What is a strata title? What is the difference between strata title and individual title of a property? And, why are strata titles important?
Before we start detailing the significance of strata titles, it is pertinent to understand all things related to strata titles in order for homebuyers to protect their legal rights.
Strata titles are commonly implemented to subdivided buildings or complexes including residential buildings, such as serviced apartments and commercial buildings. This form of title is necessary for subdivided buildings because unlike landed properties, the title gives control for the individual unit in the building that the homebuyer occupied —namely the parcel— instead of the land itself. The land and the common facilities surrounding the property are managed by the management committee of the Management Corporation (MC), which is elected amongst the strata title owners of the property.
Among the two types of land titles available in Malaysia —namely individual title and strata title— there are several differences as listed below:
- Ownership: For individual titles, the land and property ownership is with the purchaser. However, for the strata title, the ownership is shared between the owners of the properties.
- Registration of titles: Individual titles are registered faster than strata titles.
- Issuance of titles: Individual titles are issued to landed properties, whereas strata titles are issued to high rise properties.
- House type: Houses that have their own land such as terrace houses, semi-detached houses and bungalows will have an individual title. On the other hand, strata titles are available to high rise buildings that are subdivided such as condominiums and apartments.
- Responsibility: The responsibility for properties with individual titles falls solely on the individual who owns the property, whereas shared maintenance is expected for the building amongst strata title owners.
- Ease of finance: Acquiring financial support is easy for individual title owners. However, strata title owners may face some difficulties while attempting to acquire financial support.
There are many cases whereby despite homebuyers having bought their apartment units over 20 years ago they have yet to receive strata titles from their developers. Such stories are unfortunately common and rampant in Malaysia.
Although there are many voices expressing their opinion to involve banks in Malaysia to correlate with home buyers in issuance of the strata titles, there are no concrete actions taken thus far. Hence, with all things said, why bother with strata titles when its absence can go unnoticed for years, even decades?
Firstly, strata titles serve as proof of ownership of the high rise building’s parcel. This is because before the issuance of strata titles to the home buyers, the land and the building still legally belongs to the developer (or the registered proprietor) and the homeowner has only beneficial ownership of said parcel. The absence of strata titles will certainly be felt when the property developer becomes insolvent or goes into liquidation, as homeowners will need to prove ownership of their parcel to the liquidators without having a strata title.
The situation will be even more so complicated when homebuyers are seeking to sell their property. Aside from being an ultimate proof of ownership, a strata title is a necessary instrument when it comes to a smooth transaction during the sales process, as the developer is still the registered owner of the property.
Secondly, banks are often reluctant to grant loans where strata titles are either not perfected or downright not issued to the homebuyer, making it difficult for the sub-sales buyer to obtain a housing loan for the purchase. Hence, nowadays many sub-sale buyers require the presence of strata title as a prerequisite for the property purchase deal. Having the strata title ready during the sales process serves as an attractive prospect, allowing homebuyers to offer a higher price too.
What about the homebuyers who intend to stay in the property? Do they require a perfect strata title?
Thirdly, the issuance of strata titles to a minimum of 25% of the parcel owners is required to kickstart the formation of the MC. The members of MC are voted by all the other parcel owners who attended the Annual General Meeting, as strata developments are intended to operate as a democratic community. There are many responsibilities that are handled by the MC including enforcing rules and regulations, maintaining and managing common properties, obtaining insurance, paying quit rent and complying with relevant policies and law. The MC is a representation of all the parcel owners, in which it can only be enacted upon the issuance of strata titles.
Last but not least, the property developer can impose additional storage charges ranging between RM100 to RM150 monthly in the event of failure or delay to effect the perfection of transfer. This is because by not perfecting the transfer of the strata title within the specific period as announced by the developer, the developer continues to bear the burden of being the registered owner of the property. In this case, it is a lose-lose situation that should be rectified as soon as possible.
In conclusion, we strongly urge homebuyers to not delay the perfection of their respective strata titles the moment the developers have issued the strata titles for the property. Having a strata title registered in your name not only proves your indefeasible ownership of the property, but it allows you to fully exercise your rights as a parcel owner in a strata development.
