What is the importance of share value?

For current as well as prospective owners/subsidiary proprietors (SPs) of condominiums (or any other strata titled properties), it is important to understand the concept of share value of their property. Taking into consideration the fact that condominiums are generally strata-titled developments, the concept of share value is one that will be utilized for a wide array of outcomes and administrative issues. This article aims to provide a brief explanation of the aforesaid issue.

In order for a condominium’s Management Corporation (MC) to be able to control and manage common property, SPs in the strata scheme will be required to pay the amount of maintenance contributions levied by the MC, in order to maintain the common property as well as  cover ancillary expenses. The amount of maintenance contributions that needs to be paid is in shares proportional to the share value of their respective lots. This means that the money is paid to the MC to enable the MC to meet the costs of regular and periodical maintenance of the estate.  As such, this brings about the importance of share value, especially in mixed-use developments.

Definition of share value

The share value of a property is a figure that represents the proportionate share entitlement assigned to each strata unit in the same development. Though there are various methods of determining share value including equal share basis, usage basis and judgment basis, it is not possible for a single method to be fair to all strata owners. The two most acceptable methods are the floor area basis and the capital value basis, although it is rare that these are both used together. In Singapore (and New South Wales), the floor area approach is the most commonly used method, though it is subject to certain weightage factors. These vary according to the type of use, rather than the extent of usage.

The purpose of the share value is to determine the amount of shares each owner has in relation to the other owners in the development. So, for example, if the share value of an apartment unit in a condominium is represented by the figure 5/350, then 350 represents the total share value of all the units in the condominium and 5 is the share value allotted to the unit. On the other hand, the importance of share value lies in the fact that it is the single and only determinant of the powers (and obligations) of strata owners for the following three critical matters.

Significance of Share Value

Firstly, the share value determines the amount of service charge contributions for maintenance that an owner has to pay to the MC of the estate (i.e. the MC is statutorily tasked with the responsibility of maintaining the common areas in the development. For practical purposes, the most significant function of share value is that it determines a proprietor’s contribution towards maintenance and administrative expenses, as well as his proportional liability for the debts of the MC. Share value is the cornerstone of the LTSA (Land Titles Strata Act) for the maintenance and repair of the common property and the subsidiary proprietors share the financial burden in proportion to their share value entitlements.

Secondly, the share value of a strata lot determines the voting rights of a unit owner. The higher the share value an owner has, the more voting rights he or she has. By regulating the voting rights of a proprietor, the share value determines the extent of a proprietor’s power and role in the administration of the strata scheme. In practice, the voting rights of proprietors can be material not only in matters requiring a special resolution and where a poll is demanded, but also in relation to achieving the requisite majority percentages for a collective sale to proceed.

Thirdly, the share value determines the share (or ownership) an owner has in the common property, which is jointly owned by all the owners in a development as tenants-in-common. Generally, the fact that a proprietor’s undivided share in the common property is determined by the share value has little significance in relation to his use and enjoyment of the common property, as long as he does not interfere with the reasonable use and enjoyment thereof by other proprietors. However, the share value becomes critically important when profits resulting from transactions involving the common property are distributed, for example, where part of the common property is leased. Another instance is when the strata scheme is terminated, as in the case of a collective sale, and the proceeds of sale have to be apportioned.

Concluding Thoughts

Overall, should you be an owner of a strata-titled property, it is important for you to know how understanding the share value which you have as a subsidiary proprietor can be extremely helpful (be it during maintenance expenses, voting rights or collective sales). As such, please be aware of this, do the necessary investigations and keep in mind your own share values.

Clive Chng

Clive Chng

Clive graduated on the Dean’s list from Nanyang Technological University with an Engineering degree. Prior to joining Redbrick, he not only served as a Project Manager for Keppel Shipyard where he oversaw multi-million dollar marine projects, but was also the Vice President for Keppel Young Leaders, focused on the development of future leaders. Being a fan of low-cost Index Funds, his passion in Investing and strong interest in understanding how financial markets shape economies ultimately fuelled his move from the field of engineering into the financial industry where his personality trait as a servant leader further allows him to service his clients effectively.
Clive Chng