IMPACT OF THE COMING INTO FORCE of the Housing Development (Control & Licensing) (Amendment) Act 2012, Housing Development (Control & Licensing) (Amendment) Regulations 2015, Housing Development (Housing Development Account) (Amendment) Regulations 2015, Strata Titles (Amendment)

Act 2013, Strata Management Act 2013, Strata Management (Maintenance & Management)Regulations 2015 and Strata Management (Strata Management Tribunal) Regulations 2015.

1 st June and 1st July 2015 were 2 special dates that marked major changes in the landscape of the housing development and stratafied properties development in Malaysia. A total of 7 enactments and regulations all came into force within the span of two months. This article serves to take a brief look at some maior and impactful provisions contained in these enactments and regulations.

Introduction

In Malaysia, residential properties development are governed and regulated mainly by Housing Development (Control & Li-censing) Act 1966 and Housing Development (Control & Licensing) Regulations 1989. It governs development of anything above 4 units of properties owned meant for human habitation (terrace, semi-de-tached, bungalow, gated & guarded strata landed development, apartment, or condominium dwellings) or partly human habitation partly commercial (SOHO or serviced apartments).

The development of stratified properties, which comprise of both residential developments as mentioned in the above para as well as non-residential developments (commercial stratified shops, retail lots, offices, SOVO, SOFO or hotel suites) are governed and regulated by the Strata Titles . Act 1985 and now for the first time in the history of Malaysia, Strata Management Act 2013.

THE AMENDMENTS TO RESIDENTIAL/HOUSING DEVELOPMENT

The Housing Development (Control & Licensing)(Amendment)Act 2012("HDAA 2012" came into effect on 1st June 2015 which amended the Housing Development Act 1966 ("HDA 1966"); Housing Development (Control & Licens-ing) (Amendment) Regulations 2015 came into effect on 1st July 2015; while Housing Development (Housing Development Account) (Amendment) Regulations 2015 came into effect on 2nd June 2015 Here are some salient aspects of the above Acts and Regulations :-

1. DEPOSIT FOR DEVELOPER'S LICENSE

1. Prior to the amendment, in order to obtain Developer's Licence, developers were bound to place a deposit amount of RM200,000.00 to the Controller prior to the issuance of the Developer's License by the Ministry of Housing. NOW under the revised s.6 (1) HDA 1966, developers are to make a deposit sum equivalent to 3% of the estimated cost of a housing development construction within their respective projects. The deposit sum could be in RM millions.

2. The 3% of the estimated costs shall be deposited by the Developer by way of cash, bank guarantee or having a balance of the 3% estimated costs in the Housing Development Account - Regulation 3A of HDR 1989.

3. Withdrawal of the said deposit will require approval of the Housing Control-ler, which typically will be granted after completion of the Housing Development and defect liability period. The period where the deposit sum is 'stuck' could range between 4 to 6 years.

B. ADVERTISEMENTS BY HOUSING DEVELOPERS

The contents allowed in "any advertisement made by any licensed housing devel-oper" is further restricted with the insertion of Regulation 8(1A) in HDR 1989, which prohibits the following to appear on the Developer's advertisement or marketing bro-chures:

1. offer of free legal fees;

2. projected monetary gains and rental in-come;

3. claim of panoramic view

4. travelling time from housing projects to popular destinations

5. any particulars to which a housing developer cannot genuinely lay proper claim

C. COLLECTION OF PAYMENT OUTSIDE OF A SALE AND PURCHASE AGREEMENT

Previously only developers were prohibited to collect any payment such as 'book-ing fees' or 'earnest deposit' before signing of a sale and purchase agreement. To further protect purchasers, the amended Regulation 11(2), HDR 1989 extended this prohibition to stakeholders appointed by the Developer:

"No person including parties acting as stakeholders shall collect any payment whatsoever except as prescribed by the contract of sale"

D. PRESCRIBED SALE AND PURCHASE AGREEMENTS

HDR 2015 also provides substituted versions of the prescribed sale and purchase agreements (or more commonly known as Schedule G and Schedule H). Housing Developers who obtain their Developer's Li-cence on/after 1st July 2015 must adopt the amended Schedule G and Schedule.

Some key clauses in the new Schedule H are :-

1. Clause 6 - Financial Facility

Purchaser must obtain facility within 30 days after receipt of stamped sale and purchase agreement. If the facility is not approved, Developer must refund the balance of amount payable to Purchaser within 30 days.

2. Clause 10 - Interest on late payment

Purchasers have 30 calendar days to settle progressive payments to developers as stipulated in the Third Schedule whereby previously it was 21 working days. Interest on late payment cannot be charged for a period of 6 months to purchasers who have obtained financial facilities from Government. If a Purchaser cannot obtain a loan due to ineligibility of income and can produce such proof, Purchaser shall pay to the Developer 1% of the purchase price.

3. Clause 12 - Separate Strata title and transfer of title

Developer shall apply for subdivision of title and execute memorandum of transfer in favour of the purchaser before delivery of vacant possession. Please cross refer to Strata Title (Amendment) Act 2013 below.

E. STATUTORY TERMINATION OF SALE AND PURCHASE AGREEMENT

In relation to the new prescribed sale and purchase agreement, Section 8A HDA 1966 provides purchasers with the unilateral right to terminate said agreement, at any time, provided:

1. It is certified by the Controller of Housing that the developer has refused, de-layed, suspended or ceased work for a continuous period of 6 months after execution of the agreement; and

2. Purchaser has obtained a written consent from financier.

F. OFFENCES RELATING TO ABANDONMENT OF HOUSING DEVELOPMENT

To address the issue of abandoned housing developments, a new section s.18A is inserted in the HDA 1966. Scope of this section is rather wide in that a development will be considered as abandoned the moment a developer "refuses to carry out or delays, suspends or ceases work continuously for a period of six months or more or bevond the stipulated period of completion as agreed under the sale and purchase agreement." A developer convicted under the new s.18A shall face punitive punishment of fine between the range of RM250,000.00 and RM500,000 or imprisonment for a term not exceeding 3 years or both.

THE AMENDMENTS TO STRATAFIED PROPERTIES DEVELOPMENT AND MANAGEMENT

The Strata Titles (Amendment) Act 2013 (STAA 2013) came in force 1st June 2015, amended the Strata Title Act 1985. Under the new law, developers must now fulfil certain pre-requisites before proceeding with any sales of parcel :-

Certificate of Share Unit Formula (Sijil Formula Unit Syer "SiFUS")

Developers must obtain a Certificate of Share Unit Formula (or SiFUS) to be issued by the Land Office (PTG). This new insertion is in line with the spirit of the Strata Titles Acts i.e. to ensure the availability of strata title runs concurrently with the delivery of the vacant possession to its owners. In order to obtain SiFUS, developers must ensure the following matters and documents are in place:-

• Receipt of payment for Land Premium (if any);

• Letter of Application for Qualified Title as endorsed by Land Office (if there is no
  Final Title);

• Receipt of Quit Rent for the current year;

• Letter of appointment of Licensed Land Surveyor;

• Receipt of Surveying Fees by Land Surveyor Board;

• Share Unit Formula;

• Schedule of Parcels signed by Licensed Land Surveyor and Architect/Engineer;

• Approved Building Plans

KEY AREAS ON STAA 2013 :-

1. Section 8 - Circumstances in which it is compulsory to apply for subdivision of a building or land

1. The original proprietor (OP) must apply for sub division at the super structure stage (upon completion of building works as certified by the Street, Drainage and Building Act 1974 - structural framework - necessary for measurements of parcels accessory parcels and common property). Stage 2(c) of the payment schedule of purchase price for residential development

2. OP to apply for certificate of proposed strata plan (CPSP) within 3 months (subject to extension not exceeding 1 month) from date of super structure certificate

Proposed strata plan shall show the following

• Location plan, storey plan, delineation plan

• all parcels, all common property, all accessory parcels

3. Within 1 month from issuance of CPSP, OP shall apply for subdivision of strata titles for the Development.

The Implementation of the new timeline above represent a significant step in expediting the application of sub dividing the strata titles and facilitating the availability of strata titles upon vacant possession being delivered to property owners.

B. Section 9A - Application for subdivision in the case of phased developments

• The issuance of a provisional block comprising of land parcels is now at-lowed

C. Section 10 - Conditions for approval for sub division

• Issuance of CPSP;

• Use of land not contrary to the land category and conditions;

• Land is not subject to any charge or lien;

• Land is held under final title; and

• Leasehold land - terms of years must not be less than 21 years

D. Section 17A - Limited Common Property (LCP) and Subsidiary Management Corporations allowed

1. LCP are common features in mixed de-velopment, for example :-

• mix residential parcels and non-res-idential parcels such as apartments mixed with retail shops

• non-residential parcels used for significantly different purposes such as office and retail shops

• non-residential parcels used for the same purpose but are comprised in a building that is physically detached from other parcels in the development area such as two office blocks

• different types of residential parcels such as apartment blocks with lifts and apartment blocks without lifts.

2. Limited common property - designated for the exclusive benefit of proprietors of two or more parcels.

3. Steps to be taken to designate LCP :-

• MC to prepare the special plan

• MC to convene a general meeting to pass a comprehensive resolution

• MC to make application in Form 9

• Director must refer the application to the Director of Survey

• Director will issue a certificate (cer-tify) that the subsidiary mc has been constituted under the STA

The implementation of the above system:-

• will improve efficiency in the management of various common properties and common facilities within a single Devel-opment;

• funds collected will be properly chan-nelled towards the maintenance of specified areas and facilities;

• better representation for different owners from different sections within a De-velopment;

• resolve overlap issues in management; after which

• sub MCs will be cleared

The STAA 2013 also carved out provisions with regard to the management of subdivided buildings which is now purely governed by the Strata Management Act

2013 (SMA 2013) that was passed on 1st June 2015.

The regulations on SMA 2013 are as fol-lows:-

• Strata Management (Maintenance & Management Regulations 2015 - in effect 2nd June 2015

• Strata Management (Strata Management Tribunal) Regulations 2015 - in effect 1st July 2015

The SMA 2013 has repealed the Building and Common Property (Maintenance and Management) Act 2007 (BCPA 2007).

For new developments approved after the implementation of the STAA 2013 and the SMA 2013, there is no need to establish JMB since it will be replaced with issuance of strata titles upon delivery of a vacant possessions to its owners. Management Corporation is presumed to be formed soon after delivery of vacant possessions.

The Developer will take responsibility in maintaining and managing the common property for a period commencing from VP until 1 month after the first Annual General Meeting of the MC (preliminary management period).

The developer shall not hand over said property to MC later than the expiry of the preliminary management period.

Before MC comes into existence, the developer will assume responsibility in maintaining and managing said property within the developer's management period which expires one month after the establishment of the JMB; and management by JMB until not more than 1 month after the first Annual General Meeting.

KEY AREAS ON SMA 2013:-

1. Section 6 - Schedule of Parcels to be filed before any sales of parcel

1. A developer shall not sell any parcels within the development area unless a schedule of parcel showing the proposed share units of each parcel and the total share units is filed by the Building Commissioner;

2. For phased development, the schedule for the parcel shall show the quantum of provisional share units for each provisional block.

3. The Schedule of parcel comprises of:-

• Location plan, storey plan and delineation plan

• Parcels of common properties and all accessory parcels

• Certificate by developer land sur-veyor, architect, engineer and that the building is capable of being subdivided

4. If the developer fails to comply the above, the penalties are as such :-

• Fine not exceeding RM500,000.00; Or

• Imprisonment not exceeding 5 years; or

• Both the above

B. Section 8 - Allocation of share units

1. If sale of parcel was made before SMA 2013 and no share units are assigned to each parcel then the share units of each parcel shall be assigned by any person or body who has duty (the au-thority) to do so

2. Allocation based on the formula set out in the First schedule - Table 1 - specify weightage factors for different types of parcels, whole floor parcels and accessory parcels

C. Section 10 - The Developer establishes the maintenance account

1. Under BCPA 2007 - purchasers shall pay maintenance charges to maintain and manage the building and common property

2. Under SMA 2013 - the sum is called "Charges" to be deposited into the maintenance account

3. Apart from the Charges, each parcels owner shall pay contribution to the sinking fund of an amount equivalent to 10% of the Charges

D. Section 92 - The Developer is to pay a deposit to rectify defects on common property

1. The developer must pay in cash or bank guarantee with the approval of the Building Commissioner such sum as may be determined by the Building Commissioner for the purpose of carrying out rectification of defects on the common property

E. Section 101 - Disputes and strata management tribunal - Part 1 of the Fourth Schedule

1. Address management disputes such as claims, recovery of charges or contributions to the sinking fund

2. Consist of members of Judicial and Legal Services not less than 7 years standing

3. Not less than 21 members

CONCLUSION

Viewed in totality, it is undeniable that the recent amendments on HDA 1966 are impactful when dealing with develop-ers. The Government has time and again emphasised the importance and need for transparency and accountability amongst housing developers. This is crucial as majority of buyers of houses in Malaysia are first time purchasers who use their lifetime savings to secure a home for themselves.

Such purchasers are usually not aware of or do not understand the procedures and intricacies involved in a typical sale and purchase transaction and do not usually have equal bargaining power against housing developers who are normally 'repeat-players' in this field. As such, it is only the law that can be the protective shield for purchasers against potential risks involved in purchasing a property, especially, those under construction from housing develop-ers.

Purchasers are afforded greater protection whereby housing developers are now required to adopt the new Schedule H and/ or G agreements, be transparent in exhibiting details of important elements of a sale as well as to hand over the strata title upon delivery of a vacant possession.