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The elusive strata title
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 legal baggage.

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 the application."

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.

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