Enbloc Sale of Property

It's final: Horizon Towers sale is off
By Joyce Teo, Property Correspondent
Straits Times, Singapore, 5th April 2009

THE Court of Appeal halted the contentious Horizon Towers collective sale once and for all yesterday with a hard-hitting ruling that singled out the estate's sales committee for scathing criticism.

The dramatic judgment caught many by surprise and vindicated the four sets of minority owners who opposed the sale from day one - about 3-1/2 years ago, when the idea was first mooted - and spent nearly $1.5 million in legal costs.

One of those owners, Mr Hendra Gunawan, told The Straits Times yesterday: 'I am very happy that at last we can protect our homes.'

'We can't do anything about it if 80 per cent agree to sell but they have to do it properly so that everyone's home will be sold at a proper price.'

Industry experts are also hailing the decision as a landmark judgment that will set clear parameters for en bloc deals.

Yesterday's ruling was clear in its condemnation of the way the en bloc process was conducted and was particularly critical of the estate's sales committee.

Among a litany of criticism, it pointed to the committee's failure to follow up on a higher offer for the estate, its undue haste in agreeing to a sale price in a rising market and its sloppy procedures in appointing a marketing agent and keeping owners up to speed on the transaction.

But perhaps the most serious censure was directed at its failure to take heed of a possible conflict of interest that arose when two owners bought additional units in the estate just before they were appointed to the sales committee.

'The sale committee's duty is to achieve the best price under the circumstances, and not just a fair price,' said Mr Karamjit Singh, managing director of Credo Real Estate, which has handled many collective sales but not that of Horizon Towers.

The Strata Titles Board, which backed the sale, was also criticised for the way it took too much at face value - whether opinions on price or legal points - when it should have been more questioning. It was also rapped for not being more vigilant on the possible conflict of interest issue regarding sales committee members.

One immediate effect of the ruling is that one of Singapore's most drawn-out en bloc deals is finally over.

The sale of the Leonie Hill estate was first mooted in October 2005. The owners agreed to a reserve price of $500 million the following year, just before the dramatic run-up in the property market.

A deal was signed in January 2007 when the majority owners accepted a price of just below $850 per sq ft of gross floor area from Hotel Properties and its two partners.

The 199 owners of the 99-year leasehold estate would each have pocketed about $2.3 million while the 11 penthouse owners would each have received around $4 million to more than $6 million.

A series of court challenges followed. Even some majority owners turned against the deal when they saw how the soaring market had made their sale price look like a giveaway.

The property market has since slumped and the en bloc market has dried up.

'On paper today, the owners would have lost out, but probably by just 10 per cent,' said a property expert who declined to be named.

Only a handful of the minority owners who objected to the sale fought on until the end, spending millions along the way.

Mr Ng Eng Ghee, Mr Gunawan and his wife Sulistiowati Kusumo and Madam Ong Sioe Hong were represented by Harry Elias while Mr Rudy Darmawan represented himself, his wife and aunt at the hearing.

Madam Ong said her group incurred expenses of more than $1.5 million. Another group of objectors - who fought against the sale earlier - has spent around $1 million. Property industry experts said yesterday's landmark ruling has struck a decisive blow for transparency.

'This is the first time the court of appeal has held in favour of the minority owners,' said Mr Phillip Fong, a partner of Harry Elias Partnership, which represented four minority owners.

'There's now substantial clarity on the extent of the duties of the sale committee.'

Credo's Mr Singh said: 'The judgment is undoubtedly significant. It clarifies what constitutes, for example, good faith and conflicts of interest.'