New rules bump up lawyers’ fees, draw out collective sale process by months
GOING en bloc is now a more costly and time-consuming business for home owners because of a new set of stricter rules implemented last October.
The rules – aimed at making the process more regulated and transparent – have bumped up the price of organising a collective sale by about 20 per cent to 30 per cent and drawn out the process by a few months, say property consultants.
Most of the higher cost comes from rising lawyers’ fees, which have doubled or trebled to reflect a similar increase in workload.
According to one industry source, lawyers ‘previously charged maybe $2,000 per household, but now they can charge anything from $3,000 to $6,000’.
Among other things, the new rules now require a lawyer to be present whenever a resident signs a collective sale agreement and to explain the terms of the agreement to each resident during the signing process.
Lawyers may also have to assist the owners in vetting the minutes of sale committee meetings, as well as draft motions for the general meetings, said Ms Tng Peck Chin, the partner in charge of collective sales at law firm WongPartnership.
Another law firm, Rodyk & Davidson, said it has mostly tried to double its fees, although the actual increase varies from estate to estate.
Rodyk partner Lee Liat Yeang said the new rules now double or treble the amount of time lawyers need to put in to get a collective sale going.
‘Also, looking at market conditions, prices are already quite high,’ he said. ‘Lawyers worry that a buyer cannot be found and nothing will materialise from all the effort they had to put in at the initial part.’
In addition to higher lawyers’ fees, owners now need to bear the cost of a valuation report for the estate, previously not a requirement, said Mr Karamjit Singh, the executive director of Credo Real Estate, which specialises in collective sales.
The report can cost between $100 and $300 per owner, depending on the size of the project, he said.
Some marketing agents have also raised their fees. Savills Singapore’s investment director, Mr Steven Ming, said the firm now charges about 15 per cent to 20 per cent more to make up for ‘the extra effort and time’.
Mr Shaun Poh, a senior director of investment advisory services at DTZ Debenham Tie Leung, said while there has been no ‘great jump’ in the fees his firm quotes, there is no longer any room for bargaining.
‘Previously, it was very competitive. We used to make our fee more negotiable,’ he said. ‘Now, if we quote a fee, we will stick to it.’
A big reason is that it takes much longer to get a collective sale going under the new rules.
One rule, for instance, provides for a five-day cooling-off period during which a home owner may still change his mind after he signs a collective sale agreement.
‘Last time, consultants would meet an owner, persuade him of the benefits of going en bloc, and he could just sign the agreement,’ said Savills’ Mr Ming.
‘Now, we have to meet them. After they agree to sign, we have to schedule another time for the lawyer to come down to witness the signing.
‘If it all goes well, that’s good, but if they change their mind later, we may have to go through the whole process a few times.’
In the four months since the rules were changed, not a single estate has gone up for sale under the new system.
And while the property boom last year owed much to an unprecedented collective sale frenzy, the almost silent collective sale market now is similarly contributing to the cooling property sector.
Marketing agents say plans for a sale are under way at several developments, although most are still in the preliminary stages.
Source: The Straits Times 9 Feb 08