The recent revelations from reviews conducted by Senior Minister (SM) Teo Chee Hean and the Corrupt Practices Investigation Bureau (CPIB) concerning the rental of state properties on Ridout Road by Ministers K Shanmugam and Vivian Balakrishnan have ignited intense debates across Singapore.
While the reports essentially cleared Mr K Shanmugam and Dr Vivian Balakrishnan of any corruption or criminal wrongdoing in the rental process of these state properties, the findings raise additional questions about the rental arrangement of two Singaporean state properties at No. 26 and No. 31 Ridout Road between the Singapore Land Authority (SLA) and the two Ministers.
Guide Rent tendered
One area under the microscope is SLA’s assessment of the Guide Rent – the benchmark minimum rent – for these properties.
At No. 26 Ridout Road, the Guide Rent was initially assessed at $24,500. However, SLA later decided to levy an additional $2,000 to recoup the costs of clearing and incorporating additional land, bringing the total minimum rental up to $26,500.
CPIB pointed out in its review that this figure is identical to what Minister Shanmugam ended up paying. Even though CPIB dismisses any wrongdoing, this raises questions about the integrity of the original Guide Rent.
Similarly, at No. 31 Ridout Road, the Guide Rent was assessed at $18,800, and Dr Balakrishnan ended up paying just $200 above SLA’s figure.
Both Ministers will likely have promising careers in real estate after their political tenure, given their knack for accurately identifying landlords’ reserve prices.
Clearing of Greenery
Another point of contention lies with SLA’s decision to clear additional land for the No. 26 Ridout Road property.
Notably, the request to clear the plot due to safety concerns arose after Mr Shanmugam moved in. Mr Shamugam said he was concerned that the overgrown vegetation might pose public health and safety risks from snakes, mosquitoes, fallen trees, etc.
SLA then spent $172,000 to clear the land and fence up the additional land, which Mr Shanmugam asked for.
This action, which doubled the size of his rented estate without any corresponding increase in rent, stands out as a unique decision given the property’s long history.
Satellite imagery from 2012 shows the same green cover as in 2018, just before Mr Shanmugam decided to move in, indicating that previous tenants did not request or were not granted similar requests.
While for Dr Balakrishnan’s property at 31 Ridout Road, it is not revealed how much SLA had spent to clear the estate, but from satellite images, it is clear that the clearing was equally extensive as 26 Ridout Road.
The report states that No. 26 and No. 31 Ridout Road are part of the Tree Conservation Area, which means that NParks’ approval is required for felling trees with a girth greater than 1m.
SLA had obtained the relevant approvals from NParks for the felling of trees and has kept a record of NPark’s approvals.
This raises the question: if the request to clear the greenery did not come from the Ministers, would SLA have entertained the requests from the Ministers, and would NParks have approved the applications?
Satellite imagery shows that the greenery for both estates had never been cleared previously.
Equally puzzling is the advice from the Urban Redevelopment Authority (URA) to SLA that no approval was required for the installation of a swimming pool at No. 26 Ridout Road.
This is because planning applications to URA are not required for “minor works” that are external to and do not affect the conserved bungalow. However, no mention of 31 Ridout Road is made.
The question arises, how is installing a swimming pool considered minor work when it requires digging up soil from the conserved land and disposing of it elsewhere?
Privileged Information and Treatment as Ministers
Another intriguing point is the instance where a list of unlisted state properties was prepared for Minister Shanmugam by a deputy secretary from the Ministry for Law (MinLaw).
Such information is typically not readily available to the public, as noted in the report. It mentions that only a sign was put up outside of the estate; the property was not listed on the State Property Information Online (SPIO) website. And because the property is hidden from plain view due to its entrance only accessible via a side road, it is improbable that anyone would know it is available for rent.
This raises questions about preferential access and whether similar assistance is available to all potential tenants. For example, can a member of the public interested in renting a black-and-white bungalow write to SLA or someone from MinLaw to do up a list so that they can refer to it?
Interestingly, it is mentioned that Mrs Balakrishnan came across a “For Lease” sign at No. 31 Ridout Road. It should be noted that No. 31 is just a few minutes’ walk away from No. 26, and the estate is a “closed circuit” community where no one would walk in for no reason.
Although it is claimed that the processing of the rental transaction was properly executed with no conflict of interest, the question remains: were the transactions done with the knowledge that the renting individuals were Ministers from the People’s Action Party?
Wouldn’t that potentially influence the decision-making of individuals and entities? It is a stretch to say that such knowledge would not affect the decision-making process of the involved individuals, and those individuals would surely not confess that it had indeed affected their decision-making process.
While no corruption is involved, it brings into question whether these rental arrangements comply with the spirit of the Ministers’ Code of Conduct, introduced in 1954, which mandates that “a minister must scrupulously avoid any actual or apparent conflict of interest between his official responsibilities and his private financial interests”.
Refurbishment of Properties
The report notes that substantial repairs were needed for 26 Ridout Road, as the property had not been in use since 2013. The total cost of essential repair works borne by SLA to restore the No. 26 Ridout Road State property was $515,400.
Over at No. 31 Ridout, SLA spent $570,500 on essential repairs. It is reported that 31 Ridout Road had been vacant for five years before two unsuccessful bids were made below the prevailing Guide Rent, i.e., $12,000 in July 2018 and $5,000 in August 2018, before Dr Balakrishnan decided to rent the property.
Given the extensive repairs required, isn’t it quite obvious that the reason no one tendered for the properties or failed to meet the guide rent was because of the state the properties were in?
Why would any prospective tenant believe that SLA will refurbish the property to their satisfaction upon signing of the rental agreement or be willing to put up a rent without knowing whether the property would be refurbished?
Based on the “Occupancy Rates in Recent Years” as provided in Annex C of the report, it can be safely assumed that there are 14 properties at Ridout Road that SLA manages.
While the report seems to portray a struggle in finding tenants for the bungalows, it should be clear that the properties at Ridout Road are in high demand compared to other estates in Singapore. In 2017, only Nos. 26 and 31 were not rented out, likely due to the poor state the properties were in.
Therefore, the long vacancy can be simply attributed to poor management of the two properties by SLA, which Mr Shanmugam oversees as Minister for Law, rather than the two ministers helping SLA by renting the vacant properties as some pro-establishment netizens are trying to portray. Not to mention, SLA spent over a million refurbishing the two properties.
Additional Improvements of Ministers
The report repeatedly states how the two ministers have spent on improvements themselves.
For instance, Mr Shanmugam paid $61,400 to build a car porch which SLA was named the developer. He also stated to CPIB that he paid over $400,000 for further improvement works at 26 Ridout Road that are not covered by SLA’s restoration works.
Likewise, Dr Balakrishnan claimed that he spent more than $200,000 on improvements.
However, it should be noted that these improvements are not to the black-and-white houses themselves, but are likely for the additional swimming pools for the estates.
Mr Shanmugam had a 25-metre-long swimming pool and a car porch built in 2018, while Dr Balakrishnan had a 10-metre swimming pool constructed in 2019.
SLA states that upon expiry of the lease, the tenant is responsible for repairing any damage to the property, where appropriate. The property, with any improvements approved by SLA, will be surrendered to SLA as is, without any right of claims or recovery of costs by the tenant.
For example, 26 Ridout Road had a swimming pool built in 2009 but was removed sometime in 2015. So, what’s the point of stating the expenditures by the Ministers to build their swimming pools?
Maximum lease terms and rent offered to Ministers
The lease terms for the two ministers also warrant scrutiny.
For 26 Ridout Road, Mr Shanmugam was offered the maximum lease of 3+3+3 years from the very beginning. According to SLA, this was because Mrs Shanmugam had committed to undertake improvement works at a cost in excess of $400,000.
As for 31 Ridout Road, after signing a 3+2+2 year lease agreement, a request for a renewal of a 3+2 year term instead of the originally agreed 2+2-year term was approved, along with a rental increase from $19,000 to $20,000 per month.
Typically, tenants are often offered 2-2 years for their lease of black-and-white bungalows.
According to the Inland Revenue Authority, the annual value of buildings is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings, and maintenance fees.
The AV of land and development sites is determined at 5% of the estimated freehold market value, which applies to vacant land and land under construction.
This brings to question why black-and-white houses are treated differently, with only the built-up area being considered in the rental calculation, especially for 26 Ridout Road, where its land size doubled upon the Minister’s request.
And given how the rent was firmed up before the refurbishment of the properties, is the rent understated?
Also, considering the low rent commanded by these black-and-white bungalows despite their substantial land size, why are we continuing to preserve these colonial structures, which were built using opium trade money by the British?
Are we maintaining them so that expats and Ministers can enjoy the luxury of expansive estates without paying the market price of good-class bungalows?
To sum up, critical controversies from these rental arrangements include:
- Guide Rent Precision: The striking alignment between the Guide Rent and the eventual rent paid by both Ministers raises eyebrows about the SLA’s rent assessment process.
- Land Clearance Justification: The timing and rationale behind the decision to clear additional land at No. 26 Ridout Road and offered for “free”, as well as the substantial cost of $172,000 spent by the SLA on this, call for further examination. No cost was declared for the clearing of land at 31 Ridout Road.
- Timing of Repairs and Improvements: The SLA spent considerable sums refurbishing the properties only after the Ministers decided to rent the properties. The timing and justification behind these decisions merit an investigation into standard practice.
- Lease Terms: Is it normal for SLA to offer maximum lease terms to tenants? And how do additional improvements affect the decision when the improvements have to be torn down after the end of the tenancy?
- Access to Information and Potential Preferential Treatment: Minister Shanmugam’s access to unlisted state properties through a deputy secretary from the Ministry for Law raises questions about equal access to information for all potential tenants. Did Mrs Balakrishnan really chance upon a lease sign outside of 31 Ridout Road? Did the civil servants know that the Ministers were the ones renting, and how can we believe such knowledge had no bearing on the decision-making process based on the above points?
All these circumstances underscore the necessity for further scrutiny of the leasing arrangements and practices of the SLA, particularly in contrast to those observed with the two ministers.
The forthcoming parliamentary session next week, where these issues will be addressed, is keenly awaited as the public eagerly anticipates the ministers’ responses.