What is En Bloc and What Does it Mean?

En Bloc is a french term meaning all together. An en bloc sale refers to the collective sale of all residential/commercial unit owners in the development.

We have all heard stories about how lucrative an en bloc sale can be, and how owners of successful en bloc attempts become overnight millionaires.

It’s not surprising to have individuals receiving up to 200% of their property value since the Singapore government imposes a mandate that 80% of owners must agree to a collective sale for it to even go through in the first place. Thus, developers who are keen on a particular plot of land will have to put out an offer so enticing that you’d be a fool to not accept it.

Of course, that is not to say that every homeowner will stand to gain from a collective sale. There will be that minority group (who opposed to the collective sale) who are reluctant on giving up their home for various reasons. The home could hold sentimental value or it’s just too troublesome to find another home that possesses the same unique characteristics. Bottom line is, if the majority of 80% of homeowner votes are received, the minority group’s pleas will fall on deaf ears.

For investors, news of a collective sale will definitely be music to their ears because that is the moment they have been patiently waiting for. After all, who doesn’t want to be a millionaire overnight.

What Happens During an En Bloc Sales Process and What Should I Know?

This is a brief summary of the important stages of an En Bloc Process:

Stage 1: Commencement of an Extraordinary General Meeting (EOGM)

You can’t possibly initiate an en bloc by yourself. You’d need to gather like-minded homeowners who collectively own 20% of the development’s total share. Once this is achieved, a Collective Sales Committee (CSC) will be formed.

However, if there was a previous failed attempt for an en bloc, the previous 20% shareholder requirement is increased to 50%.

With that being said, nothing formal can be concluded until homeowners with 80% shares or strata area ownership consent to the sale. This threshold of 80% relates to developments that are more than 10 years old. For developments that are less than 10 years old, the threshold is higher at 90%.

Hence, the first EOGM is often to persuade more homeowners to agree to the collective sale.

Once a CSC is formed, they will represent the rest of the homeowners to engage marketing consultants, valuators and lawyers to aid them in the collective sale (Think of the CSC as a representative of all other homeowners).

Stage 2: Initiate a second EOGM

The second EOGM is often used to discuss the apportionment of the compensation amount once a buyer has been identified. The CSC which comprises of individuals who are more well-versed with the sales process and apportionment will usually guide other homeowners throughout the process.

There are 2 commonly used methods of apportionment — based on share value or strata area. The other less commonly used method involves the unit’s valuation. It is here where disputes commonly arise because some homeowners think the method of apportionment is not an accurate reflection of their unit. It is worthy to note that the apportionment does not take into consideration the floor level, view or extent of renovations done. Imagine a homeowner with unblocked view receiving the same compensation as another homeowner of a similar sized unit with a view of nothing but the rubbish dump. As unfair as it may seem, it’s inevitable.

There are many factors that will be considered when setting the reserve price for the property. In summary, the CSC will discuss with experts on the reserve price and once this is set, consenting owners can begin signing the Collective Sales Agreement (CSA)

Stage 3: Gathering 80% consent

As mentioned previously, no formal actions can be taken without majority consent of 80%. Hence, this is probably the most arduous process in a collective sale. Neighbours can become millionaires or bitter enemies overnight. Nonetheless, it is legally required for the CSC to obtain:

• minimum 80% consent for developments that are more than 10 years old
• minimum 90% consent for developments that are less than 10 years old

Bear in mind that the age of the property is calculated from the date of issuance of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) wherein TOP was not issued.

There is also a 12 month time period for all signatures to be collected from the date the first signature was collected.

Stage 4: Launch En Bloc Tender and Find Suitable Buyer

The property would be put on the market for sale via a public tender once the minimum consent has been received.

The legal team (consisting of marketing consultants and lawyers) will prepare all the required documents and consult the CSC to ensure that all the terms and conditions protect and meet the expectations of the owners.

After which, homeowners will leave the rest to fate and the property will be awarded to the highest bidder. In the event where there are zero bids at the tender stage, the owners can opt to enter into a private treaty with developers. This extends the process by 10 weeks.

Stage 5: Obtaining Sales Order from Strata Titles Board (STB) if Buyer is Found

In the event that there is an objection of the sale, concerned parties may appeal to the Higher Court. Where there is no objection, the application would be successful unless STB finds some discrepancies in the reserve price and method of sales proceeds apportionment or any relationship between the developer and owner(s).

If any unwilling party is to suffer a financial loss from the collective sale, the application will be rejected.

It is rather common that the tender fails to attract any bids. The CSC can choose to enter a private treaty with the developers should that happen. If not, the sale of the development will have to be subsequently launched within a 12 month duration. Failure to do so would result in gathering the necessary consent again.

Step 6: Legal Completion of the Sale

Upon receiving relevant approvals from the STB (or Higher Court if any disputes arises), the owners will receive the sales proceeds from the developers. The owners may also negotiate for a rent-free extension for up to 6 months at the expense of their sales proceeds.

Alternatively, they can receive the full compensation amount by moving out of the property immediately.

This process takes approximately 3 months.

Step 7: Handing Over the Property

You’re now envied by many investors who are still patiently awaiting en bloc news of their development.

If you have an existing tenancy agreement, you’re expected to resolve all issues and hand over the unit by the stipulated date of possession signed with the developer. Although there isn’t an exact set of bylaw as to how you have to terminate the tenancy agreement, you want to settle it as amicably as possible to avoid any complications.

How Long is the Entire En Bloc Process?

To break it down, it takes approximately 1 month for the first EOGM to be initiated followed by another 1–2 months to hold a second EOGM.

A maximum of 12 months is allowed to gather 80% of homeowner’s consent and to sign the CSA. Hence, before a public tender is launched, a period of 3–15 months is required.

In general, homeowners will require 1–2 months to lay out their expectations and discuss the terms and conditions for the sale, bringing the timeline to 4–17 months.

Finally, the launch of the public tender, processing of bids, closing and awarding the tender to a successful bidder would require another 1–2 months.

Unless 100% consent is acquired from the get-go, the collective sales process will take between 1–2 years to materialize.

Throughout the entire process, home owners will also need to concurrently look for their next accommodation if they wish to avoid having to rent an intermediate home.

Conclusion

An En bloc sale is definitely one of the more profitable methods of property investment. But if it’s that easy, everyone would be overnight millionaires. There is a cyclical pattern as to when an en bloc fever will happen but it ultimately depends on the developers’ landbank and market sentiments.

There is a great deal of speculation involved in an en bloc sale and I cannot stress this enough. No one can guarantee when a particular development will undergo a collective sale but an expert will be able to guarantee your position when it happens. It is absolutely necessary to be prudent and do your own due diligence if you’re thinking of entering the ‘en bloc game’. After all, an en bloc is a once in a decade opportunity and when that happens, you definitely wouldn’t want to be a by-stander.

I hope this article serves purposeful in helping you make a more well-informed decision, regardless of whether you’re purchasing a property for own-stay or investment. As always, feel free to share your opinion in the comment section and I will take time to address them when I can. Till next time!