The Building Levy and Its Future

Options for the Future

At the Society’s 1995 Annual General Meeting (‘AGM’), practitioner members had unanimously passed a resolution to collect a building levy of $300 per practitioner member from 1996 to enable the Society to purchase its own premises. The Society purchased its premises at 39 South Bridge Road in 1997 for a sum of $7 million with additional renovations costing $1.6 million. The purchase and renovations were funded through a mortgage loan and collections from the building levy.

In 2002, the Society made an application to the High Court for the outstanding mortgage on the premises to be paid off from monies borrowed from the Compensation Fund. This was approved by the High Court, and the Society’s Building Fund as of 30 September 2005 owed the Compensation Fund a sum of $950,000.

By May 2006, the Society paid up the loan which had been borrowed to purchase the premises. After payment of the mortgage, an estimated $500,000 would remain in the
Building Fund. 

At this year’s Annual General Meeting (‘AGM’) to be held on 16 October 2006, practitioner members will be asked to vote on the future of the building levy. To help members think through this matter early, the Council had invited members to give views on options via an e-mail survey sent on 25 May 2005. One hundred and eighty-eight members or five per cent of the membership responded, indicating their preferences for one of the three options put forth by Council:

The matter was discussed at last year’s AGM and this year, an information leaflet was sent to members via fax and e-mail before a dialogue session on the future of the levy was held with the Council on 20 April 2006.

In the information leaflet, an alternative option was put for discussion and views – which was to allow the building levy to lapse and for the membership to consider a small increase in membership subscription for all categories and to leave the Society to manage the increased anticipated income to fund all long-term needs of the Society.

Future Maintenance and Repair Costs

The estimated running and maintenance costs of the Society’s premises are $90,000 per year with the expectation that they would increase to $200,000 per year as the building ages. The maintenance of the two Bar rooms at the courts currently costs the Society $34,000, with renovations at least every five years. With reserves in the General Fund standing at just over $2 million, and without a building levy to help defray maintenance costs, the income from the General Fund would not be sufficient in the long-term to maintain the Society’s premises and the Bar rooms.

A Dialogue on the Future

The Council held a dialogue session with members to garner further feedback in order for the Council to put forth a considered resolution for practitioner members’ vote at this year’s AGM.

At the dialogue session held on 20 April 2006 attended by less than 10 members together with several members of Council, the Treasurer, Mr Michael S Chia clarified that the Society’s surplus of $500,000 would not last more than 10 years, given that the Society from 2006 would be taxed on its income at a rate of 20 per cent per annum. Without a building levy, the Society would have immense difficulty building up its future reserves.

The members at the dialogue made the following suggestions:

1   The Society separates its maintenance costs and replacement costs, particularly as the estimated $90,000 for yearly maintenance excludes replacement costs. The Council noted the observation and said that it would share with members at the AGM the costs of maintenance and replacement.

2   The Society divides the building levy collected into sinking and maintenance fund contributions and reduces the levy to $100.

3   The Society allows the building levy to lapse since the premises would be fully paid for. Instead, the Society focuses on building its revenue in order to have more funds to improve the work and activities of the Society; improve membership benefits and services; and develop a professional secretariat for the Society. To achieve this, an increase in membership subscription of $100 was suggested.

The President, who chaired the dialogue session, thanked members for their views and noted that the decision would lie with members who, as a collective body, would vote on the future of the building levy at the forthcoming AGM.

Sharmaine Lau

The Law Society of Singapore