En Bloc Sales: A Comprehensive Guide for Property Owners and Investor

By Lawhub
2 min read

En Bloc Sales: A Comprehensive Guide for Property Owners and Investor

The en bloc sales market in Singapore saw a resurgence in the second half of 2021, following a period of decline. However, the government’s new property cooling measures in December of that year put a damper on developers’ prospects, once again slowing down the market.

As of July 2022, despite the Singaporean Government’s increase of the ABSD rate to 35% for entities and an additional 5% non-remittable ABSD for developers, there have been 12 successful en bloc sales valued at $3.5 billion, including Chuan Park condo, whose owners accepted a lower offer of $890 million made by Kingsford Development and MCC Land during the private treaty period in July after the tender had closed in April. This offer was 5.11% below the reserve price of $938 million.

We are proud to have partnered in this historic transaction as we proudly represent Chuan Park Condominium/ the developers in one of the biggest En bloc sales of 2022, which sets a new standard for en bloc sales in Singapore. The transaction is a real estate game changer in Singapore and is considered significant, as it comes at a time when en bloc sales were losing their charm.
We are honoured to have played a critical role in the successful sale, which involved navigating complex legal issues and negotiating on behalf of our clients to secure the best possible outcome.

Let’s delve deeper into the reasoning behind the fascination with en bloc sales among Singaporeans and understand this phenomenon better.

Table Of Content

What does the En bloc sale in Singapore mean?
How does En Bloc Sales Process start in Singapore?
What are the Steps in Singapore’s Enbloc sales process?
What are the benefits of en bloc sales for property owners in Singapore?
Conclusion

What does the En bloc sale in Singapore mean?

En bloc sales have become a buzzword in Singapore’s property market over the last few years. The term “en bloc” is derived from the French language meaning ‘collective’ and an “en bloc sale” literally refers to a sales process where residential property owners collectively agree to sell their homes, usually to a property developer or the government, as a single transaction.

The process can take up to two years. Every unit in the condominium and the land are sold in an en bloc sale.

The en bloc committee typically sets a reserve price higher than the current market price, and the buyer will try to match the reserve price or negotiate with the en bloc committee.

The en bloc sale is confirmed when the en bloc committee obtains a consensus to sell from the owners.

How does En Bloc Sales Process start in Singapore?

The En Bloc Sales Process officially starts with forming of the Collective Sales Committee (CSC). A minimum of 20% of the share values or owners, comprising 25% of the total number of subsidiary proprietors’ votes, is required to form the CSC.

If a development has previously failed in an En Bloc sales attempt, the owners will incur a two-year restriction period. During this period, the En Bloc sales process will need to achieve a higher threshold of 50% of the share values or 50% of the subsidiary proprietors’ votes for the first retry, and 80% of the share values and subsidiary proprietors’ votes for the second retry before calling for an Extraordinary General Meeting (EOGM).

The EOGM is a meeting that is held to vote on the proposed sale of the development. If the required threshold is met, the sale will proceed, and the proceeds will be distributed among the owners in proportion to their share values.

What are the Steps in Singapore's Enbloc sales process?

Kickstarting with the 1st EOGM: Minimum Thresholds for En Bloc Sales Process:
To trigger the 1st Extraordinary General Meeting (EOGM) and set up the Collective Sales Committee (CSC) in the En Bloc sales process, a minimum of 20% of the share values or owners comprising 25% of the total number of subsidiary proprietors’ votes is required. Suppose a previous attempt at En Bloc sales failed. In that case, a higher threshold of 50% of the share values or owners comprising 50% of the total number of subsidiary proprietors’ votes is needed, with a waiting period of two years before re-starting the process. The CSC should represent the owners in the development, including different unit sizes, and act responsibly in the best interests of all owners.
Consent Requirements and Appointment of Professionals:
In the En Bloc Sales Process, governed by the Strata Titles (Strata) Act Section 84A, the consent required for sale depends on the age of the development. For developments less than ten years old, 90% consent by share value and strata area is needed, while those older than 10 years require 80% consent by share value and strata area. The age of the development is determined by the date of the temporary occupation permit (TOP) or Certificate of Statutory Completion (CSC). The appointment of property consultants, lawyers, and valuers is usually decided at the 2nd Extraordinary General Meeting (EOGM) if the mandate is not given to the Collective Sales Committee (CSC). The CSC plays a vital role in the process and should act in the best interests of all owners.
Fair Apportionment of Sales Proceeds:
The En bloc sales process involves apportioning sales proceeds, which is usually discussed at the 2nd EOGM along with the Collective Sales Agreement terms and conditions. Property consultants and valuers can provide inputs on apportioning the sales proceeds fairly, typically by share value and strata built-up size. However, many homeowners need to be made aware of the process and tend to follow the majority without knowing if it is a fair deal. Often, it is the minority that sets the stage for the majority to follow, leaving the clueless minority to follow along in the en bloc sales process blindly.
Reserve Price Determination and Conflict of Interest
Determining the reserve price and valuation is a crucial step in the en bloc sales process and is usually discussed at the 3rd EOGM if not confirmed earlier. The Collective Sales Committee (CSC) considers various factors such as land plot ratio, development charges, surrounding en bloc sales prices, and more to estimate a reasonable bid for developers that is fair to the owners. However, there is a potential conflict of interest as some pro-en-bloc sales CSC members may be too eager to sell and compromise negotiation for a good deal. Care should be taken about the independence and impartiality of the decision-making process.
The signing of the Collective Sales Agreement (CSA)
The collective sales committee has 12 months to reach the required En bloc collective sales threshold. Once the threshold is reached, an Owners’ Meeting will be called before launching the public tender for sale.
Owners’ Meeting
Owners will meet to discuss details of the public tender for sale, which will take roughly 1 to 2 months.
Launch of Public Tender for Sale
The launch and closure of the En Bloc sales development tender will close within one month.
If no bidder meets the reserve price, the collective sales committee (CSC) will then go into a “Sale by Private Treaty” arrangement.
The En bloc sales process only works if a buyer is found within 12 months.
Award of Tender or Negotiate Sale by Private Treaty
The tender will be awarded if a successful bidder exceeds the minimum reserve price.
If the bid falls short of the reserve price, the collective sales committee (CSC) can negotiate a sale by private treaty within ten weeks.
The En bloc sales committee will need to seek further endorsement from the owners on the price for the Private sale. The Collective sales committee (CSC) and the property developer will sign a sale and purchase agreement.
Apply to Strata Title Board (STB) or High Court for En Bloc Sales Permission
The typical time required for applying to the Strata Title Board (STB) or High Court is 3 to 9 months.
Objectors may apply to the High Court to block the En Bloc sales process, which could drag out the process by 4 to 5 months.
Completion of En Bloc Sales Process
Once the relevant authorities, such as the Strata Titles Board (STB) or High Court, approves the sale, it takes another three months to complete the en bloc sales process.
Upon completing the En bloc sales process, owners can move out and receive 100% of the sales proceeds or opt to stay on for another six months.
After six months of the sale, owners who choose to move out will receive 95% of the En Bloc sales proceeds upon completion and 5% upon handing over vacant possession. (Note: terms can be negotiated during the Collective Sales Agreement stage)

What are the benefits of en bloc sales for property owners in Singapore?

En bloc sales are often seen as a positive form of development and progress for Singapore as they allow for the efficient use of limited land resources. As land is scarce and expensive in Singapore, it is logical that older developments may need demolishing to make way for new ones.

En bloc sales can benefit residents in several ways.

Firstly, they can receive a significant financial windfall from selling their property. Developers may offer high prices to persuade residents to sell their units, resulting in up to 100% profits for some owners.

Additionally, en bloc sales allow residents to upgrade to newer and better homes. As new developments often offer modern amenities and facilities, residents can enjoy a better quality of life in their new homes.

Furthermore, en bloc sales can also benefit residents by enhancing the value of their properties. As new developments are often built in prime locations, this can also increase the value of nearby properties.

Overall, while en bloc sales may result in the displacement of residents, they can also offer significant financial and lifestyle benefits for those involved.

What are the benefits of en bloc sales from a property developer's perspective?

Developers seeking to purchase older properties to replace them with more profitable homes often pursue en bloc sales. These new developments are often taller, have more units and better facilities, and can command higher prices in the market.

For potential buyers, investing in properties with criteria such as fewer units per block, older age, high plot value and strategic location may increase the chances of the property being en bloc material. However, it is still a gamble, as there is no guarantee that the property will undergo the process soon, especially with the government’s current cooling measures to promote more affordable homes.

Conclusion

In conclusion, en bloc sales have become an increasingly popular option for property owners in Singapore seeking to maximize their property’s value. It provides a potential windfall for homeowners, developers, and even the government.

However, it is still a gamble, as there is no guarantee that the property will undergo the process soon, especially with the government’s current cooling measures to promote more affordable homes.

Also, the process can be complex and involve various legal and regulatory requirements. Property owners must weigh the pros and cons of an en bloc sale carefully and seek professional advice before deciding.

Overall, en bloc sales remain a viable option for unlocking the value of ageing properties and rejuvenating the urban landscape of Singapore.

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Frequently Asked Questions

Q.1 What are the Options if an En Bloc Sale Falls Through?

If an en bloc sale falls through, the Collective Sale Committee (CSC) may consider entering into a private treaty agreement with a prospective buyer or relaunching the property for sale within 12 months.

Q.2 What is the Typical Timeframe for Finalizing an En Bloc Sale?

Usually, it takes up to two years.

Q.3 Can an en bloc sale result in eviction?

An en bloc sale can result in eviction for residents who do not agree to sell their unit once the 80% or 90% consent range has been reached. This means that even if a resident does not want to sell their home, they cannot reject the sale offer and will need to find a new home. However, they will still receive their fair share of the payment from the sale.

Q.4 How does the en bloc process work for HDB flats?

The HDB has a similar process called the Selective En Bloc Redevelopment Scheme (SERS). However, unlike private property en blocs, homeowners do not have a choice to stay or sell their property under SERS.

En Bloc Sales: A Comprehensive Guide for Property Owners and Investor