I REFER to the letter, 'Owners decide what is fair compensation in en bloc sales' by Ms Janet Han of the Singapore Institute of Surveyors & Valuers and Ms Radha S. Khoo of the Ministry of Law (ST, Dec 29), and regret that both writers overlook the potential flaws of leaving it to owners rather than lawmakers to decide.
Distribution of collective property sale proceeds based on area is fundamentally fair because every square foot counts. Especially when the intrinsic value of each square foot is computed as an aggregate of area, premium for high floor level, unit design, open view and so on.
This computation could be further translated into a fraction of 100 per cent value of the condo development at first launch. The denominator shall form the basis of each unit expressed as 0.0012345678 per cent of total. This constant shall become the thumbprint of intrinsic value of that unit for future distribution.
Placing 50 per cent weight on share value goes against the principle of fair distribution of assets. It is a guide for conservancy charges calculation. Moreover, it is too coarse a unit compared to a square foot basis for reverse computation. Condo units are sold by area and not by share value.
The criteria that constitute the value of each property unit should remain integral with the condo. For example, an 1,100 square foot unit at the second floor facing the road costs less than a similar unit on the 28th floor facing a swimming pool or with a sea view. The differential in values of similar area units in a condo development should not disappear in collective sales.
Distribution of collective property sale proceeds based on area is fundamentally fair because every square foot counts. Placing 50 per cent weight on share value goes against the principle fair distribution of assets.
We can see the flaws in these examples when owners follow the guideline of 50-50 on area and share value. Should owners of second floor units get the same amount of proceeds as owners of 28th floor units in a collective sale?
We should not allow the dynamics of property prices to distort the intrinsic value further with owners coming into the fray.
When the law says compensation of collective sales should be based on the thumbprint of each unit, at least one bone of contention is gone.
