By Datuk Chang Kim Loong
Section 6 of the Strata Management Act (SMA), 2013 (implemented on 1.6.2015) makes it compulsory that a developer cannot sell any parcel (stratified properties, whether commercial or residential) unless the Schedule of Parcels (SOP) has been filed with the Commissioner of Building (COB).
It is, therefore, incumbent upon the developer’s land surveyor and architect to certify that the building/land can be subdivided.
A developer has to display the SOP 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, the responsibility of maintaining common areas will be more equitable and transparent. Developers are also required to pay maintenance charges, sinking funds and other outgoings for their unsold units.
Closing the floodgates
The Government has heeded the recommendations of the National House Buyers Association (HBA) to close the floodgates and resolve the issue of housing developers who deliberately fail/neglect/refuse to apply for strata titles, and to transfer the strata titles to purchasers, even when they have paid in full.
It was serious enough for the Government to enact new statutory provisions, amend existing ambiguous laws (to plug the loopholes) and repeal redundant sections of the Acts to achieve this much-needed transformation.
The new salient mechanisms are elaborated below:
To ensure that strata titles can be obtained eventually, the SOP must be filed with the COB before developers can sell any parcel or proposed parcel under Sec.6(1) SMA 2013: The new regime of law requires developers to comply with all the pre-requisites before proceeding with any sale of a parcel.
The major 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 SOP is prepared by the developer’s land surveyor, comprising of the location plan, storey plan and delineation plan based on approved building plans.
It shows all the parcels with dimensions, areas, share units, accessory parcels and common properties using the same format as approved strata title plans. Developers cannot simply carve out any common property and accessorize as they like as before, and accessorize remaining unsold residential car parks to developer units.
Under Sec.6(3) SMA, a developer’s land surveyor and architect have to certify on the SOP that the buildings/land can be subdivided.
An SOP shows the proposed share units of each proposed parcel and the total share units of all the parcels.
In phased developments, the SOP shows the proposed quantum of provisional share units for each provisional block. The total share units of all parcels, including the provisional block, are normally referred to as the aggregate share unit.
A share unit is a number assigned to each parcel to determine the amount of charges, sinking fund and other outgoings, to be paid by owners in an equitable and transparent manner.
Share units are computed based on the 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 developers for their unsold units.
Each parcel and its allocated share unit is shown on the strata plan. Penthouses will have bigger share units and come with more voting rights (if voting is done by a poll) compared to intermediate units. The higher the share unit, the higher the maintenance.
How does the new regime benefits future purchasers?
These provisions benefit purchasers as follows:
* Before a sale, developers must obtain all approvals on land matters with regards to land premiums, registration of title fees paid, land title and strata survey fee paid, approved equitable share units for all the parcels including provisional block, approved building plans.
A ‘Certificate of Share Unit Formula’ or the ‘Sijil Formula Unit Syer’ or its acronym ‘SiFUS’ is a certificate issued by the 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 to achieve the issuance of strata titles simultaneously with delivery of vacant possession.
* For a housing developer license and sale/advertisement permit to be issued by the licensing department of the Housing Ministry, developers need to get the ‘SiFUS’ from the DLM and file a copy of the SOP with the COB.
* To further protect house buyers, the concept of ‘vacant possession simultaneously with strata title’ was adopted under the new improved version of the statutory Sale & Purchase Agreement (Schedule H) implemented 1.6.2015. Developers cannot deliver vacant possession and claim the 17.5% progress payment, as in item 3, unless the strata title has been issued.
* Furthermore, 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) which is reproduced as follows:
- ‘On the date the Purchaser takes vacant possession of the said Parcel as in item 3 where the Developer has executed and delivered to the Purchaser or the Purchaser’s solicitors the instrument of transfer in favour of the Purchaser together with the original issue document of strata title to the said Parcel’
* Developers have to pay liquidated ascertained damages (LAD) calculated at the rate of 10% per annum for delays in the 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 instalment of the purchase price due to the developer – sort of set-off/contra.
* Developers including liquidators (as ‘de facto’ developers) for existing schemes cannot sell any parcel or proposed parcel until the SOP has been filed with the COB under Sec.6(1) SMA 2013.
* The amendment of building plans by developers will be reduced, as any proposed amendment will be tedious. Amendments to the SOP that have already been filed with the COB will require the written consent of all purchasers. Any refiling whatsoever to the COB must be made within 30 days under Regulation 6(3) (b) Strata Management (Maintenance and Management) Regulations, 2015 (SMR 2015).
* Purchasers can be confident of getting their strata titles, as the developer’s land surveyor and architect have to certify on the SOP plans that the building/land can be subdivided before signing the sale and purchase agreement (SPA), and strata titles must be issued before the delivery of vacant possession.
* To avoid future grievances, developers have to display the SOP chart conspicuously in the sales gallery/office for purchasers to see all parcel areas, dimensions and share units under Sec.6(2) SMA 2013 before they sign the SPA.
* Under the revised definition of ‘developer’, which includes liquidators under HDA (as amended by the 2012 amendments), SMA 2013, the developer including the liquidator for existing buildings must now apply for strata titles within three 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 to better govern the fundamental need of modern society – owning a home, forming communities and living in a shared environment. The changes will, to a certain extent, address the inadequacies and shortcomings faced by the old strata laws, and provide adequate protection to the purchasers.
After all, purchasers are developers’ customers and should be treated with dignity and not shortchanged.
This article is written by Datuk Chang Kim Loong, Hon. Sec-Gen of the National House Buyers Association (HBA), a non-political, not-for-profit Organisation manned wholly by volunteers Their link: www.hba.org.my