[The final version of this paper has been published in [2015] 1 Malayan Law Journal
lxxiii-xcvi available at Lexis Nexis database]
Gated Community – Modern Lifestyle in Urban Area:
Issues and Challenges on Legal Development in Peninsular Malaysia*
Tay Eng Siang, Senior Lecturer,
Faculty of Law, Multimedia University
Kuek Chee Ying, Senior Lecturer,
Faculty Law, Multimedia University
Jason Kung Que Seng, Senior Legal Officer,
TAHPS Group Berhad, Kuala Lumpur, Malaysia
Abstract
The immense development in Malaysia has brought about the elevation of
property value in Malaysia. Noticeably, as property prices continue to
soar, urbanites are now seeking the option of sharing high rise units. There
are approximately 26% or 5.9 million citizens in Peninsular Malaysia
residing in airspace parcels. This number is expected to increase with the
growth of the population in the country. It is therefore a matter of time
before the sky is congested and this led to some creative proposals for
undergrounds to be explored for future developments. Sharing has
therefore formed part and parcel of the urbanite community.
Inevitably, disputes among developers, management corporations and
purchasers on multiple of issues have also shown an increase in the recent
days. Laws are therefore an essential tool to regulate disputes and to
administer on a macro perspective, the issue of sharing of gated
community.
Historically, the National Land Code 1965 contains some provisions
pertaining to the issuance of subsidiary titles for units in a subdivided
building. However, as disputes grow and further expand to include other
issues, the urge for specific legislation has seen the evolution of the law in
respect of subdivision of a building into parcels. The Strata Titles Act 1985
was introduced in 1985 to facilitate the subdivision of a building into
parcels, followed by, the Building and Common Property (Maintenance
and Management) Act 2007, the Strata Titles (Amendment) Act 2013 and a
new enactment namely the Strata Management Act 2013 to close the gaps
of the previous legislations.
This paper intends to examine the recent laws and to what extent these laws
have addressed the current issues and challenges. Comparison will be
made to the success story of Singapore and Australia (New South Wales) in
handling gated community matters.
INTRODUCTION
The development of land for commercial and residential purposes led to the formation
of many townships in both urban and land areas. Thanks to the growing population,
property has seen a great demand in the recent years rendering land itself a significant
valuable property particularly in the urban settings.1 In order to cater to the need of
people, property developers are looking towards the sky to accommodate the growing
demands in the 21st century. However, as the saying of old goes “sky is the limit”,
many urban developments have now proposed their next direction of future
developments to be conducted.
In Malaysia (except Sabah and Sarawak), there is approximately 14,998 strata
development areas, with about 5,000 located in the city and that an estimated 5.9
million citizens living in high-rises.2 More and more urban folks today and the future
will have to accustom to the lifestyle in gated community3 with the sharing of
common property.4 Gone are the days when land owners have the luxury of operating
their own properties within their boundaries of land save for the privilege few who
have the purchasing power to demand for such luxuries.
Inevitably, disputes among proprietors, developers, parcel owners and/or management
bodies are prone to happen. As at the time of writing, the writers had witnessed a few
important issues such as non-issuance of strata titles by the authorities or delay in
application for issuance of strata titles by the original proprietor or developer, nonpayment of maintenance charges by the parcel owners, relationship among the parcels
proprietors, and disputes in the maintenance and management of building and
* The law is as at 5 October 2014.
An earlier draft version of this paper was presented at the 11th Asian Law Institute Conference,
organised by the National University of Singapore, 29 & 30 May 2014, at University of Malaya, Kuala
Lumpur, Malaysia.
1
2
3
4
Steven Daniel, “KL Mayor: Strata Management Act to Help Overcome Flaws in Old Guidelines”
The Star (26 October 2013)
<http://www.thestar.com.my/News/Community/2013/10/26/New-law-to-be-enforced-soon-MayorStrata-Management-Act-to-help-overcome-flaws-in-old-guidelines.aspx/>
accessed 4 October 2014.
The Kuala Lumpur City Hall (DBKL) Mayor Datuk Seri Ahmad Phesal Talib said “Land is
becoming scarce in the city due to rapid development. As such, proper management of strata title
buildings is needed”.
Ibid. See also Hansard Dewan Negara, D.N. Deb 19 December 2012 No.27, p 62.
A Gated Community refers to the residential development that restricts public access through
walls, gates and sometimes security systems that may use guards and closed-circuit television
(CCTV). See Rowland Atkinson, Sarah Blandy, John Flint and Diane Lister, “Gated Cities of
Today? Barricaded Residential Development in England” (2005) 76(4) The Town Planning
Review 401, 402.
Each proprietor owns a parcel held under a strata title and common property is jointly owned by all
proprietors in the scheme.
Common property is generally defined to refer to so much of the lot as is not comprised in any
parcel, including any accessory parcel, as shown in the certified strata plan and is used and capable
of being used or enjoyed by the occupiers of two or more parcels. See Michael J Willis,
Management Corporations in Malaysia – Owning Strata-titled Property under Malaysia’s Strata
Management Act 2013 (Sweet & Maxwell Asia 2013) 8.
1
common property being disputed albeit with the evolution of law governing gated
communities under the earlier rudimentary provisions of the National Land Code to
Strata Titles Act 1985 and the present Building and Common Property (Maintenance
and Management) Act 20075 (“BCPA 2007”).
History of Strata Title Legislations
Historically in brief, the first legislation that introduces the new concept of
subdivision of buildings into parcels is the National Land Code 19656 (“NLC 1965”)
which contains some provisions7 pertaining to the issuance of subsidiary titles for
units in a subdivided building. This concept arose in light of the growing urbanisation
among Malaysians and the need to resettle urban squatters, coupled with the growing
demands for rights of ownership in the mid-1960s on the development of large multistorey buildings.8
Throughout the period of development,9 the provisions relating to the subdivision of
buildings were further amended to enhance the effectiveness of the provisions to
overcome any inadequacies encountered, to matters such as, no imposition of legal
duty on the original proprietors or developer to apply for subdivision of building so as
to obtain separate strata titles for each of the individually owned parcels; difficulty of
the parcel owners in borrowing loan from financial institutions; lack of provision in
allowing phased development of residential and commercial complexes, common
accessories such as car park.
Needless to say, there was therefore an urge among Malaysians for a specific
legislation to address any inadequacies under the NLC 1965. This led to the
enactment of the Strata Titles Act 198510 (“STA 1985”) to facilitate and/or to govern
the subdivision of a building into parcels in 1985. The STA 1985 has retained the
former provisions relating to subsidiary titles under the NLC 1965 by replacing the
terminology of “subsidiary title” with “strata title”. New provisions and concepts have
been incorporated into the STA 1985 to further improve the process and procedure of
applications for issuance of strata titles and to overcome deficiencies of the former
5
6
7
8
9
10
Act 663.
Act 56 of 1965, applicable to Peninsular Malaysia only. It was modeled after the Australian New
South Wales Conveyancing (Strata titles) Act 1961 (No.17 of 1961), since repealed and replaced
by the New South Wales Strata Titles Act 1973 (No.68 of 1973) (as amended).
In Sarawak, the law governing the matters pertaining to the subdivision of buildings into parcels is
the Sarawak Strata Titles Ordinance 1995 (Cap 18) and in Sabah, the Sabah Land (Subsidiary
Title) Enactment 1972 (No.9 of 1972).
The relevant sections of the NLC 1965 were found in Chapter 4 of the Part Nine (ss 151-157),
Chapter 2 of the Part Ten (ss 161-163) and Part Twenty-Five (ss 355-374) where the term
„subsidiary‟ title was used. However, all these provisions were subsequently repealed by the Strata
Titles Act 1985 (Act 318).
Teo Keang Sood , Strata Title in Singapore and Malaysia (4th edn, LexisNexis, Singapore 2012),
11.
The National Land Code (Amendment) Act 1977 (Act A386), the National Land Code
(Amendment) Act 1979 (Act A444), and the National Land Code (Amendment) Act 1981 (Act
A518).
Act 318 (with effect from 1 June 1985). This STA 1985 has repealed those provisions then existing
under the NLC 1965.
2
provisions on subsidiary titles under the NLC 1965.11 The STA 1985 was also
amended to provide solutions to problems that occurred and to meet the current
development and social-economic needs.12
Social evolution especially in urban areas has further urged the government to
introduce the Building and Common Property (Maintenance and Management) Act
200713 (“BCPA 2007”) with the aim of addressing quality of maintenance and
management of buildings and common property and to overcome the problems in
maintaining common areas in high-rise development before the setting up of the
management corporation (“MC”).
Sometime in 2012, the Parliament passed the Strata Titles (Amendment) Bill, which
was later known as Strata Titles (Amendment) Act 201314 (“STA 2013”). The STA
2013 comprises 45 amendments which among others, extending the application of
STA 1985 to the Federal Territory of Labuan,15 requiring the application to subdivide
at “super structure stage” instead of after completion and the establishment of MC.
Additionally, there is also a new enactment namely the Strata Management Act
201316 (“SMA 2013”) (both the STA 2013 and SMA 2013 are collectively known as
the “2013 Strata Acts”). These 2013 Strata Acts are aimed to close the gaps of the
previous legislations. The STA 2013 received the Royal Assent on 28 January 2013
and was gazetted on 7 February 2013 and the SMA 2013 received the Royal Assent
on 5 February 2013 and was gazetted on 8 February 2013. However, as at the time of
writing, the dates of enforcement of the respective Acts had yet to be announced by
the ministry in charge.
It is pertinent to note the few main influences attempted by the 2013 Strata Acts,
which are: (a) implementation of the electronic land administration of system for
strata titles in Peninsular Malaysia; (b) bring forward the application for subdivision
11
12
13
14
15
16
Teo Keang Sood, Strata Title in Singapore and Malaysia (4th edn, LexisNexis, Singapore 2012),
14. The new provisions and concepts include accessory parcels for car parks, stores and
accommodation for employees (STA 1985, ss 6(1), 10(4) and (5), 34(2) and 69), provisional
blocks (STA 1985, ss 16(1)(b), 19-23 and 70) and low-cost strata schemes (STA 1985, ss 58-67).
For examples, on 23 February 1990, the Strata Titles (Amendment) Act 1990 (Act A753)
introduced provisional strata title for a provisional block in a phase development; on 2 August
1996, the Strata Titles (Amendment) Act 1996 (Act A951) permitted the application for
subdivision with qualified title; on 1 December 2001, the Strata Titles (Amendment) Act 2001
(Act A1107) introduced the Strata Title Board; and on 12 April 2007, the Strata Titles
(Amendment) Act 2007 (Act A1290) introduced land parcels and the Building and Common
Property (Maintenance and Management) Act 2007 (Act 663).
Act 663.
Act A1450.
Some major new provisions which are added to STA 1985, include: introduction of Electronic
Land Administration System (s 4B); applying to subdivide at super structure stage (previously, it
was done when a building is completed with certificate of completion and compliance); certificate
of proposed strata plan (s 8A); allowing issue of provisional strata title for provisional block in
respect of land parcels (previously no land parcels as a provisional block) (s 9A); allowing limited
common property and subsidiary MC (s 17A); deleting the entire Part VI on Management of
Subdivided Building and Second Schedule on provisions for MC; s 19A replaces deleted s 40A;
time period to transfer strata titles reduced from 12 months to 1 month.
Section 3 of the STA 2013 (amending s 2 of the STA 1985).
Act 757. The SMA 2013 is introduced with an aim to repeal the BCPA 2007, to revamp the law
and procedure on maintenance and management of building and common property, joint
management body and MC.
3
of the building or land at the super structure stage; and (c) carving out the provisions
on the management of subdivided building which is to be governed by the SMA 2013.
It seems that the 2013 Strata Acts were introduced to resolve the grey areas faced in
the interpretation of the STA 1985 and BCPA 2007, which includes the transfer of
responsibilities from the developer to Joint Management Body (“JMB”) and from
JMB to MC.
AIM OF THIS PAPER
This paper intends to examine the recent 2013 Strata Acts and its adequacy in
addressing present and projected future issues and challenges in Peninsular Malaysia.
Albeit the possibility of a vast and comprehensive discussion, the writers will in this
article focus only on four aspects, which are (a) issues pertaining to subdivision of
building or land, (b) limited common property, (c) criminally punitive provisions for
non-compliance of the strata legislations, and (d) applicability of strata legislations to
parcels intended to be leased.
I.
Subdivision of building or land under the STA 1985
Prior to the 2013 amendments, the original proprietor of the alienated land (or through
the developer) is required to apply for subdivisions of building or land within the time
period of six months from the date the building was first completed, if the sale or
agreement to sell any parcel of the building took place before the completion of the
building. However, if the sale or agreement to sell took place after the completion of
the building, application for subdivision should be made within six months from the
date of the sale or agreement. If a building was completed and the sale or agreement
to sell took place before 12 April 2007, then application for subdivision should be
made within six months from 12 April 2007. However, if the building was completed
before 12 April 2007 but the sale or agreement to sell took place after 12 April 2007,
then the time for application for subdivision is six months from 12 April 2007 or six
months from the date of sale or agreement, whichever is longer.17
Under the newly amended s 8 of the STA 1985, the original proprietor of any
alienated land on which there is a building capable of being issued with strata titles
shall first apply for a certificate of proposed strata plan18 (“CPSP”) within three
months from the super structure stage. Upon issuance of the CPSP under s 8A(8), the
original proprietor shall apply for subdivision of the building or land in accordance
with s 9(1) within a period of one month from the date of issuance of the CPSP.19
17
18
19
The commencement date of the Act A1290 is 12 April 2007. See s 10 of the Strata Titles
(Amendment) Act 2007 (Act A1290).
Documents required in an application for CPSP are: the original copy of the approved building
plans, proposed strata plan, a certificate by the architect or engineer that the building was
constructed according to approved plans, a certified copy of the final title, a certified copy of the
document that certifies the super structure stage, , a certified copy of the certificate of completion
and compliance (CCC) or certificate of fitness for occupancy (CF), if applicable, a certified copy
of the schedule of parcels or amended schedule of parcels. See STA 1985, s 8A.
New s 8(3) of STA 1985.
4
As to the definition of “super structure stage”, it is well defined under the amended s
4 of the STA 1985 to mean the stage upon the completion of building works as duly
certified in accordance with the relevant by-laws made under the Street, Drainage and
Building Act 197420 (“SDBA 1974”). However, one of the ambiguities lies in the
relevance of the Uniform Building By-Laws 198421 (“UBBL 1984”) to the
construction of common property, which was made pursuant to s 133 of the SDBA
1974, does not define “super structure stage”. Such uncertainty may defeat the very
nature intended by the legislature which is to avoid any unnecessary delay in the
subdivision of the building or land. Additionally, original proprietors may have to
endure unnecessary liabilities despite their best effort to comply with the timeframe of
“super structure stage” due to the lack of a proper definition.
In the interim, the possible source to determine what amounts to “super structure
stage” is by referring to the definition of “structural framework” of the Building in
Stage 2(b) of the respective Third Schedule under the Schedule G22 or Schedule H23
sale and purchase agreements. Unfortunately, due caution must be exercised as this
interpretation may not be a fool proof nor is it a proper way of providing a proper
definition to the meaning of “super structure stage”.
Notwithstanding, the writers further research on the meaning of “structural
framework” was conducted in lieu of its close proximity with the term “super
structure stage” under the newly amended STA 1985. Accordingly, the Guidelines on
the Third Schedule [Clause 4(1)] of the Standard Sale and Purchase Agreement for
Land and Building and Sub-divided Building24 issued by Lembaga Arkitek Malaysia
(Malaysian Architect Board) have clarified the meaning of the structural framework
of the Building under Schedule G agreement (Land and Building)25 and Schedule H
agreement (Sub-divided Building),26 for the purpose of certification.
20
21
22
23
24
25
26
Act 133.
GN 5178/1984.
Sale and Purchase Agreement (Land and Building) pursuant to Subregulation 11(1) of the Housing
Development (Control and Licensing) Regulations 1989 (PU(A) 58/1989), (Amendment
Regulations 2007), regulations made by the Minister in exercise of the powers conferred by s 24 of
the Housing Development (Control and Licensing) Act 1966 (Act 118).
Sale and Purchase Agreement (Building or Land Intended for Subdivision into Parcels) pursuant to
Subregulation 11(1) of the Housing Development (Control and Licensing) Regulations 1989
(PU(A) 58/1989), (Amendment Regulation 2007), regulations made by the Minister in exercise of
the powers conferred by s 24 of the Housing Development (Control and Licensing) Act 1966 (Act
118).
General Circular No.3/2008 dated 27 November 2008.
The description of construction work that must be completed for certification of Stage 2(b) “the
structural framework of the said Building” are:
* All primary structural elements above lowest floor level including:
- Beams
- Columns
- Suspended Slabs
- Roof beams
- Structural walls
(if any)
* Retaining walls forming part of the structural element to the Building (if any)
The description of construction work that must be completed for certification of Stage 2(b) “the
structural framework and floor slab of the said Parcel” are:
* All primary structural elements above lowest floor level including:
- Beams
- Columns
- Suspended Slabs
5
For the avoidance of doubt, it will only be proper for the definition of “super structure
stage” to be further clarified under newly amended STA 1985. At this particular
juncture, assuming that the definition is in line with the adaptation of the practical
analysis of equating Stage 2(b) of the Third Schedule to the Schedule G and H
agreement as super structure stage, then the original proprietor must make the
application for CPSP within 3 months from the structural framework.
The whole process of subdivision of building or land has been brought earlier and the
idea is to improve the process and to compel the original proprietor to hand over strata
titles to the parcel owners together with their certificate of fitness (“CF”) or certificate
of completion and compliance (“CCC”) simultaneously.27
If this is the intention of the Parliament, then the related Housing Development
(Control and Licensing) Regulations 198928 will also need to be amended to provide
that the original proprietor / developer shall deliver to the purchaser the strata title and
vacant possession of the parcel simultaneously.
However the new provision in the STA 1985 only requires the original proprietor to
apply for the subdivision and not to transfer the strata title at the same time ownership
of the parcel is handed over to the buyer owner. So long as the original proprietor
submits the application for subdivision within one month of the CPSP, then the
original proprietor shall avoid any criminal liability under the new s 8(7) of the STA
1985.
It is also justifiable to impose the duty on the original proprietor to apply for the
subdivision as there are reasons not attributable to the original proprietor in not
transferring the strata title to the parcel owners. For examples, the parcel owners are
hesitant to execute the transfer due to the reasons that they do not want or cannot pay
the adjudicated stamp duty on the transfer; they do not want to pay legal fees to their
solicitors; or they intend to sell the parcel to another party.
Another possible practical problem faced by the original proprietor in the application
for subdivision of building is that s 9(2) of the STA 1985 imposes conditions, inter
alia, that the land is not subject to any charge or lien when an application under s 9(1)
- Roof beams
- Structural walls
(if any)
* Retaining walls forming part of the structural element to the Parcel (if any)
Note also that the phrase “the structural framework and floor slab of the said Parcel” appear in
Stage 2(b) of the General Circular No.3/2008 is slightly different from Stage 2(b) of the Third
Schedule to the Schedule H, “the structural framework of the said Parcel”.
27
28
This is in line with the statement made by the Housing and Local Government Minister (New
Straits Times, 13 October 2011) stating that to protect the interests of buyers, the ministry and
Natural Resources and Environment Ministry are getting the Strata Titles Act amended to make it
mandatory for developers to hand over the strata titles at the same time the ownership of property
is handed over to buyers.
See also: R Girubaharan, “Strata Titles: Plug Loophole in Legislation” New Straits Times (15 May
2013)
<http://www.nst.com.my/opinion/letters-to-the-editor/strata-titles-plug-loophole-in-legislation1.279145> accessed 4 October 2014.
PU(A) 58/1989.
6
is made.29 Further, s 10(1) of the STA 1985 (new) provides that the Director of Lands
and Mines shall not approve the subdivision of any building or land into parcels
unless, inter alia, the land on which the building or buildings stand is not subject to
any charge or lien.30
Both the new provisions, s 9(2)(c) and 10(1)(g), indirectly compel the original
proprietor to settle and discharge the master charge within three months from the date
of the issuance of CPSP that certifies the super structure stage. This mean, in
developments governed by the Housing Development (Control and Licensing) Act
1966, the original proprietor will have to settle and discharge the master charge at an
early stage, namely Stage 2(b) of the Third Schedule, when the original proprietor or
developer has collected 35% of the total purchase price.
This may lead to possible consequences such as the original proprietor or developer
having difficulty in obtaining bridging loan to finance the development area, 31 or the
amount of bridging loan approved by the bridging financier may be reduced, or the
conditions for releasing the bridging loan will become stricter, for example the
bridging financier may require that the sale reaches a higher percentage.
II.
Limited common property
The SMA 2013 has introduced the new concepts of limited common property32
(“LCP”) and subsidiary MC especially to cater for mix development areas in the
modern era.
29
30
31
32
STA 1985, s 9(2)(c) after the Strata Titles (Amendment) Act 2013 (Act A1450) comes into effect.
Ibid, s 10(1)(g).
SMA 2013, s 2 defines “development area” –
(a) in relation to a building or land intended for subdivision into parcels, means any land on
which the building or land intended for subdivision into parcels is developed or is in the
course of development or intended to be developed; and
(b) in relation to a subdivided building or land, means any alienated land held as one lot under
final title (whether Registry or Land Office title) on which the subdivided building or land is
developed.
See the definition under s 2 of the SMA 2013 where “limited common property” means such part
of the common property in a lot(a) that is designated in a comprehensive resolution referred to in s 17A of the STA 1985 for the
exclusive benefit of the proprietors of two or more, but not all, parcels; and
(b) for which a certificate has been issued by the Director certifying that the subsidiary MC has
been constituted under the STA 1985.
“common property” is also defined under s 2 of the SMA 2013 as –
(a) in relation to a building or land intended for subdivision into parcels, means so much of the
development area(i) as is not comprised in any parcel or proposed parcel; and
(ii) used or capable of being used or enjoyed by occupiers of two or more parcels or proposed
parcels; or
(b) in relation to a subdivided building or land, means so much of the lot(i) as is not comprised in any parcel, including any accessory parcel, or any provisional block
as shown in a certified strata plan; and
(ii) used or capable of being used or enjoyed by occupiers of two or more parcels.
See also BCPA 2007, s 2 where “common property” in relation to development area means so
much of the development area as is not comprised in any parcel, such as the structural elements of
the building, stairs, stairways, fire escape, entrances and exits, corridors, lobbies, fixtures and
7
The increase in popularity among developers for mix development may render LCP a
suitable choice for structures with a mixture of residential and non-residential parcels
(apartment and shops), non-residential parcels used for different purposes (office and
shop lots), and different types of residential parcels (for example, an apartment block
with lifts services and another block without lifts services) as different parcels with
different functions and needs may require different set of attention and interest in
relation to proper maintenance and service among common properties.
Hence, under the SMA 2013, the MC may designate limited common property and
create one or more subsidiary MCs only for the purpose of representing the different
interests of parcel owners by way of comprehensive resolution conducted under the
SMA 2013.33
The establishment of the subsidiary MCs will be able to represent a particular group
entitled to exclusive use and enjoyment of LCP. For example, in a mixed
development area involving residential parcel, office and shop lots, certain lifts
services and sports and recreational facilities are only to be used by the residential
proprietors exclusively, and central air-conditioning are exclusive use of the shop lots‟
proprietors.
There are two-tier corporations involved in the strata management of a mix
development areas, the first tier being the MC which represents all parcel owners,
maintain and manage all common property enjoyed by all parcel owners, and the
second tier being the subsidiary MC which represents only a group of two or more
parcel owners.
First issue, according to s 2 of the SMA 2013, a comprehensive resolution means a
resolution which is considered in the MC‟s general meeting of which at least thirty
days‟ notice has been given; and at the end of the period of sixty days after the said
general meeting is convened, on a poll, the total of the share units of the parcels for
which valid votes are counted in support of the resolution is at least two-thirds of the
aggregate share units34 of all the parcel owners who constitute the MC at the end of
such period.
At first glance, it is quite confusing as to why the agenda cannot be mooted or
discussed during the MC‟s first general meeting convened and why there must be a
gap of sixty days of the first general meeting. It seems the rationale behind this
requirement that all the parcel owners (or through their proxies) to meet on a second
33
34
fittings, lifts, refuse chutes, refuse bins, compounds, drains, water tanks, sewers, pipes, wires,
cables and ducts that serve more than one parcel, the exterior of all common parts of the building,
playing field and recreational areas, driveways, car parks and parking areas, open spaces,
landscape areas, walls and fences, and all other facilities and installations and any part of the land
used or capable of being used or enjoyed in common by all the occupiers of the building.
See STA 1985, s 17A (new).
SMA 2013, s 2, “share units” has the meaning assigned to it in s 4 of the STA 1985 and „aggregate
share units” means – (a) in relation to a building or land intended for subdivision into parcels, the
sum of the allocated share units of the parcels or proposed parcels, including a provisional block,
in a development area; or (b) in relation to a subdivided building or land, the sum of the share units
of the parcels, including a provisional block, as shown in the strata register prepared and
maintained by the Registrar under the STA 1985.
8
time to cast their votes is not explained and cannot be understood. One possible view
is that this comprehensive resolution is amounting to a circular resolution which must
be signed by all parcel owners.35
Next issue is in a case where two groups of parcel owners who enjoy different limited
common property exclusively to each other, but the voting shares do not achieve twothirds majority of the aggregate share units as required under the comprehensive
resolution. Practically there will be a deadlock and it seems again the law does not
provide any solution to this.
Another problem is that the existence of a subsidiary MC depends very much on the
establishment of a MC. If a MC is not formed yet, then there will never be a chance
for the subsidiary MC to be formed. The 2013 Strata Acts ideally foresee that the
strata titles are ready during the delivery of vacant possession of the parcels to the
parcel owners. There is a lacuna in situation where MC is not formed yet where the
strata title is not ready and which results in many issues arising among the parties
concerned, original proprietor, developer, JMB, MC, and parcel owners.
Notwithstanding the issues raised above, upon obtaining a comprehensive resolution,
the MC shall then apply to the Director of Land and Mines for the issuance of
certificate of subsidiary MC for the designated limited common property.36 The
subsidiary MC is a body corporate constituted under the STA 1985 and may sue and
be sued.37 One of the members from the subsidiary management committee of a
subsidiary MC shall be a member of the management committee of the MC.38
One interesting question is whether the MC and the subsidiary MC can take legal
action against each other? There is no direct decision on this issue. However an equal
inference can be drawn to the relationship between the developer and MC as
explained in Perbadanan Pengurusan Straits View v Permas Jaya Sdn. Bhd.39 and
Badan Pengurusan Wisma 2020 v Property Base Development Sdn. Bhd.40
In Perbadanan Pengurusan Straits View41 case, the MC claimed against the developer
for the contributions in respect of the provisional block. The developer‟s defence was
that the provisional block was outside the area managed by the MC and did not
receive any benefit or services from the MC, and the MC‟s act in levying contribution
on the provisional block was contrary to s 45(3)(a) of the STA 1985.
It was held that as the provisional strata title in respect of the provisional block had
already been issued, the developer, as the proprietor of the provisional block under s 4
of the STA 1985 is automatically included under s 39(1) of the STA 1985 for the
purposes of the establishment of the MC. The duties and the powers of the MC
35
36
37
38
39
40
41
Clarification made by Mr. Andrew Wong Fook Hin, a senior legal practitioner who was involved in
the drafting of the 2013 Strata Acts during his talk on “Updates on Latest Laws Relating to
Development of Buildings Intended for Subdivision and Management of Buildings and Common
Property” (Professional Practice and Development Talk organanised by the Malacca Bar
Committee at LA BOSS Hotel, Melaka, 29 November 2013).
See STA 1985, s 17A(3) (new).
See STA 1985, s 17A(6) (new).
See SMA 2013, s 63(4).
[2013] 8 MLJ 260 (Johor Bahru HC).
[2012] 10 MLJ 309 (Muar HC).
[2013] 8 MLJ 260.
9
encompass the provisional block. In the other words, the provisional block came
under the purview of the MC. The MC is empowered to levy contributions on the
proprietors in proportions to the share units or provisional share units of provisional
blocks (s 45(3) of the STA 1985).
Likewise, in Badan Pengurusan Wisma 2020 v Property Base Development Sdn.
Bhd., notwithstanding the developer‟s challenge on the legality of the establishment
of the MC had been dismissed by the High Court, the developer made a statement on
the notice boards and issued invoices to the purchasers of the parcels requiring them
to pay the maintenance fee to the developer.
The High Court held that, inter alia, the developer had no power to impose and
collect maintenance charges after the establishment of the MC. The duty of imposing
maintenance charges had been given to the MC pursuant to s 8(1)(b)-(2)(a) of the
BCPA 2007. The developer had committed the tort of interference and exemplary
damages were ordered against the developer.
Thus it is submitted that since both MC and subsidiary MC are two separate legal
entities and one may foresee that MC and subsidiary MC may engage in litigation
suits if there is any dispute between both corporations.
Will this new concept of LCP be popular among the parcel owners in the mixed
development area? It seems that the calculation of maintenance charges will be fairer
as the share units will be assigned according to weightage factors, different user
groups will have to pay for different charges and have different voting rights. The MC
and/or the subsidiary MC may determine different rate of charges in respect of parcels
used for significantly different purposes.
However, to enable the LCP to work, LCP must be capable of being easily identified
or ascertained on the ground, the buildings must be designed to clearly define
common property for separate blocks and common property for all and the developer
will play a major role in determining whether the LCP will be possible at the
beginning of the construction. Creating awareness among the parcel owners is vital on
these new concepts to strengthen and protect their rights.
III.
Criminal offences for non-compliance of the Strata legislations
Interestingly, the modern legal jurisprudence in Malaysia seems to favour imposing
criminal sanction for non-compliance of statutory provisions in private transactions.
The 2013 Strata Acts is of no exception. What is of concern among the writers will be
the incorporation of at least 9 and 36 criminal provisions respectively under the STA
198542 (with the latest amendments in 2013)43 and the SMA 201344 for breaching of
duties or non-compliance of the provisions stated therein.
42
43
44
STA 1985, ss 14A(1), 22A(1) and 22B(1) all being deleted via STA 2013; ss 40A(3), 41(2) and
55A.
STA 2013, new s 8(8), 19A(3) and 20(9).
SMA 2013, ss 6(6) & (7), 9(5), 10(7), 11(7), 12(9), 13(3), 14(5), 15(4), 26(5), 27(4), 29(3), 30(2)
&(3), 34(3), 48(4), 49(3), 50(4), 51(3), 53(3), 54(5), 55(4), 57(2), 62(5), 72(2) & (3), 78(3), 89(5),
91(2), 92(6), 123, 126(7), 133, 134, 135, 140, 141, 143, 151.
10
This manifests the legislature‟s stance in addressing the problems in the strata
development considering the increase of populations who will be residing in the gated
communities. The rationale behind the criminal nature of such offence is to act as a
deterrence to parties (especially the developers, JMB and MC) who handle the money
(sinking fund and maintenance charges) paid by the parcel owners on trust. A high
standard of duty of care in maintaining and managing the money (sinking funds and
maintenance charges) of the parcel owners is therefore being placed to eliminate those
scrupulous developers who would have mismanaged the money collected.
What is more appropriate under the 2013 Strata Acts would be the intention of the
legislature to protect the weaker parties (parcel owners) in common property
transaction as most of the criminal offence provisions are mainly related to the
breaches of duties imposed on original proprietor,45 developer,46 JMB,47 MC48 and
managing agent49 as early as from the stage before the sale of any parcel to the
maintenance and management of the parcels.
The newly enacted SMA 2013 contains only two provisions imposing criminal
penalty on the purchasers or parcel owners who, without reasonable excuse, fails to
comply with the written notice issued by the developer or JMB,50 MC or subsidiary
MC51 demanding payment of the sum due. Prior to this, there is only civil sanction on
the parcel owners who neglect or fail to pay the maintenance charges to the developer
or MC. The MC has no other options but to recover the sum due through civil suits in
the courts of law. Now with the imposition of criminal penalty, this serves as deterrent
to those parcel owners who fail to pay the sum due that they may end up in prison for
45
46
47
48
49
50
51
Offences involving the original proprietor under the STA 2013 are:- failure in transfer of
ownership of strata titles: s 40A(3) [new s 19A(3)]; breach of duty to convene the first annual
general meeting: s 41(2); failure to pay the contributions demanded by the MC: s 55A.
Offences involving the developer under the SMA 2013 are:- failure to file the schedule of parcels
with the Commissioner of Building before sale of any parcel: s 6(6); failure to comply with the
duties during developer‟s management period: s 9(5); failure to establish maintenance account: s
10(7); failure to establish sinking fund: s 11(7); failure to pay charges, and contribution to sinking
fund: s 12(9); breach of duties in relation to accounts: s 14( 5); failure to hand over to the JMB: s
15(4); failure to convene the first annual general meeting of JMB: s 18(5); breach of duty in
respect of charges for building or land intended for subdivision into parcels completed before the
commencement of SMA 2013: s 29(3); failure to prepare and maintain register of parcel owners: s
30(2); failure to maintain and manage properly subdivided building and common property: s 48(4);
failure to comply with the restrictions during the preliminary management period (prohibition
against borrowing money or giving securities; or entering into any contract relating to the
maintenance and management of any subdivided building or land and the common property in the
development area): s 49(3); failure to establish maintenance account in the name of MC: s 50(4);
failure to establish sinking fund account in the name of MC: s 51(3); breach of duties in relation to
account during preliminary management period: s 54(5); failure to comply with duties in handing
over of control to MC: s 55(4); failure to convene the first annual general meeting of the MC: s
57(2); failure to prepare the strata roll during preliminary management period: s 72(2); failure to
pay deposit to rectify defects on common property: s 92(6).
Offences involving the JMB under the SMA 2013 are:- breach of duty of JMB in relation to
accounts: s 26(5); fail to dissolve JMB: s 27(4); fail to prepare and maintain register of parcel
owners: s 30(3).
Offences involving the MC under the SMA 2013 are:- breach of duties in relation to accounts: s
62(5); and fail to prepare the strata roll: s 72(3).
Offences involving managing agent under the SMA 2013 are:- breach of duty in maintaining and
managing the sinking fund account: s 89(5); and failure to comply with the duties imposed upon
termination of the management agreement: s 91(2).
SMA 2013, s 34(3).
SMA 2013, s 78(3).
11
non-payment of the outstanding sum. Whether such provisions are effective in
reducing the number of errant parcel owners remain to be seen.
Another question is whether the criminal offence provisions which provide for
imprisonment term are effective in compelling the original proprietor, for example, to
comply with s 8 of the STA 1985 (amended).
Where the original proprietor has not made the application for subdivision of the
building or land within the prescribed period, he shall be guilty of an offence under s
8(7) of the STA 1985 and shall, on conviction, be liable for a fine not less than
RM10,000 but not more than RM100,000 or to imprisonment for a term not
exceeding 3 years or to both; and in the case of a continuing offence, to a further fine
of not less than RM100 but not more than RM1,000 for every day during which the
offence continues to be committed.52
If the original proprietor is developing the area, he is also considered as the developer.
Most development projects involve joint venture between original proprietor and the
developer where the developer is not the original proprietor. Almost all the developers
are body corporates. The issue now is can a body corporate (or its officer) be
imprisoned?
The High Court in an appeal case, Dunlop Malaysian Industries Bhd. v Public
Prosecutor53 held that the Magistrate Court has misapplied the law as the Magistrate
has no powers as set out in the Third Schedule of the Subordinate Courts Act 1948 to
sentence the factory manager to imprisonment unless it is exercised in the manner or
in such manner as may be prescribed by a written law. The High Court set aside the
sentence of one day‟s imprisonment imposed on the factory manager who represented
the corporation at the hearing when the corporation pleaded guilty to a pollution
offence under the Environmental Quality Act 1974.
The new enactment in SMA 2013 contains a provision on offences by body corporate
under s 140. It is stated that the director, member of the MC or subsidiary MC, chief
executive officer, manager, secretary or other similar officer of the body corporate,
may be charged jointly and severally with the body corporate; and if the body
corporate is found guilty of the offence, one of these persons who purporting to act in
such capacity or responsible for the management of the body corporate‟s affairs or
assisting such management shall be deemed to be guilty of that offence. The defence
available to the person is that if he can prove that the offence was committed without
his knowledge, consent or connivance; and he had taken all reasonable precautions
and exercised due diligence to prevent the commission of the offence.54
However, there is no similar provision in the STA 1985 and thus it is submitted that if
the developer fails to apply for the subdivision of the building or land, then the
persons behind the veil of the developer will escape any criminal sanction.
52
53
54
See STA 1985, s 8(8). Previously, the penalty was, a fine of not less than RM10,000 but not more
than RM100,000 and a further fine of not less than RM100 but not more than RM1,000 for every
day during which the offence continues to be committed.
[1985] 1 MLJ 313 (Seremban HC).
Similar provisions can be found in the Employee Provident Fund Act 1991 (Act 452), s 69 and
Personal Data Protection Act 2010 (Act 709), s 133.
12
Another issue is if the developer has complied with s 8 of the STA 1985 in applying
for subdivision but the strata titles are not issued for any reason attributable not to the
developer, will the developer be in breach of Schedule H agreement? Can the
developer deliver vacant possession of the parcel without strata title? These issues are
also not addressed clearly in the 2013 amendments.
IV.
Applicability of strata legislations to parcels intended to be leased
Having discussed the intricacies of the strata legislations, we can safely conclude that
the strata legislations in Malaysia are meant to protect and to preserve the rights of
purchasers upon having obtained their rights to proprietorship from the original
proprietor55 which in most cases will be the developer for cases involving transfer of
ownership or proprietorship of the strata titles from the original proprietor to the
parcel owners56 by way of issuance of strata title.
Generally each parcel owner, upon being the legal and beneficial proprietor of the
respective parcels, shall then have the rights and obligations to deal with the strata
title in accordance with the provisions of dealing under the NLC 1965 which includes
a further transfer of proprietorship of the parcel to a subsequent purchaser using Form
14A57 or to serve as a collateral for housing loan taken by way of charging the strata
title to the financial institution as security for loan facilities using Form 16A.58
Under the present Strata legislations, it is also crucial to note that parcel owners shall
only be granted the statutory rights59 and obligations imposed under the SMA 2013.
These include the right to establish the MC,60 right to attend the general meeting, right
to vote, and obligation to pay sinking fund61 and Charges.62
Conventionally, parcel owners of parcel units will purchase a property through the
perfection of transfer by way of Form 14A or through a perfection of charge through
the strata title for home loan granted for the purchase of the property.
However, as property prices soared and with many other determining factors
estopping the rate of home ownerships, there are now several proposals being in place
55
56
57
58
59
60
61
62
SMA 2013, s 2. The words “proprietor” and “original proprietor” have the meaning assigned to it
in s 4 of the STA 1985 respectively. Under STA 1985, “proprietor” refers to a parcel proprietor,
namely a person or body for the time being registered as the proprietor of a parcel, as well as to the
proprietor of a provisional block, namely a person or body for the time being registered as the
proprietor of a provisional block unless expressly provided otherwise and “original proprietor”
means the proprietor of the lot immediately before the subdivision of building.
SMA 2013, s 2. “Parcel owner” means the purchaser or the developer in respect of those parcels in
the development area which have not been sold by the developer.
NLC 1965, s 214 read together with s 217.
NLC 1965, s 241 read together with s 242.
SMA 2013, Part VI which deals with the rights and obligation attaching to individual parcels and
provisional blocks (ss 34 to 38).
STA 1985, s 39 provides that a MC consisting of all the parcel proprietors including in the case of
phased development, the proprietor of the provisional block(s) can come into existence upon the
opening of a book of the strata register in respect of a subdivided building or land.
SMA 2013, s 2. “Sinking fund account” means an account required to be opened and maintained
by a developer, JMB, MC or subsidiary MC under ss 11, 24, 51, 61 or 67 as the case may be.
SMA 2013, s 2. “Charges” means any money collected to be deposited into the maintenance
account.
13
where among them will be the “rent-to-own” scheme or to lease from the original
proprietors for a fixed period of time63 before the a complete transfer of proprietorship
to the parcel purchaser.64 Not surprising as well, the original proprietor may want to
only lease to the parcel owners and not to transfer the ownership or proprietorship to
the purchaser of the parcel.
This may lead to a discussion on whether the original proprietor is required to apply
for subdivision of the building or land under s 8 of the STA 1985 if the original
proprietor intends to lease the parcels (portion of the land) only to the purchasers
(supposedly known as „lessees‟ under the NLC 1965. The dealing of „lease‟ does not
come within the ambit of the STA 1985 and therefore there is no requirement for
subdivision of the building or land under the NLC 1965 or under the STA 1985.
What is required upon the original proprietor will be to execute in favour of the
“purchaser” (or “lessee”) a mere Form 15A65 under the NLC 1965 in consideration of
a sum of payment for the lease period of a maximum of thirty years only66 subject to
any right of option to renew the lease. Through this method of dealings, the writers
take the position that the original proprietor retains the absolute legal ownership of the
property whilst the execution of Form 15A transfers the beneficial ownership of the
property to the parcel owner.
The Ministry of Housing, through the Controller, has approved modification67 to the
statutory forms of the sale and purchase agreements in the Housing Development
(Control and Licensing) Regulations 1989 for the sale and purchase of parcels which
the original proprietor will lease to the purchasers upon issuance of strata titles. In that
context, the lessees to be are “purchasers”. But still when it comes to the perfection of
the transaction, the parties concerned will adopt Form 15A (lease) instead of Form
14A (transfer) under the NLC 1965.
Further, no lease or tenancy may be granted to two or more persons or bodies
otherwise than as trustees or representatives under s 225(2) of the NLC 1965. This
may further be an obstacle to the property market as not all purchasers can afford to
purchase the parcel individually, and mostly will purchase jointly either between the
husband and wife or the family members or friends.
With a limited beneficial ownership to the parcels, the literal reading of new
provisions in s 8 together with s 19A of the STA 198568 manifest a clear intention of
the Parliament to secure only the rights of the owners who have the legal ownership
of a particular parcel by way of Form 14A and not “purchasers” through the lease
form of Form 15A.
63
64
65
66
67
68
Sarban Singh, “Najib: Govt to Offer Rent-To-Own Schemes for PR1MA Housebuyers Without
Bank Loans”, The Star (9 September 2014)
<http://www/thestar.com.my/News/Nation/2014/09/09/PR1MA-rent-to-own-najib/>, accessed on
4 October 2014.
Notwithstanding the term “rent-to-own” being used by the Honourable Prime Minister, the writers
are of the view that the proposed scheme falls under the category of a lease under s 221(2) of the
NLC 1965 which has the following words, “(2) Every lease granted pursuant to this section shall
be for a term exceeding three years.”
See NLC 1965, s 221(4).
NLC 1965, s 221(3)(b). See also Siew Soon Wah v Yong Tong Hong [1973] 1 MLJ 133 PC.
Regulation 11(3).
See also SMA 2013, s 40A.
14
As the concept of leasing a property may be a progressive step in addressing the home
ownership issue here in Malaysia, there is a certain need for the legislative bodies to
oversee the many issues arising out of the latest trend of purchasing a property by way
of lease to provide such purchasers by way of lease the rights under the strata
legislations and to impose the relevant obligations should the purchaser defaults in
performance as with any other conventional parcel owners.
POSITION IN SINGAPORE AND AUSTRALIA (NEW SOUTH WALES)
In the writers‟ point of view, both Singapore and Australia (New South Wales) have
shown a remarkable success in handling issues of gated communities. After almost
two decades of introduction, Malaysia is finally adopting the principles which led to
the success story of these two sovereign nations.
I
Singapore
Although both Singapore and Malaysia initially introduced the strata legislations in
the 1960s,69 Singapore has surged ahead with many rounds of amendments and new
enactments together with the introduction of new concepts (which historical
amendments will not be the scope of discussion here). In Singapore, the current
legislations governing strata titles are the Land Titles (Strata) Act70 (“LTSA”) and the
Building Maintenance and Strata Management Act71 (“BMSMA”). The former (quite
similar to our STA 1985) is an Act to facilitate the subdivision of land into strata72
(subdivision of building or land into parcels in our STA 1985) and the disposition of
titles thereto and for purposes connected therewith together with facilitate the
collective sale of property. The latter is an Act which provides for proper maintenance
and management of buildings73 (and common property in our SMA 2013).
Our recent amendments made in 2013 were exactly what Singapore has experienced
about ten years ago,74 such as expedite the application and issuance of strata title,
facilitate the management of mixed development (LCP and subsidiary MC), and
introduce criminal sanctions. However, since then, Singapore has deleted various
offences on the ground that no serious threat has been posed to the public order.
II.
69
70
71
72
73
74
Australia (New South Wales)
Both earliest systems were modeled on the New South Wales‟s Conveyancing (Strata Titles) Act
1961. The first legislation in Singapore was the Land Titles (Strata) Act 1967 (No.41 of 1967).
Cap 158 (2009 Rev. Ed.).
Cap 30C (2008 Rev. Ed.).
See Preamble to Cap 158.
See Preamble to Cap 30C
BMSMA was introduced in 2005, then known as Building Maintenance and Strata Management
Act 2004 (No.47 of 2004) vide S 191/2005 which intended to repeal the then Buildings and
Common Property (Maintenance and Management) Act 2000 (Cap 30) and merged some parts of
LTSA and Cap 30.
15
In the state of New South Wales of Australia, there are currently three pieces of strata
legislations, i.e., Strata Schemes (Freehold Development) Act 1973,75 Strata Scheme
(Leasehold Development) Act 1986,76 and Strata Scheme Management Act 1996.77
While the first two legislations deal with development related matters pertaining to all
freehold or leasehold strata scheme in New South Wales, as the case may be, the third
legislation governs the management and resolution of dispute aspects of all strata
schemes (be it freehold or leasehold). This Australian model has, in recent years,
expanded to cover newer concepts or ideas in the strata management. Among others,
are the introduction of leasehold strata title scheme, part building strata schemes,
retirement villages‟ scheme, and community titles.
Interesting enough that the purpose of the Strata Scheme (Leasehold Development)
Act 1986 is to allow land to be subdivided by means of a strata scheme in cases where
the owner of the land does not wish, or is not able, to part with ownership of the
land.78 It is further stated that “under a leasehold strata scheme, the owner of the land
that is the subject of the scheme retains an estate in fee simple in the land. The
purchaser of each lot that is created under the subdivision obtains a leasehold interest,
rather than a freehold interest, in the lot.79
SUGGESTIONS
On the first issue pertaining to subdivision of building or land, clear and unambiguous
meaning of “super structure stage” need to be ironed out to synchronise with other
related and incidental legislations and regulations. It is suggested that if the intention
of the legislature is to refer to “structural framework of the building”, then the same
term should be adopted consistently.
Pertaining to the issue on limited common property, it is known that there is a lacuna
where the concepts of LCP and subsidiary MC will not exist until an MC is in
existence for the development area. Perhaps amendment is required to allow the
establishment of subsidiary JMB to co-exist with the JMB before the establishment of
MC. But the idea of the 2013 amendment to STA 1985 is to establish the MC when
the strata title is ready together with the delivery of vacant possession, and thus there
should be no gap to establish JMB during the interim stage (pending the issuance of
strata titles). So, one practical solution is that the parties concerned including the
issuing authority must work hand in hand to expedite the issuance of strata titles.
The inclusion of so many criminal offences for non-compliance in the private and
civil matters in the SMA 2013 has certainly raised eyebrows although the
effectiveness of the enforcement of these provisions is yet to be proven. Although it
may, inculcate fear on the parties concerned so as not to simply breach their
respective duties without any worry of any serious consequences. The writers are of
the view that the Singapore‟s approach in de-criminalising various offences which do
not pose a serious threat to the general public should be emulated.
75
76
77
78
79
No.68 of 1973.
No.219 of 1986.
No.138 of 1996.
Part 1 Preliminary of No.219 of 1986.
Ibid.
16
On the final issue on the applicability of strata legislations to parcels intended to be
leased, it is proposed that the laws need to be extended to cover the dealing in lease.
Unless it is incorporated in the strata legislations, the only protection to the parties is
through contractual relationship. Adopting something similar to the Australian Strata
Scheme (Leasehold Development) Act 1986 is a viable practical solution in this
aspect.
CONCLUSION
As the 2013 Strata Acts intends to overcome any adversities faced under the previous
legislations, the sudden introduction may have great impact on all parties involved,
both positively and negatively. On a positive note, proprietors can now look forward
to a speedier issuance of strata titles; better maintenance and management of their
developer area; and different user groups can look forward to an opportunity to
designate and manage LCP for their exclusive use and enjoyment.
Additionally, the 2013 Strata Acts provide a better monitoring mechanism and control
over the developer, JMB and MC on their respective roles, functions and duties owed
to the parcel owners. This is rather obvious with the presence of so many criminal
sanctions provided in particularly the SMA 2013 which requires strict compliance
among the developer, JMB and MC to the 2013 Strata Acts.
With the improvement of urban lifestyle, amendments will certainly be on the table to
address any issues which may be lacking considering the 2013 Strata Acts still have
plentiful of rooms for improvement.
17