AN EN-BLOC sale may bring a windfall to property owners but deciding who gets how much can cause unhappiness.
This fact was highlighted last Wednesday when the Strata Titles Board ruled that the collective sale of Eng Lok Mansion can go ahead, rejecting the objections from two owners.
Madam Chow Ai Hwa and her son felt that they should get more than the $2.16 million each for their 146 sq m units in the prime Napier Road property.
The 64-unit property had six apartment sizes - from 118 to 146 sq m - and the majority of the 64 owners had decided to split the payout equally.
In March this year, the site was sold for $138 million.
Property agents tell LifeStyle that there is no fixed formula to sharing the sale proceeds but the size of the unit is one factor that is often considered.
That's because the market value for a bigger unit is naturally higher than a smaller unit's, PropNex CEO Mohamed Ismail explains.
Another factor considered is the share value of each unit - which determines how much monthly maintenance fee has to be paid by the owner.
The more an owner pays for the maintenance of the estate, the more he can usually expect from a payout.
Still, there is no 'one-size-fits-all way to divide the money so it's a matter of working out something that will satisfy the residents', says Mr Karamjit Singh, managing director of Credo Real Estate. Those living on higher floors often want to claim a better price as well, Mr Singh observes.
'But it's not a factor that's considered, because the developer is buying a piece of land, not an individual unit,' he explains.
'Besides, if you don't get the agreement of those from the lower floors, the sale won't go through anyway,' adds Mr Ismail.
The ayes have it
FOR an estate to embark on a collective sale, 80 per cent of the owners must agree to it, if the estate is more than 10 years old.
For estates less than 10 years old, that figure rises to 90 per cent.
This discrepancy between the perceived value of the flat and the real market value remains the biggest stumbling block for collective sales.
Although agents would have examined location, owner profile, and demand and supply before offering a reserve price - the lowest price that the estate will be sold at - it remains below some owners' expectations.
One resident at Pine Grove, for instance, isn't satisfied with the reserve price of around $900,000 that has been set for his 120 sq m home.
The estate is in the midst of gathering signatures for its collective sale.
'We have an estate here on the edge of District 10, with big open spaces, quiet surroundings and good accessibility,' says the 28-year-old student, who does not wish to be named. 'Even though the offer is higher than our market value, we can't find a similar place for the money they will compensate us with.'
Mr Singh says this is a common refrain from home owners: ' 'Our property is so prime, so strategic, where can we find another one like this?' - I've heard this phrase many times, whether they live in Orchard Road or the suburbs.'
Indeed, owners often have their 'own sense of value', which may not be consistent with that of the market, says Ms Tang Wei Leng, director for investment advisory services at DTZ Debenham Tie Leung.
Agents argue that it's pointless to set the reserve price too high, only to have no bidders because developers are not willing to fork out the money.
A classic profile
BUT Madam Chow also fits the classic profile for another group of residents who are usually resistant to selling - the older people who have lived in a location for many years.
Madam Chow, 80, had argued on emotional grounds, saying that her late husband's spirit would be lost and would not know how to find her if she moved.
She had lived there since 1969.
Agents estimate that about 20 to 30 per cent of estates that are trying to go en-bloc are caught in a limbo because of residents citing these reasons.
But, legally, the strongest ground for objection is financial loss.
So if a resident bought a unit for $1 million but will only be compensated with $900,000 through a sale, he has the right to object, says Mr Lui Seng Fatt, Jones Lang LaSalle's regional director and head of investments.
The agent and other residents will then have to find a way to compensate him for the sale to proceed.
'It's not easy to make everyone happy but that's the challenge,' says Mr Ismail.
'It's a process that requires not only skill and patience, but also perseverance.' chengwee@sph.com.sg
