The elusive strata
01/03/2003 Published in NST-PROP
A Buyer Watch Article by National House Buyers Association
In statistics compiled over the past two years, problems with strata titles
are high on the list of complaints we received from buyers.
For the year ending 2002, there were a total of 28,550 owners in 155 projects
facing strata title problems representing 27 per cent of the total number
of complaints received.
We foresee that this will increase drastically as there appears to be no
serious effort taken to reverse the trend in a market where more and more
stratified properties are coming on line by the day.
Difficulties faced by owners without strata titles are numerous. For a
start, there is no final and conclusive proof of ownership. When an owner
wishes to sell his property he cannot execute a straightforward transfer of
ownership but has to go through the a Deed of Assignment and all the attendant
Owners also do not have rights to manage and maintain the common areas
and facilities themselves because such rights are vested with the developers
until such time the strata titles are issued. In the meantime they have to
continue to pay developers or their agents monthly maintenance charges. The
common complaint here is that the standard of maintenance is not satisfactory
and/or that the charges are too high.
Another complaint is that the developers ask for the payments of unreasonable
amounts just to give their consent to owners to sell their properties. And
if the developer goes belly-up prior to the issuance of the strata titles,
then the whole issue becomes even more muddled.
Developers are solely responsible for the application for the issuance
of strata titles. It is stated in the sale and purchase agreement (SPA) (Schedule
H) Clause 10 that: "Vendor shall, at its own cost and expense, apply for the
subdivision of the Building so as to obtain the issue of a separate strata
title to the said Parcel under the Strata Title Act."
But looking at the above considerations, it is to his advantage to delay
making such applications. Firstly, developers want to continue managing the
properties, which is essentially a cash cow. Secondly, to fully comply with
all the conditions for the application of the titles they would have to incur
expenses such as surveyors' fees plus all the other charges imposed by the
issuing authorities. Thirdly, once the titles are out they can no longer charge
any consent fees for transfers.
But yet, section 8 of the Strata Titles Act 1985 makes it compulsory for
a proprietor (developer) to apply within a certain period for subdivision
for buildings that are capable of being subdivided. The penalty for failure
to do so is a fine of not less than RM10,000 and not exceeding RM100,000
and to a further fine of not less than RM1,000 each day the offence continues
to be committed.
Section 20 makes it compulsory for the proprietor of a stratified building
to apply for strata titles within six months from the date when the Certificates
of Fitness for Occupation (CF) are issued. Failure to do so carries a find
of not exceeding RM5,000 and to a further fine not exceeding RM1,000 for each
day the offence continues to be committed.
So why then do errant developers still drag their feet when there is so
much risk involved? But is it that risky? Perhaps not. We have yet to hear
of any party being charged and prosecuted in court by the Ministry of Land
and Cooperative Development for this serious breach, let alone being convicted.
The laws are there and they are stringent too. But laws only serve to occupy
space on bookshelves unless they are properly and vigorously enforced. Errant
developers know full well that the chances of the law catching up with them
is almost zero.
Of course we concede that not all cases of non-issuance of strata titles
are due to developers' reluctance to apply. There are certain cases where
technical problems were encountered. But then we should refer to Section 8(3)
which states: "...the application...shall be treated as not being in accordance
with section 10 if the application is defective by reason of any material
non-compliance with any of the requirements of that section pertaining to
It can be seen that the Act has placed the responsibility squarely on the
proprietor to ensure that fulfillment of all prerequisites for the application
for the subdivision and issuance of strata titles.
Thus if he submits a defective application, he may be deemed to have failed
to apply and the book may be thrown at him. This will plug the loophole of
errant developers deliberately submitting defective applications so that the
processing of strata titles continues to be frustrated.
We believe the day will come when the departments concerned will be so
overwhelmed with backlog cases that some thing similar to the writing-off
of unsettled traffic summonses need to be considered. Clearly somebody needs
to quickly press the panic button on the issue.