NEW STRATA LAWS: FINALLY IN FORCE

By: Admin

Background on Malaysian Strata Law

Malaysian Strata Law has always been criticized as outdated and inadequate compared to countries like Singapore, Hong Kong and Australia. In fact, for a very long time we did not have a single, comprehensive source of law on the area. Following the Australian[1] experience our National Land Code 1965 did initially contain some scattered provisions on ‘subsidiary’ titles which were later repealed and replaced by the Strata Titles Act 1985[2].

The STA 1985 was the first piece of legislation passed to specifically govern subdivision of buildings into parcels and the subsequent issuance of strata titles[3] in Peninsular Malaysia. Though commendable, the STA 1985 proved insufficient over time particularly in covering the aspect of management of subdivided buildings. This then led to the enactment of Building & Common Property (Maintenance & Management) Act 2007[4] to specifically address the issue of maintenance and management of high-rise buildings and their common property by developers followed by joint management body and management corporation.

Co-existence of STA 1985 and BCPA 2007 further led to confusion on interpretation and application of the law in relation to management and maintenance of subdivided buildings, which necessitated overhaul of the law as such.

The 2013 Strata Acts

On 1st June 2015 the long-awaited 2013 Strata Acts – Strata Titles (Amendment) Act 2013[5] and Strata Management Act 2013[6], were brought into force. The STA 2013 extends the application of STA 1985 to the Federal Territory of Labuan. Provisions in STA 1985 are amended and harmonized with the National Land Code 1965. STA 2013 has also carved out all the provisions regarding management of subdivided building[1] under the STA 1985 and placed it purely under the governance of Strata Management Act 2013[7]. The implementation of the SMA 2013 is complemented by the Strata Management (Maintenance & Management) Regulations 2015[8] which duly came into force on 2nd June 2015.

Combined impact of the Strata Laws is to ensure strata titles being passed to purchasers upon delivery of vacant possession, promote certainty on the allocation of share units from early stages of development and greater check and balances on developers[10] at various stages of construction. This article is an effort to raise awareness on the key changes introduced by the recent laws on developers involved in stratified developments[11]:

Prior to Sales of Parcels

Under the new regime of law developers must now fulfill certain pre-requisites before proceeding with any sales of parcel;

i. Certificate of Share Unit Formula (SijilFormula Unit Syer)

Developers must obtain a Certificate of Share Unit Formula (or SiFUS) to be issued by the Land Office (PTG). This new insertion is in line with the spirit of the Strata Acts i.e. to achieve passing of strata title with delivery of vacant possession. Accordingly, in order to obtain SiFUS developers must ensure the following matters and documents are in place;
All relevant land matters are settled;
Receipt of payment for Land Premium (if any);
Letter of Application for Qualified Title as endorsed by Land Office (if there is no Final Title);
Receipt of Quit Rent for the current year;
Letter of appointment of Licensed Land Surveyor;
Receipt of Surveying Fees by Land Surveyor Board;
Share Unit Formula;
Schedule of Parcels signed by Licensed Land Surveyor and Architect/Engineer;
Approved Building Plans

ii. Schedule of Parcels

Section 6 of SMA 2013 makes it compulsory for developers of any building or land intended for subdivision to file a Schedule of Parcels[12] with the Commissioner of Building before proceeding with sales of any parcel.

Developers are not at liberty to unilaterally change the plan or legends. Any amendment to the Schedule of Parcels can be made only (i) as per the requirement of local authority or (ii) with agreement of all purchasers of the development. In case of such changes, developers must submit within 30 days from the date of alteration or revision of building plans an amended schedule of parcels[13].

To promote transparency in the development industry, the newstratalawsrequires a copy of the Schedule of Parcels to be exhibited at a conspicuous position[14] in any office or branch office of developers and at such place where the sale of parcels is conducted.

Super Structure Stage

Once a development reaches it super structure stage, the developer must begin the process of applying for subdivision of building or land[15];

i. Certificate of Proposed Strata Plan (CPSP)

A new insertion has been made under section 8A of STA 1985 whereby developers must now apply for and obtain a Certificate of Proposed Strata Plan from Director of Survey in JUPEM. This certificate certifies the proposed strata plan which further facilitates the application of subdivision of building or land.

ii. Application for Subdivision

Under the revived section 8, STA 1985 the original proprietor of the land or building must apply for subdivision of building or land 3 months[16] from the date of issuance of document certifying the super structure stage.

Besides complying with the time frame of application, developers must also ensure (i) the land is held under final title; (ii) use of the land is not contrary to the land category and conditions; and (iii) the land is not subject to any charge or lien, before making an application for subdivision of building or land.

Delivery of Vacant Possession

Common Property Defects Account

Upon delivery of vacant possession, developers are now required to deposit[17] a sum not less than 0.5% of estimated cost of construction of development area (which includes commercial and residential components) but exclude land costs or RM50,000 (whichever is higher) into a Common Property Defects Account, an account to be opened and maintained by the Commissioner of Building.

Under the new law, the Common Property Defects Account allows a claim[18] against any defect in the common property to be made by either (i) a purchaser, (ii) a proprietor, (iii) a joint management body, (iv) a management corporation, (v) a subsidiary management corporation, (vi) managing agent or (vii) any other interested person[19].

Maintenance and Management

i. Preliminary Management Period

From the date of delivery of vacant possession until one month after the first Annual General Meeting of the Management Corporation, developers bear the responsibility to maintain and manage the subdivided building or land and common property. During this period developers are duty bound to, amongst other;

Determine and collect charges and contribution to sinking fund;
Establish and maintain a maintenance account until the expiry of the Preliminary Management Period (ie one month after the first AGM);
Prepare and maintain a register of all parcel owners of the subdivided building or land;

ii. Management Corporation

Before expiration of the Preliminary Management Period, developers must hand over control of the maintenance or management by transferring all balance of money in the Maintenance Account, administration office and all related records, plans, warranties on their respective development to Management Corporation.

iii. Limited Common Properties and Subsidiary Management Corporation

The SMA 2013 expressly acknowledged the concept of Limited Common Properties which are common features in mixed developments. Limited Common Properties are such part of common property that is designated for the exclusive benefit of proprietors of two or more parcels.

For effective management of this category of common property, Management Corporation can now create one or more Subsidiary Management Corporations and delegate the management of limited common properties to the same, for the purpose of representing the different interests of parcel proprietors;

The creation of a Subsidiary Management Corporation (SMC) is governed closely under the new s17A STA 1985. The Management Corporation (or its appointed professionals) to prepare, convene and facilitate an Extraordinary General Meeting (EGM) in order to reach a comprehensive resolution on a special strata plan which must clearly define the boundaries of limited common properties. The Management Corporation must then submit the special strata plan, copy of the comprehensive resolutionand poll result to the Director of Land & Mines who will duly issue a Certificate for establishment of SMC;

iv. Statutory By-Laws

The SMR 2015 provides a more complete set of by-laws in the new Third Schedule. Previously the by-laws under STA 1985 only broadly detailed the duties of the proprietor, the functions of management corporations and outline a few prohibitions for parcel proprietor.

The new by-laws, which contain 8 Parts and run into 15 pages is a template that is applicable during management by the developer, the joint management body, the management corporation or the subsidiary management corporation.These by-laws will bind these bodies to the purchaser, parcel owners or proprietors, and any charge or assignee, lessee, tenant or occupier of a parcel, as the case may be.

The by-laws spell out general duties of the proprietor, general prohibitions against usage of parcels for illegal purposes and specific prohibitions against various other aspects such as storage of inflammable or explosive materials, pest control, keeping of animals and drying of laundry. Other parts of the by-laws detail out the management of common property and its use, handling of vehicles, solid waste disposal, renovations and the power of management corporation to take proceedings as agent for proprietors in case of defects of parcels.

To allow management bodies to function more effectively, the by-laws contain enforcement provisions which will now allow management bodies to impose fines against defaulters and recover outstanding sums from proprietors by applying for a warrant of attachment on movable property.

Conclusion

Implementation of the Strata Acts is undeniably received with mixed feelings; where on one hand it is applauded to finally inject clarity and security in the sales and purchase and management of subdivided properties whilst on the other hand, it breeds frustration in demanding property developers to be familiar and adopt a revived version of workflow in line with the Acts. However, with the mushrooming of high-rise buildings and gated and guarded housings, it is almost inevitable that the nation moves towards having suchan improved,comprehensive regime of law to better govern a very fundamental need of the modern society – owning a home and living peacefully within a ‘sharing’ environment.

[1] The Australian New South Wales Conveyancing (Strata Titles) Act 1961

[2] Hereinafter referred to as STA 1985

[3] STA 1985 replaced the older reference to ‘subsidiary title’ in National Land Code 1965 to ‘strata title’

[4] Hereinafter referred to as BCPA 2007

[5] Hereinafter referred to as STA 2013

[6] Hereinafter referred to as SMA 2013

[7] Part VII on Management of a subdivided building, Part IXA on StrataTitles Board, Second Schedule and Third Schedule in STA 1985 are now deleted

[8] Repeals the BCPA 2007

[9] Hereinafter referred to as SMR 2015

[10] Collectively refers to housing and non-housing developers

[11] Collectively refers to housing and non-housing developments

[12] 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 case of phased development, the schedule of parcel shows the proposed quantum of provisional share units for each provisional block.

[13] Regulation 7 of SMR 2015

[14] As provided under Section 6(5),SMA 2013

[15] Unlike the pre-2013 amendments whereby developers were required to apply for subdivisions within 6 months from the date building is completed if the sale or agreement to sell any parcel took place before completion of the building

[16] Upon application, the time frame can be extended for a further one month by the Director of Survey

[17] Deposit to be made either in cash or by bank guarantee

[18] During the defect liability period

[19] As per Regulation 50, SMR 2015