Section 6 of the Strata Management Act, 2013 (implemented 1.6.2015) makes it compulsory that a developer cannot sell any parcel (stratified properties, whether commercial or residential) unless the Schedule of Parcels has been filed with the Commissioner of Building (COB). Thus, it is incumbent upon the Developer’s licensed land surveyor and registered architect to certify that the building / land is capable of being subdivided. A Developer has to display the Schedule of Parcels in a conspicuous location at the point of sale so that purchasers know what they are getting eventually. With the share units being calculated according to the First Schedule of the SMA 2013, sharing of responsibility in maintaining the common areas will be more equitable and transparent and developers are also required to pay maintenance charges sinking funds and other outgoings for their unsold units.
CLOSING THE FLOOD GATE
The Government has heeded the recommendations of the National House Buyers Association (HBA) to close the floodgate and resolve the issue of recalcitrant housing developers who deliberately fail/ neglect/ refuse to apply for strata titles and the issue of failure to effect subsequent transfer of strata titles in purchasers’ name, though the full purchase price has been paid by the purchasers. It was serious enough for the government to enact new statutory provisions, amending existing ambiguous laws (to plug the loopholes) and repealing redundant sections of the Acts to achieve this much-needed transformation. The new salient mechanisms are elaborated below.
SCHEDULE OF PARCELS
To ensure that strata titles can be obtained eventually, Schedule of Parcels (SOPs) must be filed with the COB before the developer can sell any parcel or proposed parcel under S.6(1) SMA 2013. The new regime of law requires the developer to comply with all the pre-requisites before proceeding with any sales of the parcel.
The major pre-requisite requirements include the payment of all premiums and fees to the relevant authorities and bodies; land and strata title survey; approval of building plans and allocation of share units. The SOPs are prepared by developer’s licensed land surveyor, comprising of location plan, storey plan and delineation plan – drawn based on approved building plans. It shall show all the parcels with dimensions, areas, share units, all accessory parcels, common properties using the same format as approved strata title plans. Developers cannot simply carve out any common property and accessorized as they like before, accessorize remaining unsold residential car parks to developer units. Under S.6(3) SMA, developer’s licensed land surveyor and registered architect have to certify on the SOPs that the buildings/lands shall be capable of being subdivided.
A Schedule of Parcel shows the proposed share units of each parcel or proposed parcel and the total share units of all the parcels. In the case of a phased development, the schedule of parcel shows the proposed quantum of provisional share units for each provisional block. Total share units of all parcels, including provisional block, is normally referred to as the aggregate share unit.
Share unit is the number assigned to each parcel by the developer’s licensed land surveyor to determine the maintenance charges, sinking fund and other outgoings, to be paid by each parcel owner in an equitable and transparent manner. Share units are computed based on area, usage, size and location of the accessory parcel using the prescribed formula under the First Schedule of SMA 2013. Share units shall be determined before any sale so that purchasers know from the onset their share of payment including those of developer for their unsold units.
Each parcel is allocated with share unit and is shown on the strata plan. The owner of a penthouse will have bigger share units, thus more voting rights (if voting is done by poll) as compared to an owner of an intermediate unit. A parcel owner with a bigger share unit will have to pay higher maintenance charges.
BETTER PROTECTION FOR HOUSE BUYERS (TO A CERTAIN EXTEND)
Implications from these new provisions that are beneficial to purchasers are as follow:
1. Before any sale, the developer must obtain all necessary approval on land matters with land premiums, registration of title fees paid, land title and strata survey fee paid, approved equitable share unit for all the parcels including provisional block, approved building plans. A Certificate of Share Unit Formula or in the Malay language Sijil Formula Unit Syer or its acronym ‘SiFUS’ is a certificate issued by Director of Lands and Mines (DLM) after all these conditions are complied with. This new requirement is in line with the spirit of the Strata Titles Act ie to achieve issuance of strata title simultaneously with delivery of vacant possession.
2. For a housing developer license and sale/ advertisement permit to be issued by the licensing department of the Housing Ministry, the developer need to obtain the ‘SiFUS’ from DLM and file a copy of Schedule of Parcels with the COB.
3. To further protect the house buyers, the concept of ‘vacant possession (of residential parcel property) simultaneously with strata title’ was adopted. It effectively means that a developer cannot deliver vacant possession and claim 17.5% progress payment unless strata title has been issued. This is the effect of Clause 27(1) Schedule H, of the Housing Development (Control & Licensing) Regulations 1989 (as amended in 2015). The new clause reads inter-alia:-
Clause 27 (1) Manner of delivery of vacant possession The Developer shall let the Purchaser into possession of the said parcel upon the following:- (a) the issuance of a certificate of completion and compliance; (b) the separate strata title relating to the parcel has been issued by the appropriate authority; (c) water and electricity supply is ready for connection to the said parcel; (d) ………..
4 Further, the developer cannot claim the next 2.5% progress payment unless the duly executed instrument of transfer together with the original issue document of strata title is delivered to the purchaser or the purchaser’s solicitor under item 4 Third Schedule (Schedule of Payment).
5. Developer shall be liable to pay liquidated ascertained damages (LAD) calculated at the rate ie 10% per annum for delays in delivery of vacant possession beyond the stipulated period of 36 months if the strata title has not been issued. A new clause now allows a purchaser to deduct such LAD from any installment of the purchase price due to the developer – sort of set-off / contra.
6. A developer including liquidator (as a de-facto developer) for existing scheme cannot sell any parcel or proposed parcel until SOPs has been filed with COB under S.6(1) SMA 2013.
7. Amendment of building plans by a developer will be reduced and made tedious by requiring that any proposed amendment of such building plans, thus requiring amendments to the schedule of parcels, after having filed with the COB requires the prior written consent of all purchasers. Any refiling whatsoever to COB must be made within 30 days under Regulation 6(3) (b) Strata Management (Maintenance and Management) Regulations 2015 (SMR 2015).
8. Purchasers can be confident of getting their strata titles as developer’s licensed land surveyor and registered architect have to certify on the SOPs plans that the buildings/lands are capable of being subdivided before signing the sales and purchase agreement (SPA) and strata titles must be issued before delivery of vacant possession.
9. The developer has to display the Schedule of parcels chart conspicuously/ prominently at their sales gallery/office so that purchasers can see all parcel areas, dimensions, share units under S.6(2) SMA 2013 so that they can be well informed before signing the SPA. This will avoid any future grievances.
10. Under the revised definition of ‘developer’ which includes liquidator under HDA (as amended by the 2012 amendments), SMA 2013, developer including liquidator for existing building must now submit for strata title application within three (3) months after the enforcement date to avoid being prosecuted.
With the mushrooming of high-rise buildings (vertical strata titles) and gated/ guarded housings (horizontal strata titles), it is inevitable that our country moves towards this improved comprehensive regime of law to better govern the fundamental need of the modern society – owning a home, forming a community and living within a shared environment.The changes led by the new strata regime will to a certain extent address the inadequacies and shortcomings faced by the old strata laws and provide adequate protection to the purchasers’ of the developer’s products. Afterall, purchasers are developer’s customers and should be treated with dignity and not short changed.
This article was first published in the iProperty.com Malaysia May 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!