Recent Development In Law Governing Strata Properties In Malaysia

1. INTRODUCTION

In recent times, developers have taken preference in undertaking strata developments in Malaysia such as apartments and condominiums, particularly in the city centre and satellite towns. This is very common in developed nations such as Singapore and Australia. With that being said, the laws governing the strata properties would need to be more comprehensive to cater for the uprising of strata developments which comes with its own issues, conflicts and/or inconsistencies.

In Malaysia, the current laws governing strata properties are the Strata Titles Act 1987 (“STA”), Strata Management Act 2015 (“SMA”) and the Housing Development (Control and Licensing) Act 1966 (“HDA”). There are also regulations issued under the abovementioned Acts, such as the Housing Development (Control and Licensing) Regulations 1989 (“HDA Regulations”).

There were concerns of lacunas and administrative loopholes in managing the strata developments. Recently, the Government took steps to introduce various amendments to the laws governing the strata development to overcome the various issues faced in these strata developments. We will look into the 5 main amendments on the current laws.

2. MAIN AMENDMENTS

A. Issuance of strata title

One of the major amendments to the STA is in relation to the expedited issuance of strata title. Previously, the original proprietor has to submit the application for issuance of strata title once the construction of the building was completed. This caused delays in the issuance of the strata title. However, the amended STA requires the original proprietor to conduct several pre-requisite before any sale for the strata property can be made.

With the new amendments, the original proprietor is required to do the following throughout the construction stage:

1. Prior to commencing any sale of strata property, the original proprietor should obtain the Certificate of Share Unit Formula (Sijil Formula Unit Syer – SiFUS) from the land office and file the Schedule of Parcels to the Commissioner of Buildings[1];

2. Prior to superstructure stage, the original proprietor must obtain a Certificate of Proposed Strata Plan from Director of Survey in Jabatan Ukur dan Pemetaan Malaysia (JUPEM)[2]. This certificate further facilitates the application of subdivision of building or land; and

3. Upon completion of the superstructure stage, the original proprietor would need to submit the application for subdivision of the building to the land office within 3 months[3].

Failure on the part of the original proprietor to comply with these new requirements would constitute an offence and be liable for fine of not less than RM10,000 and not more than RM100,000 and/or imprisonment not exceeding 3 years. There is also a further fine of between RM100 to RM1000 for every day in which the offence is continuing. The Court may also order for the original proprietor to comply with the pre-requisites[4]. It must be noted that typically, the developer, through a power of attorney, would act on behalf of the original proprietor in complying with these requirements.

With these new requirements, amendments were also made to statutory forms for sale and purchase agreement for a newly developed property under Schedule H of HDA Regulations in 2015 whereby the schedule of payment in the third schedule has been tied with the delivery of vacant possession and issuance of strata title to the purchaser.

These new amendments were made to ensure that upon delivery of vacant possession of the strata property to the purchaser, the strata title will be issued as well. This also secures the interest of a purchaser as he obtains his strata title upon gaining access to his newly acquired strata property.

Despite the law being in place to expedite the whole process for the delivery of vacant possession and issuance of strata title, there have been instances where developers who were unable to give vacant possession to the purchasers in time have requested for an extension of time from the Ministry of Housing and Local Government (“MHLG”) and Controller of Housing (“Controller”). In the recent Court of Appeal case of Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor v Ang Ming Lee & Ors And Other Appeals[5], involving the buyers of Sri Palace Condominium taking an action against MHLG and the developer for the delay in delivery of the vacant possession and the extension of time granted by the MHLG, it was claimed by the buyers that the extension of time deprived them of the liquidated ascertained damages as provided in the sale and purchase agreement (Schedule H) signed for the said development. It was held by the Court of Appeal that even though MHLG had the authority to grant such extension of time to the developer, the developer should have consulted the purchasers before applying for such extension of time. As no such consultation was made to the purchasers, the decision to grant the extension of time, whether given by the Controller or MLHG, was null and void and of no effect. The decision to grant extension of time was accordingly set aside. The Court of Appeal further ruled that despite the discretion to provide extension of time, it must be done fairly so as to not prejudice the rights of the purchasers.

With the latest amendments, the developers are required to provide vacant possession as well as separate strata title simultaneously. The law still allows the developer to apply for extension of time from the Controller, but following the decision of the Court of Appeal referred to above, it is recommended that the developer should consult the purchasers before applying for any such extension.

B. Quit Rent Payment Obligation

Previously, the payment for quit rent (which is the annual sum payable to the State Authority by way of rent[6]) is done to the State Authority by the management corporation (MC) or the joint management bodies (JMB) on behalf of the parcel owners. This is where every parcel owner of a strata development would need to make the contribution for quit rent to the MC. The issue came about when there are parcel owners who have refused to make payment to the MC, and it greatly affected the ability of MC to make the quit rent payment.

This however, creates a highly large number of complaints when there have been many cases of unit owners failing to pay the quit-rent and the burden shifting to the JMB and MC of stratified projects. STA was amended, whereby the obligation of to make quit rent payment is now on the parcel owner individually[7]. To facilitate the process, the State Authority issues the quit rent bill to the parcel owners directly without going through the MC. What’s interesting is that the State Authority is now allowed to enforce the outstanding quit rent payment against the parcel owner, which will be discussed in 2(C) below.

In Selangor, the enforcement of the new powers of the State Authority can be seen from 1 June 2018, whereby Selangor’s Land and Mines Department have started issuing quit rents directly to the individual parcel owners as compared to the JMB and/or MC. It is obvious that by this process, more and more parcel owners are settling their quit rents directly to the State Authority, within the stipulated time.

C. Forfeiture of Strata Property

In order to enforce the collection of quit rent from the individual parcel owners, the State Authority is vested with the power under the STA to forfeit any of the parcels belonging to the parcel owners who have defaulted in making the quit rent payment[8]. This is similar to the power vested in the State Authority under the National Land Code 1965 (“NLC”)[9] where the State Authority, may upon giving notice to the land owner, forfeit any land belonging to the land owner who has defaulted in paying the quit rent. The forfeited strata property will then be vested to a transferee to be determined by the State Authority, to hold the property, for the benefit of the State Authority, freed and discharged from any interest subsisting prior to the forfeiture[10]. The previous parcel owner is still liable for any arrears relating to management funds, debt and any other outstanding payment under the SMA[11].

D. Land Acquisition of Strata Property

Another major change in the recent laws relates to strata development is contained in the Land Acquisition Act 1960 (“LAA”), Section 57A and the new Seventh Schedule of STA. Under these amended provisions, the State Authority is now empowered to make compulsory acquisition on an individual parcel or any area of the strata property including the common property. The State Authority may now compulsorily acquire a strata property for public purpose which was not possible before as the power was only to acquire a land or a portion of the land.

E. Custodian of Common Property in Strata Property

It is made clear now in the STA that the MC would be registered as the proprietor of the common property and holds custody of the titles for the common property[12]. MC is given the power to deal with the common property as permitted under the NLC[13] provided that the MC obtains the unanimous resolution of the parcel proprietors[14]. (save for the power to transfer, create charge or lien[15]).

However, the MC has no power to transfer, create a charge or lien over the common property.

3. CONCLUSION

As the development of strata properties has become increasingly in demand in Malaysia, the law would need to be comprehensive and dynamic enough to cater for any issues which may occur due to the fast development. All players who are involved with the development of strata properties including the regulatory authorities will have to continue to monitor the progress in order to keep up the strata development.

Fortunately, the regulatory authorities in consultation with the industry players are open to changes required under the law and we are looking into exciting times for the development of strata properties in Malaysia which may include issuance of titles of air space as well as a creation of strata properties over a private lease. There have been proposals by the Ministry of Housing and Local Government for further amendments to be done, particularly on the provisions of the SMA[16].

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1 Section 6, SMA
2 Section 8A, STA
3 Section 8, STA
4 Section 8(8), STA
5 [2018] 9 CLJ 640
6 Section 9, NLC
7 Section 23B and Section 23C,STA
8 Section 23H, STA
9 Section 127, NLC
10 Section 23M (a) and (b)
11 Section 23M(c), STA
12 Section 17B(1), STA
13 Section 17B(2), STA
14 Section 17B(3)(a), STA
15 Section 17B(3(b), STA
16 https://www.nst.com.my/property/2018/11/427166/strata-management-act-2013-smaneeds-be-amended

Prepared by:

Haji Mohd Rasheed Khan Mohd Idris (Senior Associate) rasheedkhan@azmilaw.com

Muhammad Inamul Hassan Shah Norman Dunsah (Senior Associate) hassanshah@azmilaw.com