Buyers of project on private lease scheme in Johor sue developer

PETALING JAYA: Buyers of a property project in Medini, Johor, on a private lease scheme are taking the developer to court for failing to issue separate strata titles for their units.

One hundred and seven buyers of The Meridin@Medini are claiming for inter alia damages for misrepresentation and late delivery from Mah Sing Group Bhd unit Tropika Istimewa Development Sdn Bhd.

The case highlights one of the concerns raised by the House Buyers Association of allowing private corporations to lease out freehold land for housing development.

Note that the term "leasehold property" is commonly used in Malaysia and refers to a state lease. This type of leasehold land is owned by state authorities, which have a moral obligation to renew the lease upon expiry, at a nominal fee.

SunBiz wrote in June that projects in Medini are being developed under the private lease scheme. The Meridin is one of the projects, along with Iskandar Residences, 1Medini and Paradiso Nuova.

The defendant, Tropika Istimewa, had filed an application to strike out the plaintiffs' case on the grounds that the claim was without merit, frivolous and an abuse of process of the court.

However, the High Court yesterday dismissed its application with costs of RM5,000. The trial has been set for Sept 13.

The Meridin is a project that sits on freehold land that is owned by Iskandar Investment Bhd (IIB), which granted lease to Medini Land Sdn Bhd for 99 years from April 15, 2013.

Under a lease-purchase agreement dated Oct 18, 2012, Medini Land agreed to sell the lease to Tropika Istimewa.

Upon completion of the lease-purchase agreement, IIB granted absolute right to the developer to develop the land as a housing development and to sell the lease over the condominium parcel to the public.

The buyers and the developer signed sale and purchase agreements (SPA) which saw the developer selling the lease over the parcel to the buyers.

Clause 11 of the SPA provides that the developer shall apply and obtain separate strata titles to the parcel under the Strata Title Act 1985. However, to date, no application has been made for subdivision and issuance of separate strata titles.

Note that there is no provision in the National Land Code and the Strata Title Act to allow private lease schemes which, at present, is practised only in Medini.

Under the Act, only the registered proprietor, in this case IIB, can apply for the strata title and not the developer, which is a lessee. The Act also does not recognise the rights of the buyers of the lease to participate in the management corporation.

The National Land Code prohibits the transfer of a lease to two or more persons and if there are two or more buyers who signed the SPA, the lease cannot be transferred into both their names as only one name is allowed.

Thus, there is a statutory restriction imposed for the transfer of a lease into the names of the purchasers.