BY The National House Buyers Association
The government has heeded the recommendations by the National House Buyers Association (HBA) to close the floodgate and resolve the issue of recalcitrant housing developers which deliberately fail, neglect or refuse to apply for strata titles and fail to effect subsequent transfer of strata titles to purchasers’ names, though the purchase price has been fully paid. It was serious enough for the government to enact new statutory provisions, amending existing ambiguous laws (to plug the loopholes) and repealing redundant sections of the Strata Management Act, 2013 (SMA 2013), implemented on June 1, 2015, to achieve this much needed transformation.
A developer has to display the SOPs 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, sharing of responsibility in maintaining the common areas will be more equitable and transparent, and developers are also required to pay maintenance charges, sinking funds and other outgoings for their unsold units.
The new salient mechanisms are elaborated below.
Schedule of Parcels (SOPs)
To ensure that strata titles can be obtained eventually, Section 6 of the SMA 2013 forbids a developer from selling any parcel or proposed parcel (stratified properties, whether commercial or residential) unless SOPs has been filed with the Commissioner of Building (COB).
The new regime of law requires the developer to comply with all the prerequisites before proceeding with any sales of parcel.
The major prerequisites include the payment of all premiums and fees to the relevant authorities and the Board of Surveyors; land and strata title survey; approval of building plans and allocation of share units. The SOPs are prepared by the developer’s licensed land surveyor, comprising location plan, storey plan and delineation plan drawn based on approved building plans. It shall show all the parcels with dimensions, areas, share units, all accessory parcels, and all common properties using the same format as approved strata title plans.
Under S.6(3) SMA 2013, a developer’s licensed land surveyor and registered architect have to certify on the SOPs that the buildings or lands shall be capable of being subdivided.
An SOP shows the proposed share units of each parcel or proposed parcel and the total share units of all the parcels. In case of phased development, the SOP shows the proposed quantum of provisional share units for each provisional block. The total share units of all parcels, including provisional block, is normally referred to as the aggregate share unit.
Share unit is the number assigned to each parcel by the developer’s licensed land surveyor to determine the amount of charges, sinking fund and other outgoings, to be paid by each parcel owner in an equitable and transparent manner. Share units are computed based on area, usage, size and location of 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 the developer for their unsold units.
Each parcel is allocated with a share unit shown on the strata plan. Owners of a penthouse will have bigger share units, thus more voting rights (if voting is done by poll) as compared to an owner of an intermediate unit. A parcel owner with a bigger share unit will have to pay higher maintenance charges.
Better protection for house buyers (to a certain extent)
Implications from these new provisions that are beneficial to purchasers are as follow:
- Before any sale, a developer must obtain all necessary approvals on land matters with land premiums, registration of title fees paid, land title and strata survey fee paid, approved equitable share unit for all the parcels including provisional block and approved building plans. A Certificate of Share Unit Formula or in Malay, Sijil Formula Unit Syer (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 issuance of strata title simultaneously with delivery of vacant possession.
2.For a housing developer licence and sale or advertisement permit to be issued by the licensing department of the Housing Ministry, the developer needs to obtain the ‘SiFUS’ from DLM and file a copy of SOPs with the COB.
3.To further protect house buyers, the concept of ‘vacant possession (of residential parcel property) simultaneously with strata title’ was adopted. It effectively means that a developer cannot deliver vacant possession and claim 17.5% progress payment unless strata title has been issued. This is the effect of Clause 27(1) Schedule H, of the Housing Development (Control & Licensing) Regulations 1989 (as amended in 2015). The new clause reads inter-alia:-
Clause 27 (1) – Manner of delivery of vacant possession
The developer shall let the purchaser into possession of the said parcel upon the following:-
(a)the issuance of a certificate of completion and compliance;
(b)the separate strata title relating to the parcel has been issued by the appropriate authority;
(c)water and electricity supply is ready for connection to the said parcel
4.Further, 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).
5.The developer shall be liable to pay liquidated ascertained damages (LAD) calculated at the rate of 10% per annum for delays in 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 installment of the purchase price due to the developer as a set-off or contra.
6.Developers, including liquidators (as de-facto developers) for existing schemes cannot sell any parcel or proposed parcel until SOPs has been filed with COB under S.6(1) SMA 2013.
7.Amendment of building plans by a developer will be reduced and made tedious by requiring that any proposed amendment of such building plans, thus requiring amendments to SOPs, after having been filed with the COB, requires the prior written consent of all purchasers. Any re-filing whatsoever to COB must be made within 30 days under Regulation 6(3) (b) Strata Management (Maintenance and Management) Regulations 2015 (SMR 2015).
8.Purchasers can be confident of getting their strata titles as a developer’s licensed land surveyor and registered architect have to certify on the SOPs that the buildings or lands are capable of being subdivided before signing the sale and purchase agreement (SPA), while strata titles must be issued before delivery of vacant possession.
9.A developer has to display the SOP chart prominently at their sales gallery or office so that purchasers can see all parcel areas, dimensions, share units under S.6(2) SMA 2013 so that they can be well informed before signing the SPA. This will avoid any future grievances.
10.Under the revised definition of ‘developer’ which includes liquidator under HDA (as amended by the 2012 amendments), SMA 2013, developers, including liquidators for existing buildings must now submit for strata title application 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 for our country to move towards this improved comprehensive regime of law to better govern the fundamental needs of the modern society – owning a home and forming community and living with a shared environment.
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 for purchasers. After all, purchasers are developers’ customers and should be treated with dignity and not short changed.