AN en-bloc sale is the collective sale of apartment units owned by different owners to one person or a corporation. En-bloc sale may also be used for a single block of landed properties, similarly owned by different owners, and all the houses in that block would be purchased by one buyer or a group of buyers, respectively. The proceeds of the sale are distributed among the unit owners in proportion to the size of their respective units.
En-bloc sales are only allowable after a minimum number of owners have agreed to the sale. The sale is advertised with a reserve price. Sometimes, a group of developers may form a consortium and make a bid for a single piece of property as some sales may be too huge for an individual company to handle.
The location of the property is an important factor. For instance, Normanton Park Condo in Singapore, is located close to healthcare facilities. It was hoped an aging population and rising demand for quality healthcare could be a positive factor in the sales of the new development. The aim was to promote it as a wellness village with medical facilities.
Before an en-bloc sale can be initiated, the development has to be older than 10 years and 80 per cent of the residents have to agree to the sale. If not, 90 per cent of the residents have to give their consent. The 80 and 90 per cent figures do not refer to a head count of owners. The percentage is calculated on the basis of share value, share in land or notional share held by each owner. This means that the consent of owners holding a minimum of 80 per cent of the share value and 80 per cent of the total strata area are required.
En-bloc sales may be achieved in three ways. Firstly, by consensual agreement. The majority of the residents agree on the sale and the price, and if they find a buyer they may be able to get a better price than they would have if they had sold their units individually.
Secondly, a buyer may approach a group of residents and convince them to get the majority consent required for a sale. This may backfire, as other buyers may then approach different groups of residents and there may have to be a pow-wow between the buyers, with the sale ultimately not taking off, and no one wins in this scenario. Thirdly, a company may act as a middleman in a sale. The company’s representatives would negotiate with the owners and if they come to an agreement, the development is sold to a third party; with the company making a quick profit.
En-bloc sales are encouraged in countries with limited land such as Singapore and in countries like Japan and Israel where cities are densely populated. Japan Times columnist Philip Brasor said many of the condos in Japan were built in the 1960s and 1970s.
Properties in Japan do not appreciate much in value unless they are located in the centre of major cities. In 2002, Japan government passed a law allowing for the redevelopment of properties if four-fifths of the owners gave their approval. Asians normally prefer new buildings and in Japan, there is virtually no incentive to buy used condos. As such, en-bloc sales have started happening in Japan and the number may rise as buildings get older.
En-bloc sales in Israel are governed by a regulation called pinui-binui (evacuation building) which requires 75 per cent of the owners to agree for a building to be destroyed and another built on the same site. Apartment owners are evacuated during the demolition and rebuilding. They return to apartments in the new buildings.
All costs incurred in the demolition, construction, relocating owners and rental of their temporary homes is borne by the contractor. In exchange, the contractor adds new apartments to the building which he then sells to recoup his costs and make a profit.
Tides of time demand that the old sometimes have to make way for the new. Development has to move on. There cannot be a situation where one person can hold an entire community to ransom simply by not agreeing to move when all the others have agreed for a new development project to emerge.
For instance, in 2012, a Chinese house was left in the middle of a new highway because its elderly owners refused to move out. The highway was built with the house still in the middle. Dingzihu, the Chinese term for residents who refuse to move during demolition, are becoming an increasingly common sight due to China’s rapid urbanisation. These people refuse to move because all land in China is state-owned and residents are only paid a fraction of what their homes are worth in compensation.
Laws are necessary. If there were no laws governing collective sales, there may be many instances where a small group of individuals, or an elderly couple may halt the development of an entire neighbourhood. The 80 per cent consent requirement for en-bloc sales ensures that private property laws are protected and development is not unduly hindered.
The writer, Grace Xavier is a research fellow, Faculty of Law, Universiti Malaya. The writer can be reached at email@example.com