LAW & REALTY: Problems faced by owners of strata title properties – Lately, the authorities have insisted that the current year’s quit rent for the master title must be paid before the authorities will accept for registration any instrument of dealing relating to a parcel.
It is quite common for Malaysians to ask whether one’s property is “landed property” or with “strata title”. The issue document of title to a landed property is issued by the relevant authority under the National Land Code, 1965 (“NLC”), whilst the issue document of strata title is issued under the Strata Titles Act 1985 (“STA”).
Strata title properties are parcels of properties in a building to be subdivided into separate parcels. Examples of properties with strata titles are office suites, parcels in a commercial complex, apartments, flats, condominiums and townhouses. When strata titles for such properties are issued, the master title for the lot of land on which the subdivided building has been erected thereon, continues to exist and will be registered in the name of the developer or, when the book of strata register is opened, in the name of the management corporation (“MC”). It is pertinent to note that the master title is issued under the NLC and not the STA.
Owners of properties with strata titles tend to face certain problems which are not faced by owners of landed properties.
The first problem is a major and common complaint relating to the period of time it takes for strata titles to be issued. Sometimes this delay is attributable to the developer or its financier, and sometimes, to the relevant authority responsible for issuing the strata titles.
There are sufficient provisions in the STA to regulate the period within which a land proprietor (usually also the developer) must apply for the strata titles in a completed development, failing which the land proprietor shall be guilty of an offence and liable on conviction to a fine of not less than RM10,000 but not more than RM100,000 and a further fine of not less than RM100 but not more than RM1,000 for each day the offence continues to be committed.
However, the lack of enforcement of such provisions is a sore issue, as one hardly hears of or learns of anyone being convicted for such an offence. In the meantime, and until the coming into force of the Housing Development (Control and Licensing) (Amendment) Act 2006, owners of properties with strata titles will have their sub-sale transactions or re-financing transactions inordinately delayed as the consent of their respective developers is required before the property owners can proceed with these transactions. The Amendment Act has done away with the requirement of obtaining the developer‘s consent before a sub-sale or refinancing transaction.
The second problem is the responsibility of parcel owners to pay monthly charges for the maintenance of the common areas and other contributions, to the developer, with the parcel owners having no say in the amount of the monthly charges and the standard of service provided.
Parcel owners can only participate in matters pertaining to the maintenance of the common areas after the strata titles have been issued and the MC has been formed from amongst them. This problem will soon be gone when the Building and Common Property (Maintenance and Management) Act 2006 comes into force, as this Act will establish a Joint Management Body (JMB) comprising of the developer and the purchasers and the JMB will maintain the common areas and determine the amount of monthly charges, prior to the formation of the MC.
The third problem relates to the payment of the quit rent for the master title, which is registered in the name of the developer or the MC, as explained earlier. When strata titles have been issued for the development, a parcel owner will want the strata title for his parcel to be quickly transferred and registered in his name. In the normal course of lodging an instrument of dealing for registration at a land registry or land office, the quit rent of the property which is the subject of dealing must be shown to have been paid for the current year. Quit rent is charged on the master title and not on the property with strata title and parcel owners are required to pay a proportionate amount to the developer or the MC, who will then pay the quit rent for the master title to the relevant authority on or before May 31, each year.
Previously, in Selangor as well as in Wilayah Persekutuan, a letter of confirmation from the developer or the MC that the parcel owner has paid his portion of the quit rent for the master title is required before the registration authority will accept the instrument of dealing for registration.
Lately, however, the authorities have insisted that the current year’s quit rent for the master title must be paid before the authorities will accept for registration any instrument of dealing relating to a parcel. This change in practice has affected many parcel owners as they are unable to register any dealing in connection with their property even though they have paid their portion of the master title quit rent to the developer or the MC.
Instrument of dealings which are lodged in the months between January and May of each year are inevitably affected as most developers or MCs do not pay the quit rent for the master title until the month of May each year, if at all. Penalties, fines and interests are imposed on the parties to the transactions, with some transactions being terminated and ending in litigation.
The Strata Titles (Amendment) Act 2006, which has yet to come into force, appears to have addressed this problem as provisions are in place to allow for payment of quit rent on the parcels and not on the master title. However, before this amendment comes into force and quit rent is made payable on each parcel and not on the master title, the problems highlighted above will continue unless the relevant land authority accepts a letter of confirmation from the developer or the MC to state that the parcel owner has paid his portion of the quit rent for the master title.
It is, therefore, prudent for owners of strata title properties to seek independent legal advice on their rights and liabilities in any transaction in order to avoid anypitfall.