SINGAPORE, June 29 — The two ministers who rented out black and white colonial bungalows at Ridout Road have been cleared of all wrongdoing after two separate reviews into the matter were initiated last month by Prime Minister Lee Hsien Loong, said the Prime Minister’s Office (PMO) yesterday.
It was announced in May that there would be an independent review led by Senior Minister Teo Chee Hean into the rentals of 26 Ridout Road and 31 Ridout Road by Law and Home Affairs Minister K Shanmugam and Foreign Affairs Minister Vivian Balakrishnan respectively.
In a statement yesterday, PMO revealed that Lee had earlier also tasked the Corrupt Practices Investigation Bureau (CPIB) to conduct its own investigation of the matter last month as the CPIB “reports directly to the prime minister and has the necessary powers to ascertain if there was any corruption or criminal wrongdoing”.
“Both CPIB and SM Teo have completed their reviews and submitted their reports to PM Lee,” said the statement.
“The Prime Minister accepts the two reports and has ordered that the two reports be published and tabled in Parliament as a Miscellaneous Paper.”
Both reviews concluded that the ministers had conducted themselves properly in the two rental transactions, there was no abuse of power or conflict of interest resulting in the ministers gaining any unfair advantage or privileges and that the process they underwent of renting out the two properties did not deviate from government guidelines.
The Attorney-General’s Chambers has agreed with CPIB’s findings and decided that no further action will be taken as “the facts do not disclose any offence” and that the investigation into the matter is closed.
In a statement last month, the Singapore Land Authority (SLA), the agency overseeing the rental of these colonial bungalows, said that Shanmugam had notified a “senior Cabinet colleague” when he wanted to rent the property, and it was revealed on Wednesday that this colleague was Teo.
It was also disclosed yesterday that Shanmugam had recused himself of any discussions related to his rental of 26 Ridout Road, and had instructed the then Senior Minister of State in the Ministry of Law (MinLaw), Indranee Rajah, to handle any matters that may arise with regard to the property.
The review by CPIB did find, however, that SLA had been imprecise in its use of the term “guide rent”.
This meant that SLA, a statutory board under the Ministry of Law, had incorrectly said in a statement in May that the rental offer made by Shanmugam for 26 Ridout Road was above the guide rent, when in fact it was equal to the guide rent.
The guide rent is the reserve rental fee based on market rates as determined by qualified valuers.
CPIB said that its review included interviews with the two ministers and their spouses, former and current officers from MinLaw, SLA and the National Parks Board, property and managing agents, and other individuals with the knowledge of the rental transactions of the two state properties in question.
How the review began
The bungalow at 26 Ridout Road was leased to Shanmugam in June 2018 and he renewed the tenancy for another three years in June 2021.
The one at 31 Ridout Road was leased to Balakrishnan from October 2019 and the tenancy was renewed three years later.
Speculation around the rentals of these two properties arose when Reform Party chief Kenneth Jeyaretnam wrote a series of articles last month questioning whether the ministers were “paying less than the fair market value” for the properties, among other allegations.
He alleged that trees had been cut down illegally on Shanmugam’s rented property, and that SLA had paid for work to be done on a car porch there.
Responding to the articles by Jeyaretnam, SLA confirmed in May that the state properties were leased to both ministers above the “guide rent” and that the rentals were fully compliant with its procedures.
It added that “more details on this issue” would be provided during the next parliamentary session in July.
Ahead of the upcoming seating, various Members of Parliament have filed questions on the matter.
Findings on 26 Ridout Road
According to the CPIB review, 26 Ridout Road state property had been vacant since Dec 2013 without attracting bids for more than four years, and in 2018, Shanmugam appointed a property agent to represent him for a rental transaction of the property.
This was after he had visited some properties since 2017, all of which had a “For Lease” sign displayed prominently on their gates.
During his visit to the property, Shanmugam noticed overgrown and thick vegetation on an empty slope on land adjacent to the property. He had expressed concern that there could be a public health risk such as from snakes, mosquitoes, or fallen trees.
Through his property agent, Shanmugam had initially negotiated with SLA on clearing of the adjacent land before leasing the property, at his own cost, as he was “not confident that the adjacent land would be maintained in a way that would keep the place free of health and safety issues”.
“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,” said CPIB in its report.
However, SLA’s view was that the tenant’s responsibility would not extend to maintain the area beyond the tenant’s property boundary, and so if Shanmugam were to maintain the adjacent land at his own cost, the adjacent land then had to be included into the tenancy of 26 Ridout Road.
This was agreed to, and SLA then did the fencing of the adjacent land within the property boundary, and this meant that as a result, the land size increased by about 150 per cent, from 9,350sqm to 23,164sqm.
The cost of the site clearance, replanting of greenery and fencing was S$172,000 (RM593,134), which was initially borne by SLA and subsequently recovered from Shanmugam’s rent.
The cost of maintaining this additional land, approximately S$25,000 per year, was incurred by Shanmugam, a cost which would otherwise be borne by SLA.
As for the guide rent, Shanmugam and his agent were unaware of it. Instead, his agent studied the rental of comparable neighbouring properties and independently determining and valued the rent.
CPIB noted that in this process, Shanmugam had instructed his property agent that he should not be paying less than his neighbours.
The final negotiated amount was S$26,500, which met the minimum rental to be achieved by SLA.
The repair work on the property was substantial, having not been in use since 2013, with essential repair works done by the state amounting to S$515,400 to ensure that the property was habitable, which was undertaken and borne by SLA.
On Shanmugam’s end, he paid S$61,400 to build the car porch, and on top of that, over S$400,000 for additional improvement works to the state property not covered by SLA’s restoration works.
As for the tenancy agreement, Shanmugam’s wife signed a nine-year agreement, broken up into three three-year blocks.
After the tenancy was first renewed in 2021, the rental of the second term was maintained at S$26,500, as determined by SLA based on prevailing market considerations.
Shanmugam had also informed his ministry, MinLaw, that he would recuse himself of any discussions related to the rental of his property.
He had instructed then Senior Minister of State in MinLaw, Indranee Rajah, to take over such matters, and that if the matter had to go beyond Indranee, that she should approach Senior Minister Teo.
In his separate review, Teo noted that Shanmugam had informed him of this arrangement.
Shanmugam had also informed the deputy secretary at MinLaw that he would recuse himself of any discussions related to the rental of his property.
While the CPIB review did not name MinLaw’s deputy secretary at that time, public records show that the role was filled by Han Kok Juan from Nov 1, 2015, to Sept 15, 2019.
“There was no matter raised by the SLA to MinLaw during the entire rental process,” noted CPIB.
The bureau also noted that “due diligence checks” were also done before signing of the tenancy agreement for the No. 26 Ridout Road state property.
This included a declaration made by SLA made to the permanent secretary at MinLaw, that the processing of the rental transaction was properly done with no conflict of interest.
Findings on 31 Ridout Road
Balakrishnan’s spouse came across a “For Lease” sign at the 31 Ridout Road. She contacted the SLA’s appointed managing agent on Sept 11, 2018 and they negotiated a rental price.
The property had a land size of 9,157.36 sqm and had been vacant since July 2013. It was listed on the State Property Information Online website, and had been vacant for five years following two unsuccessful bids.
The managing agent named an asking rent of S$19,000, and Mrs Balakrishnan offered S$19,000 with the inclusion of essential repair works and upgrading of the toilet.
The agent rejected the toilet upgrading as it was considered to be improvement works, and the minister’s wife subsequently agreed to bear the costs of the toilet upgrading.
The asking rent for 31 Ridout Road was independently determined and valued by the managing agent, with neither Balakrishnan nor his wife being 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,” said CPIB.
CPIB found the managing agent had asked SLA whether there was a policy for very very important persons (VVIPs), and the SLA leasing manager replied in an email that there was no policy for VVIPs, and “all prospects and tenants were to be treated equally”.
CPIB did not reveal the intent behind the question.
“There was no preferential treatment given in the process of the rental transaction,” said CPIB.
The total cost of essential repair works borne by SLA to restore the 31 Ridout Road state property was S$570,500, and 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 the property was initially over seven years, starting with a three-year tenancy, followed by two two-year blocks, and this was signed by his spouse in October 2019.
After the first three-year term, Mrs Balakrishnan requested and was granted a renewal of another three years and then a two-year term instead of two two-year terms.
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, said CPIB.
CPIB: Lack of precision over guide rent
In assessing the guide rent quantum for Shanmugam’s rented property, 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 that the offer by the tenant (S$26,500) was above the guide rent was incorrect, said CPIB in its review.
“In fact, the S$26,500 rental Shanmugam paid was equal to the correct guide rent of the property.”
CPIB explained that the guide rent is intended to be the minimum rental to be achieved.
With the additional cleared land at 26 Ridout Road, SLA valued the minimum rental of the property at S$26,500, and so SLA had therefore assessed the guide rent to be equal to this minimum rental.
However, SLA assessed the guide rent to be S$24,500, and the agency’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,” said CPIB.
CPIB found that the 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,” the bureau said.
Despite this issue with the guide rent, SLA did ensure that Shanmugam paid not less than S$26,500, which is 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,” it said. — TODAY
