I REFER to the letter from Miss Ng Kheng Lau, 'How is en-bloc payout tied to 'share value'?' (ST, Oct 24).
It is incorrect to say that 'share value' merely helps to determine the maintenance fees and voting rights in the management of an estate. Under the Land Titles (Strata) Act, the share value also determines the percentage of ownership in the common property. Thus, in the Eng Lok Mansion case, where the 64 owners have equal share value, all have a corresponding equal share in the common property. When a development is sold, the owners sell not only their units but also their interests in the common property.
For the purpose of a collective sale, the Institute of Surveyors and Valuers accepts valuation according to share value, the area of each unit, a market valuation or a combination of these methods. The market-valuation method is hardly used as it is more open to challenge.
Apportionment of sale proceeds solely by the share-value method or the area-of-each-unit method is appropriate where the units are approximately the same size. Factors such as renovation costs, which floor a unit is on and the view from a unit are not to be taken into consideration. While these are relevant when a unit is being sold individually, they are not relevant in an en-bloc sale as it is the collective interest in the land that is being sold. In an en-bloc sale, the apportionment of the proceeds is usually determined by a combination of both share value and floor area. The Strata Titles Board will accept any method of valuation that at least 80 per cent of the owners had agreed upon, provided they had acted in good faith. In the Eng Lok Mansion case, the objecting owners had not been able to establish that the majority owners had lacked good faith in apportioning solely by share value although the units were of different sizes. The board took into consideration the fact that the method of apportionment had been discussed at length at an extraordinary general meeting, that 46 of the 48 owners of the large units had consented to the method or had not objected to it, and four of the six members of the sale committee own large units.
The sale committee and the owners are entitled to choose any method of apportioning the proceeds that they decide upon rationally. If they acted in good faith, the board will not impose its view of the method that should have been adopted.
Jeanette Lee (Ms)
Partner
Messrs De Souza Tay & Goh
(Lawyers acting for the majority owners in the Eng Lok Mansion en-bloc sale.)
