Ridout Road Saga Conclusion: CPIB & SM Teo Revealed Rental Rates; Cleared Shanmugam & Balakrishnan of Any Wrongdoings

Simplifying the Ridout Road Saga Conclusion Involving Colonial Houses Rented by Minister K Shanmugam & Minister Vivian Balakrishnan

If you’re waiting for the next episode of the Ridout Road Saga to drop in Parliament next month, spoiler alert: today (28 June 2023), before any minister could be grilled in Parliament, the results of the investigation into the rental of the colonial bungalows are revealed, and both Law and Home Affairs Minister K Shanmugam and Foreign Affairs Minister Vivian Balakrishnan have been cleared of any wrongdoings.

This was a review done by Senior Minister Teo Chee Hean and—wait for it—the Corrupt Practices Investigation Bureau (CPIB).

And also, the only agency who did something “wrong” is SLA.

So, why is the CPIB involved, and what did SLA did wrong? And how much did the ministers paid for rental?

Here’s the latest update of the Ridout Road saga, simplified and summarised for you.

Ridout Road Saga Update: CPIB & SM Teo Chee Hean Cleared Minister K Shanmugam & Minister Vivian Balakrishnan of Any Wrongdoings

When the saga first broke out, PM Lee has said that he’s be tasking Senior Minister Teo Chee Hean to conduct an independent review.

However, it turned out that PM Lee also tasked the Corrupt Practices Investigation Bureau (CPIB) to conduct its own investigation of the saga.

Truly Singaporean-style: always kiasu, even when one is retiring.

The conclusions from the two reviews indicated that the ministers’ actions in the two leasing deals were appropriate, and there were no instances of power abuse or conflict of interest that led to them receiving undue benefits or privileges.

Furthermore, the process they followed to lease out the two properties was in line with government policies.

The Attorney-General’s Chambers has concurred with the findings from the CPIB and determined that there’s no need for additional action, because “the facts do not disclose any offence”. Consequently, the investigation related to this issue is now closed (but still open for debate lah).

For a recap of what happened, watch this to the end:

But why was SLA the “bad guy?”

In its review, CPIB did discover some imprecision in the Singapore Land Authority’s (SLA) usage of the term “guide rent”.

Back then, they had said that the ministers had made bids that were higher than the guide rent, which was not disclosed to them.

That was “wrong” as the bids were actually equivalent to it.

The guide rent refers to the minimum rental price based on prevailing market rates as assessed by qualified valuers.

Truly Singaporean-style: always paying just enough, never more (even if you’re a minister).

CPIB confirmed that their review process involved conducting interviews with the two ministers and their spouses, former and current employees of MinLaw, SLA and the National Parks Board, real estate and managing agents, and other individuals knowledgeable about the rental agreements of the two state properties in question.

More Details About K Shanmugam’s Colonial House, 26 Ridout Road

Apparently, Mr Shanmugam had been visiting properties since 2017, each of which prominently displayed a “For Lease” sign. At 26 Ridout Road, he noticed the nearby land’s overgrown vegetation, raising public health concerns due to potential risks such as snakes, mosquitoes, or falling trees.

The state property there had lain vacant since December 2013, failing to attract bids for over four years. In 2018, Mr Shanmugam employed a property agent to facilitate a rental agreement for the property.

Through his property agent, Mr Shanmugam negotiated with SLA to clear this adjacent land before renting the property, at his own expense, citing health and safety concerns if the land wasn’t properly maintained.

In his CPIB interview, Mr Shanmugam noted that he had no intention of leasing the extra adjacent land due to the legal obligations it would impose. However, the SLA argued that if Mr Shanmugam chose to maintain the land at his own expense, it must be included in 26 Ridout Road’s tenancy.

It must be interesting to witness SLA arguing with Mr Shanmugam, but we digress.

This arrangement was agreed upon, with the SLA fencing off the adjacent land within the property boundary, causing the land size to increase by roughly 150%, from 9,350sqm to 23,164sqm.

SLA initially bore the S$172,000 cost of clearing the site, replanting vegetation, and fencing, but this was later recuperated from Mr Shanmugam’s rent. The maintenance cost of this extra land, approximately S$25,000 annually, was borne by Mr Shanmugam, an expense that would otherwise fall to the SLA.

As for the guide rent, Mr Shanmugam and his agent were uninformed. The agent researched the rental prices of comparable properties in the area and independently calculated the rent. During this process, Mr Shanmugam instructed his agent not to offer less than what his neighbors were paying.

The final negotiated rent was S$26,500, which matched the minimum rental SLA aimed to achieve.

Due to the property being unused since 2013, extensive repair works costing S$515,400 were required to make the property livable, a cost borne by the SLA. Mr Shanmugam paid S$61,400 for a car porch construction and spent over S$400,000 on additional improvements not covered by the SLA’s restoration works.

Concerning the tenancy agreement, Mrs Shanmugam (apparently, not Mr Shanmugam himself) signed for a nine-year term, divided into three three-year periods. Upon the first renewal in 2021, the rent remained at S$26,500, as determined by the SLA based on current market rates.

Mr Shanmugam informed his ministry, Ministry of Law (MinLaw), of his intention to abstain from discussions related to his property’s rental. He asked then Senior Minister of State in MinLaw, Ms Indranee Rajah, to handle such matters, instructing her to approach Senior Minister Teo if the matter required further escalation.

In his separate review, SM Teo confirmed Mr Shanmugam had informed him of this setup.

So yes, the “colleague” Mr Shanmugam said that he spoke to about when he rented the property is none other than SM Teo (who was also tasked to review the saga).

CPIB noted, “There was no matter raised by the SLA to MinLaw during the entire rental process.”

The Bureau also remarked that “due diligence checks” were performed before signing the tenancy agreement for the 26 Ridout Road State property. This included SLA’s declaration to MinLaw’s permanent secretary that the rental transaction was processed correctly and without conflicts of interest.

Now, how about Minister Vivian Balakrishnan’s colonial house?

Well, for that, it’s all about the wife.

More Details About Vivian Balakrishnan’s Colonial House, 31 Ridout Road

It seems like ministers (or wealthy people) tend to find their homes offline.

Mrs Balakrishnan, Dr Balakrishnan’s spouse, had noticed a “For Lease” sign at 31 Ridout Road. She approached the managing agent appointed by SLA on 11 September 2018 to negotiate the rent.

The property, with a land area of 9,157.36 sqm, had been vacant since July 2013 and was listed on the state property information online website. After two failed bids, it had remained unoccupied for five years.

The managing agent proposed a monthly rent of S$19,000, to which Mrs Balakrishnan agreed, provided it included essential repair works and toilet upgrades.

However, the agent declined the toilet upgrade request as it was categorized as improvement work. Mrs Balakrishnan then accepted to cover the costs for the toilet improvements.

The asking rent for 31 Ridout Road was independently determined and valued by the managing agent. Neither Dr Balakrishnan nor Mrs Balakrishnan was aware of the guide rent.

CPIB noted that the SLA Leasing Department approved the lease proposal as the finalized rent of S$19,000 wasn’t below the prevailing guide rent, which was S$18,800.

According to CPIB, the managing agent did inquire if there was a special policy for very very important persons (VVIPs).

Wah.

In response, the SLA leasing manager clarified via email that there was no such policy, and all potential and existing tenants should be treated equally. The CPIB didn’t disclose the purpose behind the query.

CPIB confirmed that no preferential treatment was granted during the rental transaction process.

The total cost of essential repairs carried out by SLA to restore the state property at 31 Ridout Road amounted to S$570,500. During his CPIB interview, Dr Balakrishnan indicated he spent over S$200,000 on additional improvement works for the property.

The original tenancy agreement, signed by Mrs Balakrishnan in October 2019, spanned seven years, commencing with a three-year term, followed by two two-year periods.

Upon completion of the initial three-year term, Mrs Balakrishnan requested and received approval for a change in the following terms to one three-year term and then a two-year term, rather than two two-year terms.

CPIB reported that the monthly rent for the second term was raised from S$19,000 to S$20,000, reflecting the prevailing market conditions in 2022.

What SLA Did Wrong

CPIB clarified in its review that the previous SLA statement from 12 May, stating that the Mr Shanmugam’s offer (S$26,500) was higher than the guide rent, was inaccurate. In reality, the S$26,500 rent paid by Mr Shanmugam was the same as the actual guide rent for the property.

The bureau further clarified that the guide rent is meant to represent the minimum achievable rental.

Considering the additional land cleared at No 26 Ridout Road, the SLA had valued the property’s minimum rent at S$26,500. Hence, the guide rent was also determined to be S$26,500.

Nonetheless, SLA had initially evaluated the guide rent to be S$24,500. This valuation was based on the agency’s intention to add an extra S$2,000 to the tenant’s charge to cover the amortized cost of clearing and incorporating the additional land. This calculation would bring the total minimum rent to the accurate value of S$26,500, CPIB pointed out.

The lack of precision in guide rent evaluation extended to the second valuation for the lease renewal, which came to light during CPIB’s investigation and was subsequently communicated to the SLA.

Despite the guide rent discrepancy, the SLA ensured that Mr Shanmugam paid no less than the minimum rent of S$26,500.

CPIB confirmed that the inaccuracies in the guide rent calculation did not arise from any ill intentions from the SLA officers involved. It found no evidence to suggest any fraudulent misuse of authority in the valuation process.

This incident would be up for debate in the next Parliament sitting, but let’s face it: with these revelations, MCI’s YouTube channel isn’t going to get its Sliver Button after all.

To know more about renting colonial houses, you can read this article about renting colonial houses in Singapore, or watch this video to the end: