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.  

16 comments:

supersapient said...

Hi,
What if for a commercial office development, where all the parking are not offer to be bought by the unit owners. And all the while we assume the parking is manged under property manager. But to our surprise, all the parking are attached to 1 office unit and before the formation of JMB, the developer sold this unit, which attached together with all the parking as accessories parcel to a third company. As the new JMB has no rights to all the parking lots in the building, what is the responsibility of the management in managing the parking facility? as it is considered as a common utility to all tenants and owners. Is it legal for developer to sell all parking to just 1 owner?

Khairul Anuar Shaharudin said...

This post was written specifically for residential strata development. There is no provisions on commercial property except that commercial property uses the precedents in residential property laws.

In my opinion, as the building plans were passed and allowed the arrangement for the developer to attach all the parkings to one specific unit which was then sold off, the JMB does not have any power over the parkings and doesn't need to maintain it.

As owner or JMB that is agrieved, you can take it to the local authority. I don't think this issue is under the purview of the Commissioner for Buildings but you can try that office too. Your final resort will be the court

Sus said...

hi. Can a joint management body run /take possession of commercial shop lots at a residential development? My client is faced with the issue: Approved Development Order was for condo and a shop lot. Land title restriction : for residential use only. JMB now is claiming shop lot to be theirs. Arguement is that its a residential development, hence shop lot is common property.
Would appreciate your input.

Khairul Anuar Shaharudin said...

Hai Sus,

There's a lot of joint management bodies taking possession of commercial lots at a residential development. I was for advised by a judge to give an opinion on the matter once.

The government took notice on this and the amendment of the Strata Title Act and the Building and Common Property (Management and Maintenance) Act will reflect on the matter. A Strata Tribunal is also being set-up for such disputes.

In the interim, the aggrieved parties can either go to the Commissioner of Building or to court to settle the matter.

In my own opinion, based on your limited input and my experience in dealing with such dispute, as there is only one joint management body, unless the commercial property is owned by a specific person eg a buyer from the developer which will have relinquish its rights, the JMB has such rights to make it a common property much like a hall or other parts managed by them

Anonymous said...

Hi
We signed a sales agreement with a developer to purchase a residential condo. unit of 1400 sq.ft. plus car park for exclusive use of the apartment. However once unit was completed it was only 1100 sq.ft and now developer tells us that the sq.ft area of the car park will be added to the condo. unit as an accessory parcel. is this legal? IF so should the accessory parcel sq.ft area also be registered in the land registry.?

Anonymous said...

Hi
We signed a sales agreement with a developer to purchase a residential condo. unit of 1400 sq.ft. plus car park for exclusive use of the apartment. However once unit was completed it was only 1100 sq.ft and now developer tells us that the sq.ft area of the car park will be added to the condo. unit as an accessory parcel. is this legal? IF so should the accessory parcel sq.ft area also be registered in the land registry.?

Khairul Anuar Shaharudin said...

Hai Ano,

A developer should state in the Sale & Purchase Agreement when you buy from them which is the square feet (or meter) for the property, which is the square feet (or meter) for the accessory parcel (which is the parking lot falls under). It is wrong for them to make such representation.

Check the Sale & Purchase Agreement properly whether there is stated that the 300 sq. ft. is specifically for parking or not. If is is so, you cannot do anything but if it is not, you can demand payment for the 300 sq. ft. which is stated in your Sale & Purchase Agreement when there is a variation in the square feet of your condominium.

Then, you'll need a good lawyer to claim the money if the developer refused to do so.

Whatever it is, the key to this matter is your Sale & Purchase Agreement

Anonymous said...

Hi,

I'm working in a property developer company now where we have a project which offers generous area of private terrace. This private terrace is demarcated as accessory parcel. May I know is this private terrace chargeable of maintenance fees since it can only be accessed by the individual owners.

Khairul Anuar Shaharudin said...

Hai anonymous who works at a property company with project which has private terrace.

The answer is yes, you can charge maintenance fees

Anonymous said...

Hi . Is it true that in strata development ,car park must either be an accessory parcel attached to a parcel or a common property? Does our law allow car parks in strata development to have separate title itself and that the developer may sell those car park separately without the main parcel? Thank you

Khairul Anuar Shaharudin said...

Dear Anonymous,

As I have explaied in the article, the law does not allow for the sale of common propety by itself (such as car park). It can be rented out.

Some develoeper sell parkings but as additional parking to a particular units. If the developer is allowed to do so under its development license, it is sold as accessory parcel and not as common property. The developer may build such car parks in addition to the parking each unit gets.

Tom said...

Hi Khairul, I've read your blog (twice), I'm still not too certain about the status of carpark. In some situation its defined as common property in others, an accessory parcel. Are these definitions interchangeable? Or is carpark both a common property and an accessory parcel? The reason I'm asking this is the developer of my condo is charging me service charge on the carpark area (on top of the floor area of my condo unit) and I'm wondering if they are allowed to.

Regards,
Tom
mftngui@hotmail.com

Khairul Anuar Shaharudin said...

Dear Tom,

A car park can be an accessory parcel or a one of common properties. And both are chargeable. The accessory parcel is charged as part of the square feet of the unit sold to you and one as the service charge of the property.

It depends on how the parking lot was handed over to you. Look through the legal documents such as the Sale & Purchase Agreement and Deed of Mutual Covenants

Anonymous said...

Hi Khairul, In my SPA, there is a clause stating compensation for delay delivery to the parcel unit & a seperate clause compensation for the common facility as well. Developer had raise compensation for the parcel unit but not for the common facility stating is an all-encompassing compensation but in SPA is not stated this " all-encompassing.... Kindly advice.

Khairul Anuar Shaharudin said...

Dear Anon,

You should be able to claim compensation for common property if the property is residential sold under Housing Development Act. If your developer refused to pay the compensation, you can claim through either Housebuyers Tribunal or the new Strata Management Tribunal. Both Tribunals cost quite cheap where the parties can't bring lawyers and are more favorable to purchasers

Rajakumar said...

Dear Sir,

This condo went into receivership since the original developer has declared bankruptcy during the construction period. However the project has been revived subsequently and completed successfully. After sometime we realized that a common parcel area which is supposed to be commissioned for the usage of the residents has been sold off to a third party while the project was in receivership.

Therefore, we would like to know if the condo has any locus standi to take this matter to the court and invalidate the earlier SPA executed on the common parcel area. Appreciate your comments on this matter.

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