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.

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Cash flow refers to the movement of income (or revenue) into and expenditure out of a business.

In the construction industry, it’s a vital concept as contractors need money to pay subcontractors, material suppliers, as well as daily operation expenses during a project’s timeline.

However, negative cash flow (when there are more outgoing costs than incoming profit) also exists within the industry and can cause various drawbacks in a project’s completion. Let’s examine the critical issues that cause negative cash flow in businesses.

The first and most prevalent cause among the others is the pervasive attitude by various parties.

It has become an unfortunately common practice for paymasters to be late in issuing payment certificates as well as late in honoring them.

This culture has inevitably affected contractors’ cash flow and profit, creating a domino effect that goes as follows:

The second point is that contractors also often overlook the importance of payment provision in construction projects, despite the fact that it is a major concern for most if not all contractors.

The contractual provision governs the rights and entitlements of contractors to be paid, which relates back to the need for cash flow among contractors.There are two criteria needed to be met for the payment clause:

• Certification Period
• Period of Honouring Certificate

A majority of contracts tend to ignore or exclude the certification period as it relieves the contract administrator from being tied with a constraint period to make valuation and issue a payment certificate.

Even so, that is why the commonly used standard form of contracts such as JKR Contract (PWD) and PAM Contract have these two criteria to provide clarity in terms of payment for work done for the contractors.

To summarize, contractors must develop awareness from time to time regarding this matter to ensure that they will be able to receive the monetary rewards that they were promised.

Contractors should be aware of their rights contractually and legally and avoid being subjected to negative cash flow or worst still, become insolvent. It’s also beneficial as it narrows the room for exploitation of any party under a contract.

The third point is the availability and effectiveness of dispute resolution mechanisms.

Apart from the conventional litigation, there are various alternative ways often regarded as Alternative Dispute Resolution (ADR) to resolve disputes which include mediation, adjudication, and arbitration.

Mediation, for example, provides an alternative way to settle the dispute without the need to go to court. Involved parties could consider options and suggestions made by the mediator to ensure a win-win solution, as well as maintaining a personal and business relationship between involved parties.

The statutory adjudication under CIPAA 2012 was enacted and came into force on 15 April 2014 to cure this very payment problem in the construction industry. Through CIPAA 2012, a speedy and cheaper dispute resolution which considers all aspects of the situation can also be provided. Thus, the issue of late payments, pervasive negative cultures and behaviours can be overcame to avoid negative cash flow problems in the future.

The third method is arbitration which is an effective way of obtaining a final decision or award in a dispute, or a series of dispute, without needing reference from a court. It requires construction contracts to have an arbitration clause and is more informal compared to a typical court proceeding. It is, however, a private and consensual process whereby the involved parties are at liberty to decide on the arbitration terms such as the number of arbitrators, language used as well as the venue of the proceeding.

In conclusion, it is clear that there needs to be a greater understanding among contractors regarding the critical issues affecting their cash flow in business.

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But many new homebuyers may be unaware that several things need to be taken care of before they can start planning their house-warming party.

The most important thing is that the house-buying process doesn’t end the moment they get the keys to their property.

This might come as a surprise to some new homeowners. Developers may understand, however, as there’s still much to be done to ensure the property is safe and habitable before the purchase can be officially closed. This is also commonly known as the Vacant Possession (VP) process.

But before the VP process begins, there are three requirements that need to be addressed:

1. Local authorities need to issue a Certificate of Completion and Compliance (CCC), which verifies that said property is completed, safe and habitable.
2. The water supply and electricity to the property are ready to be connected.
3. The buyer has paid off any balance in accordance with the pre-agreed payment schedule.

Once the conditions have been met, the homebuyer will then have to sign several forms acknowledging the handover of keys, CCC as well as a list of fittings and fixtures included in their new property.

Along with those signed forms includes the Notice of Vacant Possession from the property developer. Remember to take a close look at the Notice, as buyers are given 14 days from the Notice’s date to take possession of a finished property. After the 14-day period, the buyer is deemed to have taken VP over the property.

An important note: The beginning of the Defect Liability Period (DLP) starts from the date homebuyers receive their keys, according to the Housing Development Act (HDA) Malaysia. Homebuyers are given an interval of time between 12 to 24 months of DLP depending on the type of property, to check for any problems and report it to the developer to kickstart any repair work.

Once the homebuyer reports a defect, developers are obligated to respond and begin fixing said defect within 30 days. Even if the problem cannot be fixed within a month, developers will need to show that they recognize the homebuyer’s defect report and that they have begun the process of remedying it.  If the developer does not respond to the original report within 30 days, it is legally acceptable for homeowners to begin the process of fixing those defects at the developer’s expense, as the cost of rectification can be claimed from the developer’s lawyer.

Property defects can be costly when they occur. Furthermore, the monetary costs of repairing those defects as well as the intangible costs of a ruined relationship with a homebuyer, loss of reputation among peers as well as brand damage among future potential clients, can all cost developers tremendous time, effort and money.

This whole ordeal can be quite time-consuming and expensive, especially when working with inexperienced home buyers. Luckily, there’s now a solution for developers.

Launched by CIC-QS Services Sdn Bhd (CIC), VP Manager is a new cost-saving solution for developers that is guaranteed to enhance your brand while also avoiding any potential disputes with clients.

VP Manager offers various services for contractors including but not limited to:

• Educational 3-month workshops for homeowners
• Contractor T&C support
• Homebuyer report evaluation
• On-site duty

VP Manager is also accompanied by our phone app ProFix, allowing for smoother and quicker communication between contractors and homebuyers.

So how does this process work? It’s simple.

VP Manager will conduct an educational workshop for homebuyers on the topic of building defect so that homebuyers understand what constitute to defect and the defect management procedure. The workshop is conducted by trainers who are experts in the field.

Any defects found will be liaised between VP Manager and homebuyer clients, ensuring a smooth and efficient communication bridged between the developers and the homebuyers.

With the innovative technology of VP Manager, developers can rest in ease as they focus on what they do best, delivering sturdy and quality properties to the homebuyers.

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This means anyone who owns or rents a home can sublet the whole or part of the home short-term for profit. Quick and easy!

However, things have not been easy since 2018 when the High Court in the case of Innab Salil & Ors v Verve Suites Mont Kiara Management Corp ruled that management corporation bodies of residential strata buildings can through the establishment of house rules to disallow short-term rental commercial activities. In other words, neither the owner nor tenant can run short-term rental business through the various online platforms for profit if the management has prohibited it.

In this case, Mr. Innab Salil, a Swedish citizen, formed a company operating business of leasing units in Verve Suites on short-term and long-term rental. The management corporation of Verve Suites held an extraordinary general meeting and by a 96-4 overwhelming majority, passed a house rule prohibiting the use of the units for business or short-term rental. Mr Innab Salil and his company however continued
to defy the house rule and the management corporation commenced proceedings in the High Court and named Mr Innab Salil, his company and a few parcel owners as the defendants in a bid to stop them from violating the rule.

The High Court ruled in favour of the corporation management. Dissatisfied with the judgement, the defendants appealed but their appeal was dismissed by the Court of Appeal. The defendants continued their appeal at the Federal Court.

On 5 November 2020, in recognizing the importance of the interest of the community over the interest of the individual, the Federal Court released its judgement which affirms the ruling of the two lower courts.

Therefore, until there is a specific regulation governing the business activities of short-term rental, these businesses can only operate if they have the approval of the majority.

Harsh winter indeed on top of these unprecedented times for short-term rental operators.

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