Know your stuff: The strata title and its significance

This article first appeared in City & Country, The Edge Malaysia Weekly, on February 17, 2020 - February 23, 2020.

Chang: The changes led by the new strata regime will, to a certain extent, address the inadequacies and shortcomings faced by the old strata laws and provide adequate protection to homebuyers

Photo by HBA

Tan: But in 2013, parliament passed the Housing Development (Control and Licensing) (Amendment) Act 2012 and the Strata Titles (Amendment) Act 2013, which made major changes to the laws on the issuance of strata titles

Photo by Sam Fong/The Edge

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Caroline Ho says she cannot stress enough the importance of a strata title. She had no idea how important this document was until she wanted to sell a high-rise unit she had bought in 2010.

She discovered that the developer had not completed the process of transferring the titles to the buyers.

And without the title, she cannot sell as the document is required by the bank for the purchaser to obtain a housing loan.

When she called the developer to ask about the title, she was told the subsidiary company that had developed the project had ceased operations. Ho is now left with no option but to appoint a lawyer to obtain her property title via a liquidator.

She needs to pay the lawyer for this process, which will take one to two years, and continues making the mortgage payments and paying maintenance fees for a property she does not live in anymore.

Issues relating to strata titles are, unfortunately, not uncommon, says National House Buyers’ Association (HBA) honorary secretary-general Datuk Chang Kim Loong, so, the laws that regulate strata titles have been amended.

What is a strata title (or any other property title)?

Chur Associates founder and managing partner Chris Tan explains that a strata title is “a form of property ownership usually issued for properties in a development or scheme where buildings are subdivided into a number of parcels”. These developments come with shared common areas and facilities. The title is very important for a number of reasons, the main one being that it is the ultimate proof of a person’s ownership of a property.

The title states the name of the registered owner of the property, the built-up area, the apportionment of the share in the total aggregate units (for strata title) and the conditions that are related to the property, if any.

The document is important when it comes to obtaining a bank loan or when an owner wants to sell or transfer his/her stratified property.

Without a property title, there would be complications in the sale and purchase of a property, says Tan.

HBA’s Chang says a strata title entitles the owners to form a management corporation to maintain and manage the subdivided building. They can have their own by-laws, usage or restrictions.

“Should the developer go into liquidation or become insolvent before the strata titles have been obtained, the unit owners will have to go to a lot of trouble or might eventually have to pay for the application for the strata titles themselves,” he says.

The laws regulating strata titles

In Malaysia, the main law that regulates the issuance or transfer of strata titles is the Strata Titles Act 1985, says Tan. “But in 2013, parliament passed the Housing Development (Control and Licensing) (Amendment) Act 2012 and the Strata Titles (Amendment) Act 2013, which made major changes to the laws on the issuance of strata titles.”

The new laws, which came into force on June 1, 2015, are stricter on the process of the segregation of the master title by the developer.  

In addition, it mandates that developers must apply for strata titles within three months of the completion of the superstructure and they should be ready upon vacant possession of the property.

However, Tan says, generally, the amended Acts do not apply to projects that obtained advertising permits and developer’s licence before 2015.

Any dispute over housing and/or strata management can be resolved by the Tribunal for Homebuyer Claims, Strata Management Tribunal or the courts, subject to their respective jurisdiction limits, he adds.

Amended Acts provide better protection

HBA’s Chang says that the amended Acts, to a certain extent, provide more protection for homebuyers.

Prior to any sale, the developer must obtain all the necessary approvals on land matters. After the conditions are met, a Certificate of Share Unit Formula (Sijil Formula Unit Syer) will be issued by the Director of Lands and Mines.

“This new requirement is in line with the spirit of the Strata Titles Act, which is to achieve issuance of strata titles simultaneously with delivery of vacant possession,” says Chang.

Under the Housing Development (Control & Licensing) Act, he adds, a developer cannot deliver vacant possession and claim 17.5% of the progress payment unless the strata title has been issued.

With these amended Acts in place, Chang says purchasers can be confident of getting their strata titles. “The changes led by the new strata regime will, to a certain extent, address the inadequacies and shortcomings faced by the old strata laws and provide adequate protection to homebuyers. After all, homebuyers are a developer’s customers and should be treated with dignity and not be shortchanged,” he says.