Articles


Strata Title Enforcement Anomalies in Malaysia

By

Sheila Menon (Associate, Conveyancing Department)


Hakem Arabi & Associates

When the Strata Titles Act 1985 (“STA 1985”) was amended in 2013 (vide Strata Titles (Amendment) Act 2013) and the new Strata Management Act 2013 (“SMA 2013”), was enacted which came into force in June 2015 it was intended to achieve some pertinent objectives i.e. that the developer must apply for the Strata Titles at the super structure stage and it would be issued by the time the project is completed within 36 months. The developer can then hand over the vacant possession along with the Strata Title and execute the transfer of the title thus enabling the purchaser to be a registered proprietor. The registered owners will then be able to form the Management Corporation (“MC”) which enables the owners to get involved in the maintenance and management of the said strata property.

However, in reality this is not the case as the purchasers of projects that are built before the Act came into force, are yet to obtain their Strata Title after many years. Ninety percent of the properties are under the Joint management Committee (“JMB”) and it becomes impossible to form a MC, simply because of the delay in issuance of Strata Title by the respective State Land Offices. As such owners of some of the older properties where the Developers are liquidated are not able to enjoy properly maintained strata property simply because the MC has not been formed.

In the Federal Court decision Palm Spring Joint Management Body & Anor v Muafakat Kekal Sdn Bhd & Anor [2016] 2 MLJ 191, the issue before the Federal Court was whether a JMB can co-exist with a MC? The facts of the case were that the JMB for the condominium project was established on 5 April 2008, four months after the MC was established on 8 January 2008.

At the trial stage, the High Court held that the two can co-exist, but on appeal to the Court of Appeal, the court held that they cannot do so. On further appeal to the Federal Court, the court held that under the Building and Common Property (Maintenance and Management) Act 2007 the JMB is intended to be an interim body to carry out the functions of MC pending its establishment. Once the MC has been established under STA 1985, only then JMB is automatically dissolved. Purchasers are at peril because without the Strata Title, the properties are still owned by the developers and they would need the consent of the developer and pay consent fees should they decide to sell the property before the issuance of the Strata Title.

In addition to this, if the property has changed hands several times, they would have to procure all documents for the property from the first point of transaction to the final transaction and should there be any lost documents they will have to lodge a police report and obtain a court order to prove ownership. This cumbersome process could be avoided if the purchaser had the Strata Title which could prove his ownership easily through a land office search.

To compound this problem there is no enforcement that compels the purchaser to collect the Strata Title. As such some property owners do not see a reason to fork out additional money to procure them as they can still enjoy the property and are even able to sell it without the strata title.

Furthermore, the delay in collection of Strata Titles has deprived both the Federal and State Government of its stamp duty revenue and registration fees.

The lawmakers and the government have made several attempts to enact new statutory provisions to amend the existing laws to achieve the much needed reform under Section 40A of the STA 1985 where it provides that the owner can be fined not less than RM1000 and not more than RM10,000 for failing to collect the document and the developer, for failing to apply for it. However, this provision was deleted by the Strata Titles (Amendment) Act 2013 in 2015 and reintroduced as Section 19A of STA 1985 which reads as follows:


“Transfer of ownership of strata titles


  1. Any original proprietor or any person or body appointed by a court of competent jurisdiction shall execute the transfer of strata title to the purchaser within thirty days from the date of issue of strata title by the Land Administrator or any extended period approved by the Director upon the opening of the strata register.


  2. Any purchaser shall execute complete documents of transfer of strata title within thirty days or any extended period approved by the Director from the date of notice of transfer of strata title being served to the purchaser by the original proprietor or from the date of purchase of the parcel, whichever is the later.


  3. Any original proprietor or any person or body appointed by a court of competent jurisdiction or any purchaser who fails to comply with subsection (1) or (2) shall be guilty of an offence and shall, on conviction, be liable to a fine of not less than one thousand ringgit but not more than ten thousand ringgit per parcel.”


Strangely, Section 19A of the STA 1985 was never gazetted. There seems to be a shroud of mystery as to why it was never gazetted and thus the issue of the ambiguity of the provisions of Strata Titles (Amendment) Act 2013 and SMA 2013 that lingers on to this day.

The question then is how can we plug the loopholes in this Act and how can we act on this obvious anomaly to expedite the issuance and transfer of Strata Titles to solve the issues that arise for the benefit of all the parties involved? There are many forums and initiatives by bodies like Real Estate & Housing Developers' Association Malaysia (“REHDA”) for example who is working with the Ministry of Housing and Local Government to review the policies and on amendments to Part IV of the SMA 2013 which comprises provisions on Strata Management before the existence of the MC and the Department of Director General of Land & Mines which has established a Strata Ownership Special Fund (Tabung Khas Hak Milik Strata) to aid property owners in the process of Strata Title application for buildings that are categorised as “special buildings” as stated in Section 4 of the STA 1985, with a focus on low and medium-cost housing schemes.

These are definitively steps heading in the right direction. One giant leap further would be to urge policy makers and the government to gazette and iron clad the provisions of Section 19A of the STA 1985 which would make the provision that Strata Titles need to be issued upon vacant possession of the property mandatory. With strict enforcement, we would have a more effective machinery like Singapore where they do not have an interim body like the JMB because Strata Titles are usually obtained soon after the buildings are completed. With Strata Titles issued, MCs are formed to take over from the developer straight away which reduces conflicts that may arise between the developer and JMB, and between the JMB and the MC.

The State Departments should identify and determine the underlying issues that lie in the enactment of the provisions of the Act itself. Technical interpretation of the Act should be applied to the procedural issues that arise such as restructuring the sections accordingly to solve the root cause of the problem.

Legal firms who are acting for Purchasers can also play a very important role by educating their clients, acting as a mediator between purchasers and relevant bodies to seek legal recourse by way of representative actions, if necessary, to expedite the issuance of the Strata Title.

In conclusion, a strong cumulative effort by all relevant parties to urge the policy makers to review the Act and ensure mandatory enforcement of the law could mean the beginning of a new dawn for Strata Law reforms in Malaysia.