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8 useful things to know about en bloc sales

En bloc fever is now on (again) in Singapore. Whether or not your crummy old apartment will reap you a windfall, it's still good to know what your fellow Singaporeans are going nuts about
 

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Singapore’s property market is gearing up for recovery and many homeowners are looking to ride the wave. Within this year alone, there have been seven successful en bloc deals made worth more than $2.5 bil in total. So, what’s all the fuss about? We talked to Ku Swee Yong, property analyst at International Property Advisors to find out.

What is an en bloc sale?
It’s a collective sale of two or more property lots to a single developer. As a homeowner, you stand to make a handsome profit in an en bloc sale when your property has unused built-up land area. This typically occurs when the Urban Redevelopment Authority (URA) increases the plot ratio of the land in a given area, which, for instance, could mean that a old four-storey walk-up apartment within that zone can be torn down to make room for a 20-storey condominium.
 

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Not all old properties have en bloc potential

Many people assume that all low-rise apartment blocks that were built 20 to 30 years ago will fetch a high price in an en bloc sale. This isn’t always true. According to Swee Yong, “whether a property is attractive to developers depends on whether the added value from the additional floor area outweighs the construction cost and government levies.”

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Location matters too

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“If your apartment block is in a zone reserved for landed properties,  developers won’t be able to build high-rise properties so the land value may actually be less than what you got it for,” says Swee Yong. And if your property is next to a road that has been widened or sited within a landed housing neighbourhood, the building set-back requirements may prevent developers from maximising the floor area.

 

The process costs money

To find out if your property really has en bloc potential, you’ll want to talk to an experienced property agent.

“Usually, residents will engage multiple consultants,” Swee Yong explains. The property consultant gather data such as plot ratio and zoning regulations dictated by the URA Masterplan, and other relevant information about the plot of land that could limit construction so that they can propose a market price for your property. A surveyor may be required to confirm the current built up area of your old property.

“Once you’ve settled on the best proposal, the agent responsible also needs to engage a lawyer and solicit interest from developer,” says Swee Yong. “These services will cost you a percentage of the sale.”

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And it’s tedious

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First, you need to talk to your management committee and propose the formation of an official collective sales committee to represent the residents in getting the en bloc process started. There are many rules and technicalities involved in forming this committee that must be followed to a tee. (This is where the lawyer comes in to help with all the legal paperwork.) The sales committee appoints in a property agent and a law firm to move the sales process forward.

 

You need 80 per cent of your neighbours to say yes

Then, the committee calls for a vote. If the property is more than 10 years old, you need at least 80 per cent of residents to agree. If it’s less than 10 years old, you need at least 90 per cent. This can be a challenge, particularly in large residential developments with more than a hundred units. Swee Yong suggests doing an informal survey to see if your neighbours are keen on an en bloc sale even before you form a sales committee. Only pursue it if they express interest in the idea, or you might be wasting your time.

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You can contest the majority vote

Not everyone wins in an en bloc sale. Say you renovated your apartment for a huge sum of money right before the en bloc sale was proposed. What a waste it would be if it were to be demolished! If there are enough votes garnered to proceed with the sale, you can still object to the sale on the grounds of a substantial financial loss.

“In this case, you may negotiate with the other owners for compensation based on the value of your renovations and the proposed sale price,” says Swee Yong.

 

It can get ugly

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Emotions run high, particularly for those who have lived on the property for many years and have sentimental reasons for rejecting the proposal. Those opposed to the deal may sometimes become resentful and hit back in unscrupulous ways, as was the case in the infamous Laguna Park incident in which a disgruntled homeowner poured glue into the keyholes of front and back gates belonging to neighbours who voted in favour of the en bloc sale.

If you’re pushing for an en bloc sale, expect to make enemies.

 

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