaine Chow, the executive director and head of research at Chestertons Singapore, said the current consensus levels "act as a necessary balance check".
"The interests and the rights of the minority shareholders need to be looked after and to be protected... This is especially so when it comes to matters of great importance, like having a roof over one's head," she added.
[Note the subtle insertion of the claim that homeowners are merely "minority shareholders". Sharing with whom? Your home is your home. The strata title deed is to you. Yes, there may be common areas and common property, and that is why there is a management committee for the development in such cases. But you are not a minority shareholder. You own your apartment or flat, or condo unit. When you sell YOUR unit, you do not need to seek your neighbour's consent. Because you are the owner of YOUR unit. Not a minority shareholder.
In a en bloc sale, your neighbours want to sell their unit together because, hey, more money. Do you have a responsibility to help them get more money for their unit?
If you want to, sure. If they can convince you, sure, let them. But if they can't convince you? Then you don't have to consent. Maybe you are in the less than 10% or less than 20% and the consent level is passed. Too bad for you. Or maybe they can just get 70% consent. Then too bad for them.]
The Singapore Land Authority (SLA), which governs collective sales, agrees.
A spokesman told The Straits Times that the current consent rules strike "a balance between protecting the interests of minority strata-property home owners and facilitating urban renewal".
The regulations for collective sales "must balance the interests of all strata-property owners, be they pro-sale or anti-sale", the spokesman added.
Associate Professor Sing Tien Foo, deputy head of the real estate department at the National University of Singapore, said there are a whole host of reasons - both monetary and otherwise - why some owners might not want ageing properties to go en bloc.
While more property owners are likely to consent to a collective sale when the market is booming and developers are willing to pay top dollar for a site, "there are always people not motivated by monetary incentives".
Some might feel emotionally attached to a home they have lived in for decades, while others might worry about not being able to afford a comparable home or commercial unit in the same area, he said. Prof Sing also said rules "need to protect minority owners from being drawn into collective sales started by speculators, who buy older properties and then try to launch a collective sale".
Mr Ong Kah Seng, director of R'ST Research, said not all urban renewal is unequivocally good. He said collective sales can have a "double-edged" impact on society and the cityscape.
While redevelopment results in "newer and fresher" environs, it also means "destroying our past".
"By now, even buildings built in the 1980s and 1990s are nostalgic, as each decade has its own architecture," he said. Too much collective sale activity and redevelopment might "create homogeneous building forms".
Tweaking consent levels
STILL, the quiet collective sale market might offer a good opportunity for policymakers to refine consent rules for ageing properties, if they want to spur redevelopment.
Of the 181 buildings sold en bloc since 2004, only 35 per cent were aged above 30 years old, the SLA told The Straits Times.
It also said that while the current rules are working well, the agency will "continue to monitor the situation".
One possible solution, raised by Mr Terence Tang, the managing director of Asia capital markets and investment services at Colliers International, could be to add more tiers of consent levels based on the age of the property.
Currently, developments less than 10 years old require 90 per cent of owners by share value to agree to the collective sale, while those 10 years and older require 80 per cent.
Mr Tang suggested that the consent level could be lowered to 75 per cent for buildings older than 30 years old and to 70 per cent for buildings aged above 40 years. Making the requirements less stringent would aid urban redevelopment and rejuvenation, he said. Of course, this should be balanced against the interests of the minority owners, who may be hesitant about or unwilling to take part in the sale, he noted.
One way to avoid turning elderly folk out of their lifelong homes could be to apply the lower consent rules only to commercial buildings and not residential ones.
Living in a decades-old home with ageing infrastructure might be inconvenient and expensive, but the alternative - purchasing a new property and moving out - could end up being even costlier for some owners.
On top of that, the value of a home cannot be measured in dollars and cents - homes are a repository of memories and sentiment can frequently outweigh monetary considerations.
Alternatively, in lieu of lowering the threshold, a rule mandating renovations at regular intervals might be viable.
Owners of shop or office units in commercial buildings might have similar reasons as homeowners for holding back on agreeing to a collective sale: higher rents at a new location, or the difficulty of finding suitable alternative space.
This would eliminate the collective action problem altogether, instead of merely making it easier to overcome. However, some owners might argue that they should have free rein to renovate their properties as they see fit.
The tussle between redevelopment and the protection of minority owners will continue to intensify as Singapore's strata-titled buildings continue ageing. It is timely to re-evaluate existing rules, to guard against old buildings sliding further into decline.
[If the concern is safety and maintenance, there are safety rules for building maintenance, and it should be enforced. And enforcement should be based on the assessment of risk, not mandated regular intervals - that is simply bureaucracy. This whole article is going in circles just to suggest that it is time to re-evaluate consent rules. Different tiers of consent? 90% for less than 10 years, 80% for 10 to 30 years, 75% for 30 - 40 years, and 70% consent for more than 40 years.
Maybe by the time you get to 100 years, you only need 50% consent? I guess that's how the National Library was lost. And the National Stadium. And the National Theatre.
Another comment here.]
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