May 25, 2012

Can accessory parcel or common property in strata development be sold?

One of the question to be found in the sequel to 40 Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia. This new book will concentrate more on strata development. 40 more questions and now finishing up the final 10 questions. This is also the reason why I have not post up an entry here for quite some time. 

Here is a rough draft of the answer to the question 'Can accessory parcel or common property in strata development be sold?'. Most developers in Malaysia have done it one time or another but is it legal? 

Accessory parcel and common property are two different subject matters in a strata development although both can be seen to overlap each other. Accessory parcel is an extension of a parcel owned by the purchaser in a strata development which can be a building attached to the parcel or just a space labeled to show its connection with the parcel. In short, an accessory parcel is privately owned and comes together with a parcel when it was bought by the purchaser of a parcel within a strata development. As for common property or facility, it is shared by everyone with a strata development although some of these common properties are within the sphere of a parcel. Common properties are managed by the management of a strata development and they can be immovable or movable objects. Certain accessory parcels may look like the part of common properties and vice versa. The best example for this is none other than the parking lot. When a property is bought and sold in a strata development which has many parcels attaching themselves to each other with overlapping functions such as a floor to a parcel which can be a roof to another parcel, a parking lot which can be an accessory parcel to one particular parcel can exist next to another parking lot which is a common property. That is why it is important in the initial development plan of a strata development for the housing developer to survey, label and get approval for every inch of the strata development. That is why the plan for accessory parcel, especially if it is not attached to the sold parcel and the plan for common facilities are given the option to be attached in the First Schedule of the Sale & Purchase Agreement of a strata development. In order to answer to question whether the accessory parcel or common property can be sold or not, we need to differentiate the beneficiaries of each subject matter.

Accessory parcel is built within a strata development to be sold to a particular purchaser. In the preamble of the Schedule H of the Housing Development (Control and Licensing) Regulations 1989, it is stated that ‘….the Vendor (the housing developer) and the Purchaser has agreed to purchase the parcel with vacant possession….with accessory parcel with vacant possession distinguished as accessory parcel No: ………….. of Building Land Parcel No:……………… (which is delineated and shaded BLUE in the Accessory Parcel Plan annexed in the First Schedule)’. The additional wording which appears in a bracket ‘(hereinafter referred to as “the said Parcel”)’ means that an accessory parcel is part of a parcel within a strata development. As it owes its existence to a particular parcel, in a nutshell, an accessory parcel can be transacted as long as it belongs to that particular parcel.

In Section 34(2) of the Strata Title Act 1985, under the ‘Rights of proprietor in his parcel…’, it is also specifically stated that ‘No rights in an accessory parcel shall be dealt with or disposed of independently of the parcel to which such accessory parcel has been made appurtenant’. It means that each accessory parcel must co-exist with the parcel that it is attached to. As such, the only transaction which is available to the owner of the accessory parcel who is also the owner of the parcel is to rent out any particular accessory parcel under his control. If the accessory parcel is a parking lot, that parking lot can only be rented out on a monthly basis and not sold individually as it cannot be separated from the parcel. As all accessory parcels must be labeled to indicate which parcel it is attached to, it is impossible to be sold.

Common property or common facility is built by a housing developer for a strata development to be shared among the purchasers. Common property is generally whatever not within a parcel. If the accessory parcel is privately owned once it is sold to the purchaser, common property is publicly shared among the purchasers and is actually owned collectively by all the purchasers within the strata development. If the decision about any accessory parcel is to be made by the owner of the parcel, any decision about any common property is made by the collective effort of the purchasers through the management of the strata development. Management of strata development differs depending on the time the strata development is at. From the time of vacant possession to within one year of the date of vacant possession, the management will be under the control of housing developer. After that one year the common property will be managed by the joint management body until strata title is out which will then pass the management to the management corporation.

At each interval, the powers given to the management are properly spelt out. When in relation to common property, the housing developer has the decision to decide what initially can be built and labeled as common property or common facilities. Under Clause 17 of Schedule H of Housing Development (Control and Licensing) Regulations 1989, the housing developer ‘…shall, at its own cost and expense, construct or cause to be constructed the common facilities serving the housing development…’. Common facilities plan can also be attached in the First Schedule of the same agreement. Among the duties and powers given to the Joint Management Body under Section 8 of the Building and Common Property (Maintenance and Management) Act 2007 are to ‘…maintain the common property and keep it in a good state of good and serviceable repair;’ -Section 8(1)(a) and ‘to purchase, hire or otherwise acquire movable or immovable property for use by the purchasers in connection with the enjoyment of the common property;’ – Section 8(2)(d). The same provisions as replicated in Section 43 of the Strata Titles Act 1985 as duties and powers of the Management Corporation. 

In all the clauses and sections of the agreement, regulations and acts, common property can only be managed, maintained, controlled, enjoyed and added with movable property. There is nowhere in any of these provisions that a common property can be sold. However, if a shop or a retail space is labeled, marked and reserved as a common property, it can be rented out or even leased as it can be enjoyed by every of the owner(s) of the parcels within the strata development. In the Third Schedule, Strata Titles Act 1985, as By-Laws for the Regulations of Subdivided Buildings, under clause 3, the Management Corporation is allowed to ‘…by agreement with a particular proprietor grant him exclusive use and enjoyment of part of the common property or special privileges in respect of the common property or part of it’ That will also mean that a common property such as a car park, under the control of the management of the strata development, can be rented out or leased out to the owner of parcels within the housing development. For any shop(s) or additional parking lot(s) or any other space(s) to be sold by the housing developer which are other than the residential property within the housing development, such spaces have to be parcels and declared as such. As long as these spaces are labeled as common property, it cannot be transacted as such.  

May 11, 2012

Updates : Book and Work

The last post for this blog is in early March. 

It has been a very busy two months leading up to this moment. We were appointed to two of the biggest property companies in Malaysia which sell high-end freehold properties. We offered our service and when they appoint us into a select group of solicitors to handle documentations for the sale of their properties, our infrastructure took a beating that even the partners (especially me) who always had time for other endeavors find it hard to go out.

Then, one of our long-time valuable staff who we thought will one day be the heiress to this medium-sized legal firm decided to concentrate on her study and tendered her resignation. I personally was heartbroken as I had suggested and we, as a collective, decided nearly two years ago to send her to a local university's law school. We paid for her law school's fee and ask her to stay on board after she finished her study. She had worked with us nearly 5 years then. We had watched her grow and learned various trade secrets which she then shared around. We found her to be the best candidate.

We gave her the space and time to take leaves without question. During her exam weeks, she did not have to come to the office at all. We were willing to sacrifice the time and in some way, some money too, in order to ensure the legal firm's next generation is well in place. As it was a project I had suggested, I consider it a failure on us to retain her. Her excuses of being under pressure due to her study and the feeling that she was more of a burden to her colleagues due to her absence, did nothing to lessen the pain of a failed succession plan project. I guess we need to go back to the drawing board.

However, nothing can stop me from making this lifelong project of building a successful business. To a certain extent, the business is already successful though the growing pain is still very much evidence. Reading a New Yorker's article about Uniqlo about Uniqlo having more staff than enough to man each of its store in order to ensure every customer's need is tended to at any given moment , we decided to fill up the void with more staff. We anticipated our good work may just bring us more business. It would also be good for us to ensure our clients are treated the instance the need anything too.

As for my book, I have abandoned writing it for some time until something gave me a second wind to go back writing it. In April, I was invited by Penang Regional Development Authority (PERDA) to give a one-day talk. I recruited my partner and senior associate to accompany me and we had a great time disseminating knowledge and answering questions, some which I never thought of hearing, which made me decided there is still a need for a sequel to my book. I am now halfway in writing the book and is giving myself the whole of 2012 to finish it.

I am also is reading the book 1Q84, by Haruki Murakami, one of my favorite Japanese author, which has a character who is a writer and Murakami's idea of why one writes can be seen to be manifested in that particular character. 

As long as I am motivated to write, I will...
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