Top 5 Things You Need to Know About En Bloc

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What you need to know about enbloc

We’ve all heard stories of Singaporean property owners who turned into multi-millionaires overnight, thanks to a miraculous en bloc. A recent successful case is Leedon Heights, now known as Leedon Residence that was sold for S$835m. Of course, the miracle does not actually occur overnight. In fact, a successful en bloc typically takes two years to close. Also, it doesn’t always play out in everybody’s best interests. Here is everything that you need to know about the (usually) fabulous frenzy.

5 things you need to know when you’re sitting on an en bloc gold mine

1. What is an en bloc?

An en bloc is when a group of private properties are sold together to the same purchaser. This applies to more than two units of any kind and size but the ones that make the sensational headlines are the ones that involve large condos in prime locations in the city. As per law, for properties that are more than 10 years old, an 80% owner consent is required and newer ones require a 90% approval. Very controversially, the share of voice is calculated based on the area owned, giving the owners of multiple or larger apartments an advantage over the others.

2. Why does it make sense?

In land-scarce Singapore, with no room to expand and where development is carried out rotationally across different neighbourhoods. This makes it necessary for the larger older residences to give way to new projects – public schools, hospitals or more modern denser condos. The 80% (or 90%) law allows for the deal to still go ahead without the approval of all residents. Without this law, if even one resident refused to sell, there would be no deal. Since an en bloc may not be the preferred choice for up to 20% of the owners, the compensation is rather generous, making it more enticing or less objectionable, as the case may be. So an en bloc is beneficial to the economy in general, the government, sellers, renters, builders and property agents.

3. When is it not a good idea?

On the outside, it seems like a no-brainer to participate in an en bloc sale but there are some specific scenarios when property-owners might have reason to say no.

  • The biggest losers are those who have refinanced their loans to a fixed-rate mortgage because this comes with a two to three-year lock-in period. They end up paying up to 1.5% in penalties to the bank.
  • Also left unimpressed by the sale, are those who are residing in their dream home. It is no fun to have your neighbours decide that you need to sell your home against your wishes.
  • Also if they have recently spent on renovations, it only makes matters worse. What you need to consider in these situations is the cost of your new home, the taxes and stamp duty involved apart from the emotional price you pay and see if it adds up.
  • There is also a significant time lag between the agreement to sell and receipt of the payment. This can be a high-risk factor if the property market is going up. You stand the risk of not being able to afford anything that is more luxurious after all the trouble.

Usually, the offers made are generous and take care of most financial concerns, but you would be wise to understand what exactly you stand to gain or lose.

Related: What You Need to Know About Bridging Home Loans

4. How does the neighbourhood benefit?

In the process of en bloc and developing high-density units, The government collects a land development tax, which eventually gets redistributed to the neighbourhood in the form of better transport facilities, public playgrounds, clinics, shops, and other amenities, thereby adding to the overall urbanization of the local community.

5. What is likely to change?

Despite all its glitz and glamour, there are quite a few regulations related to en bloc sales that are objectionable to many. There are arguments about the apportionment of sales returns and the power given to the Collective Sales Committee. One of the most significant objections is towards new buildings being eligible for en bloc.

Buildings that are not even ten years old are currently eligible for en bloc with a 90% consent rate. This seems very unreasonable and a big waste of the country’s resources as the buildings are still in good shape and functioning well. There is a proposal to restrict such new constructions from entering an en bloc. Also, for buildings that are 10 to 20 years old, approval of 90% of shareholders may be a must, going forward.

Interested to know what are the latest en bloc sales? Find out more from the Straits Times page.


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