Ridout Road bungalow rentals: What the CPIB probe found

SINGAPORE: As public speculation swirled around the rental of black and white bungalows by two government ministers, Prime Minister Lee Hsien Loong on May 17 tasked the Corrupt Practices Investigation Bureau (CPIB) to look into the matter to determine if there was any misconduct related to transactions involving the two state properties.

In a report of its findings released on Wednesday (Jun 28), the CPIB said it had found no evidence of corruption or criminal wrongdoing by Law and Home Affairs Minister K Shanmugam and Foreign Affairs Minister Vivian Balakrishnan in their leasing of the two properties at 26 Ridout Road and 31 Ridout Road respectively.

CPIB said it found no preferential treatment given to the Ministers and their spouses, nor any disclosure of privileged information in the process of the transactions.

There was also no evidence to suggest any abuse of position by the Ministers for personal gain, it added.

CPIB director Denis Tang in a letter to Mr Lee attached to the report said: "The Attorney-General’s Chambers (AGC) has agreed with CPIB’s findings and recommendations. AGC has directed that no further action to be taken as the facts do not disclose any offence."

He added that the investigation into this matter is closed.

For its review, the CPIB conducted interviews with the two Ministers and their spouses, former and current officers from the Ministry of Law, the Singapore Land Authority, and National Parks Board, property and managing agents, and other individuals with the knowledge of the rental transactions of the two state properties in question. It also obtained evidence from documents and other information related to the rental transactions and parties involved.

Here are some excerpts from the CPIB report:

BOTH PROPERTIES WERE PUBLICLY AVAILABLE

"At the material time in 2018/2019, the lease availability of No 26 and No 31 Ridout Road State properties were made known to the general public. Both had advertisement signs displayed prominently at the gates of these properties, and in addition No 31 was listed on the State Property Information Online website. 

Members of the public can ask the Singapore Land Authority or the Managing Agent for an indicative rent or asking rent for the properties they are interested. The final amount arrived at is a matter of mutual agreement with or without negotiation by the interested party and SLA."

WHY LAND SIZE OF 26 RIDOUT ROAD WAS EXPANDED

"The No 26 Ridout Road State property of land size 9,350 sq m had been vacant since December 2013 ... (In) January 2018, Minister Shanmugam appointed a property agent to represent him for the rental transaction of the property. By then, the property had been vacant without attracting any bids for more than four years. 

During a site visit, Minister Shanmugam noticed thick and overgrown vegetation on an empty slope of land adjacent to the property. Minister Shanmugam expressed his concern to SLA that the overgrown vegetation might pose public health and safety risks from snakes, mosquitoes, fallen trees, etc.

Through his property agent, Minister Shanmugam negotiated with SLA on the clearing of the adjacent land before leasing the property. 

He offered to maintain the adjacent land at his own cost. Minister Shanmugam stated in his interview with CPIB that he had not wanted to lease the additional adjacent land as there would be legal obligations attached to leasing it."

SLA’s view was that the tenant’s responsibility would not extend to maintain the area beyond the tenant’s property boundary. If Minister Shanmugam was to maintain the adjacent land at his own cost, the adjacent land had to be included into the tenancy of the No 26 Ridout Road property.

SLA then did the fencing of the adjacent land within the property boundary. As a result, the land size increased from 9,350 sq m to 23,164 sq m. 

The cost of the site clearance, replanting of greenery and fencing was S$172,000, which was initially borne by SLA and subsequently recovered from the tenant’s rent.

The cost of maintaining this additional land, approximately S$25,000 per year, was incurred by Minister Shanmugam, which would otherwise be borne by SLA."

RENTAL OF 26 RIDOUT ROAD

"Minister Shanmugam and his agent were not aware of the guide rent. His agent studied the rental of comparable neighbouring properties, and independently determined and valued the rent. Minister Shanmugam instructed his property agent that he should not be paying less than his neighbours.

A neighbouring unit was tenanted at S$26,000. The final negotiated rent amount was S$26,500, which met the minimum rental to be achieved by SLA. 

As the property had not been in use since 2013, substantial repairs were needed. The total cost of essential repair works borne by SLA to restore No 26 Ridout Road State property was S$515,400.

The landlord, i.e. SLA, has the responsibility to undertake essential repair works to ensure that the condition of the property is habitable.

Minister Shanmugam paid S$61,400 to build a car porch. In addition, he stated in his interview with CPIB that he paid over S$400,000 for additional improvement works to the state property not covered by SLA’s restoration works. 

Mrs Shanmugam signed the tenancy agreement of 3+3+3 years in June 2018. After the first three-year term, the tenancy was renewed in June 2021 for a second three-year term. The rental of the second term was maintained at S$26,500 per month, as determined by SLA, considering the then prevailing market conditions." 

INCORRECT USE OF THE TERM "GUIDE RENT"

"CPIB discovered that there was a lack of precision in SLA’s use of the term 'guide rent'.

As a result of this lack of precision, the earlier SLA statement dated May 12, 2023 that the offer by the tenant (S$26,500) was above the guide rent was incorrect. In fact, the S$26,500 rental Minister Shanmugam paid was equal to the correct guide rent of the property. 

The guide rent is intended to be the minimum rental to be achieved. With the additional cleared land at No. 26 Ridout Road, SLA valued the minimum rental of the property at S$26,500. SLA therefore assessed the Guide Rent to be equal to this minimum rental, i.e. S$26,500.

Instead, SLA assessed the guide rent to be S$24,500. SLA’s rationale was that on top of the S$24,500, it intended to charge the tenant another S$2,000 to recover the amortised cost of works to clear and incorporate the additional land. This would bring the total minimum rental to the correct value of S$26,500. 

This lack of precision over the guide rent carried over into the second valuation for the renewal of the lease. It was discovered when CPIB investigated the matter and informed SLA. 

Despite this issue with the guide rent, SLA did ensure that Minister Shanmugam paid not less than S$26,500, the minimum rental to be achieved. 

CPIB has confirmed that this lack of precision in the process of deriving the guide rent did not result from any ill intent on the part of any SLA officers involved. It found no evidence of any mala fide abuse of position in the valuation."

RENTAL OF 31 RIDOUT ROAD 

"The No 31 Ridout Road State Property of land size 9,157.36 sq m had been vacant since July 2013.

It was listed on the state property information online website. The property had been vacant for five years before two unsuccessful bids were made below the prevailing guide rent, i.e., S$12,000 in July 2018 and S$5,000 in August 2018. 

Mrs Balakrishnan came across a For Lease sign at the No. 31 Ridout Road State property. She contacted the SLA’s appointed managing agent on Sep 11, 2018 and they negotiated a rental price.

The managing agent named an asking rent of S$19,000. Mrs Balakrishnan offered S$19,000 with the inclusion of essential repair works and upgrading of the toilet.

The managing agent rejected the toilet upgrading as it was considered to be improvement works, and Mrs Balakrishnan subsequently agreed to bear the costs of the toilet upgrading.

The asking rent for the No 31 Ridout Road State Property was independently determined and valued by the managing agent. Neither Minister Balakrishnan nor Mrs Balakrishnan were aware of the guide rent.

The SLA leasing department subsequently accepted the lease proposal, because the final secured rent of S$19,000 was not below the prevailing guide rent, which was S$18,800."

NO SPECIAL TREATMENT FOR VVIPS

"There was no preferential treatment given in the process of the rental transaction. CPIB found that in response to the managing agent’s query on policy for VVIPs, the SLA leasing manager had emphasised in her email that there was no policy for VVIPs, and all prospects and tenants were to be treated equally. 

The total cost of essential repair works borne by SLA to restore the No 31 Ridout Road State property was S$570,500. Minister Balakrishnan stated in his interview with CPIB that he had paid more than S$200,000 on additional improvement works to the state property. 

The tenancy agreement for 3+2+2 years was signed by Mrs Balakrishnan in October 2019.

After the first three-year term, Mrs Balakrishnan requested and was granted a renewal of another 3+2 year term instead of a 2+2 year term (that was earlier granted).

The rental for the second term was increased from S$19,000 to S$20,000 per month, taking into consideration the then prevailing market conditions of 2022."

This article was originally published in TODAY.