This case was so rare that experts witness for the trial confessed he had never seen such a situation before.
In Singapore’s high-priced real estate market, every square foot counts. When buyers or investors pay premium prices for properties marketed at a certain size — only to realize much of it isn’t effectively usable — it can result in overpaying for space, difficulty attracting tenants, reduced resale value as well as legal or valuation complications.
A beauty salon owner bought a commercial shop at D’Leedon condominium for nearly $1.6 million, assuming that the size of the premises was 818 square foot (sqft) based on past transaction history data on two leading property listing portals, as well as a title search, which corroborated the square footage. After buying the shop, the buyer realised the usable floor area of the unit turned out to be just 619 sqft. Imagine the shock and anger the buyer felt upon realising the size difference.
The lawsuit was brought in the name of Madam Pan’s company, Crystal Beauty, of which she is the sole director and shareholder, which initially sued five parties over the discrepancy: her real estate agent Jasmine Xu, Ms Xu’s agency ERA Realty Network, vendor PLS Holdings, the vendor’s real estate agent Eric Kwek, and Mr Kwek’s agency PropNex Realty. The suit against the vendor was discontinued as the firm has since been struck off, while a confidential settlement was reached with Mr Kwek and PropNex.
The discrepancy arose because of the unique manner in which the lot area is calculated for properties with sloping walls, meaning there is a difference between ceiling and floor areas. For such properties, the lot area – as set out in the title documents and commercial listing portals – is calculated based on the larger of the two. In this case, it was the ceiling area that was 818 sqft.
On 8 May, the High Court dismissed the lawsuit. In his written judgment, Judicial Commissioner Mohamed Faizal said there was no evidence that the real estate agent Ms Xu had made any representations, whether explicit or implied, that the usable floor space was 818 sqft. He added that Ms Xu had conducted all the typical due diligence checks; she had cross-checked the numbers provided by the vendor against the EdgeProp property portal.
This case was so rare that the joint expert witness for the trial, real estate agent Tay Kah Poh, who is also an adjunct associate professor at NUS Business School, confessed he had never seen such a situation before. Prof Tay said the situation was so unusual that it would not have been covered in the conventional courses a person would have to typically undergo before becoming a licensed estate agent.
The judge said this case “reflects the reality that both property agents and buyers should remain vigilant”. He said: “Given the novelty of the situation, all the parties were caught unaware about the disparity between floor space and the strata lot size listed on the title search, and there was little a conscientious property agent could have done to have been more alive to a problem that simply was not viewed as a concerning feature in Singapore’s property market.”
Madam Pan had operated a beauty salon at D’Leedon since 2015. In September 2018, Madam Pan told Ms Xu, who was a patron of the salon, that she was interested in larger premises to expand the business. The unit directly across the corridor from her current shop was identified as a possible location.
Madam Pan contended that the discrepancy in size significantly hampered the salon’s expansion plans.
She said the salon is now forced to operate from both the existing premises and the new premises. The amount claimed comprised $203,400 in purported savings on operational costs if she did not have to maintain the older shop and a sum of $387,855.38 after accounting for the pro-rated price of a 619 sqft property.
In his judgment, the judicial commissioner noted that the written documents setting out Madam Pan’s claims of misrepresentation were “extremely vague”. The judge said text messages presented by Madam Pan, of discussions with Ms Xu from 2020 to 2022, did not support her claim that the latter had made the purported representations. The parties disagreed whether there had been a formal physical inspection of the interior of the unit at the time of the purchase in early 2020. The messages showed that both of them had been “jointly misled” by the developer’s marketing of the unit as being of 818 sq ft, said the judge.
This common understanding appeared to morph only in March 2022, when Madam Pan decided to sue Ms Xu after she was told by surveyors that there was nothing wrong with how the developer had calculated the strata lot area of the unit, he said.
Real estate consultant Kiwi Lim reminds property buyers and business tenants to always check the efficiency ratio (usable vs. total strata floor area) and do a physical inspection before buying or renting a property. Don’t just buy by the numbers on paper — but buy the space that truly works for you, your family or your business.
Source: The Straits Times © SPH Media Limited.
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