Obtaining strata titles: a developer's duty
15/11/1998 NST-PROP By Salleh BuangProf Salleh
Buang hopes that a recent decision of the Malacca High Court can throw some
more light on this difficult area of the law. When we buy properties, whether
landed or stratified, we expect to be furnished with some document of title
so we can show to the world that the properties belong to us. This human
urge has been given due recognition by law, specifically the National Land
Code 1965 and (if the property is part of a highrise building), the Strata
Titles Act 1985.
Although the document that we have in our possession is only an Issue Document
of Title or IDT (the actual title - called the register document of title
- is kept and maintained by the appropriate authorities), to all intents
and purposes, the IDT is accepted as proof of ownership.
Having said this, the case that becomes the focus of today's commentary
concerns the predicament of five people who had purchased certain units
in the Garden City Apartments complex in Malacca.
No, their problem was not that the project was abandoned - their grouse
was that the developer had delayed in getting the strata titles for the
apartments which they had purchased.
The case, Sor Kor Wah & four others vs Draland Sdn Bhd (1998) 4 AMR 3602),
was decided on by Datuk S. Augustine Paul JC at the Malacca High Court on
March 16 this year.
The facts
The Garden City City Apartments complex (hereinafter referred to as the
complex) comprises 1,038 units spread over 11 blocks. Four of the plaintiffs
in the case each bought a unit in Block B2 while the fifth chose one in
Block B3.
When executing their purchases, each of the plaintiffs signed identical
Sale and Purchase Agreements (SPAs) with the developer, Draland Sdn Bhd,
but they did so at different times ranging between Sept 8, 1988 and March
31, 1990.
Of particular interest in their SPAs is a provision in Section 2.04 which
states that the developer "shall apply to the proper authority for the issue
of a strata title to each of the individual parcels under the provisions
of the Strata Titles Act upon completion of of the complex".
On April 24, 1990 a Certificate of Fitness for Occupation was issued to
all the apartments in Phase 1A of the complex. Unfortunately for Draland,
between 1991 and 1996, several private caveats were lodged over the master
title to the land upon which the complex was built. These caveats were entered
by the purchasers. Draland was only able to have the last of these caveats
removed in August 1997.
In October 1997, Draland applied for a final survey of the land, but at
the time this case was filed in court, the relevant survey department still
hadn't reverted to the developer with favourable news. The final survey
is crucial, because only after this hurdle has been crossed can a developer
expect to obtain a final title. And only after a final title has been issued
can a developer apply for strata title.
According to court judgement, for Malacca's Land Office to issue strata
titles, the process takes about "five years ... from the date an application
is made for it." The plaintiffs were, as to be expected, quite unhappy.
Without the strata titles, they could not (in collaboration with the other
apartment owners form a Management Corporation (MC) - a statutory right
given to them under the Strata Titles Act. And in the absence of an MC,
Draland was entitled to collect service charges from the plaintiffs for
the maintenance of their apartments.
The plaintiffs were especially unhappy since 30% of the service charges
which they were forced to pay (as stipulated under the terms of SPA) were
actually "surcharges", which Draland could use to meet its own upkeep. The
plaintiffs argued that if the developer had applied for (and obtained) the
strata titles in the normal course of events, their obligation to pay the
surcharge of 30% would have ceased when the strata titles were issued.
The issue
The main issue in the case, said Augustine Paul JC, is "whether there is
a time period within which the defendant must apply for and obtain the strata
titles?" To resolve this, the Court had to answer the following questions:
->Whether Section 2.04 of the SPA is valid and enforceable;
->Whether the developer had applied for the strata titles within the time-limit
prescribed by the Strata Titles Act, and if not, the effect of such failure;
and
->The remedy available to the plaintiffs resulting from the developer's
default.
The judgement
Augustine Paul JC observed that Section 2.04 of the SPA was "couched in
wide terms" and imposed an obligation on Draland to apply for strata titles
"only when the complex has been completed." While Phase 1A of the complex
was completed in 1990, the entire complex had not been completed when the
plaintiffs filed the case.
The JC then considered submission made by the plaintiffs' solicitors, who
contended that Section 8 of the Act prescribes a time period within which
an application for strata titles must be made - which on the facts of this
case must be "six months from the date of the sale ... or the first of such
sales or agreements."
The plaintiffs' solicitors also contended that the object of Section 8 was
"to protect purchasers" and Section 2.04 of the SPA was clearly "an attempt
to contract out of a statutory provision and is therefore void."
The JC also considered submissions made by Draland's solicitors, who contended
that Section 8 was not applicable. They argued that "before an application
for strata titles can be made there must be a final title", and that final
title to the land would be available "only when the complex is completed
and when the master title ... is surrendered."
Draland s solicitors argued that the developer "could not have acted earlier
as caveats had been lodged" against the land by various parties." Until
the final title is issued by the relevant authorities, they said, "there
can be no application for strata titles and that in the circumstances, the
defendant could not be faulted."
The learned JC then referred to Section 8 of the Act and held that in view
of the criminal sanctions behind it, the nature of the developer's duty
to apply for strata titles under the provision is "mandatory".
The court also referred to Section 7(2) of the Act which states that the
proprietor of any alienated land held under qualified title "which has been
duly surveyed and in respect of which a certified plan has been approved
by the Director of Survey, may apply for the subdivision of any building
thereon."
Considering all the circumstances of the case, the learned JC held that:
->As the object of the Act is to protect the interests of the purchasers,
the developer "ought to have obtained the certified plan and the survey
by the Director of Survey within a reasonable time after approval of the
layout plan";
->Section 2.04 of the SPA "is contrary to the scheme of phased development
authorised by the Act";
->Under such "phased development", the proprietor of any land may apply
for the issue of provisional strata titles for a provisional block in respect
of the building that has been completed on a lot - a procedure envisaged
under Section 10A of the Act:
->The Act provides specific time periods within which an application for
strata titles must be made even when the land has not been subdivided;
->The developer should have taken the necessary steps to apply for provisional
strata title "instead of adopting the course that he is now taking";
In his concluding remarks, the learned JC said: "It follows that Section
2.04 which gives the defendant time till completion of the entire complex
to apply for strata titles is inconsistent with the Act. This amounts to
an attempt by the defendant to contract out of a statutory provision."
As such, the JC said the defendant must compensate the plaintiffs "for any
damages suffered by them."
Conclusion
Most lawyers agree that the Strata Titles Act is not an easy piece of legislation
to comprehend.
Other professionals with whom I have had the pleasure of exchanging ideas
with are generally in agreement that the Act needs to be continuously looked
into so that it will facilitate, rather than hinder, development.
I earnestly hope this recent Malacca High Court decision can throw some
more light on what has otherwise been a difficult territory of law to comprehend.
