News: Malaysian Government Suffers Delayed Revenue Due To Uncollected Strata Titles

Feb 24, 2020

Due to the failure of property owners to collect their strata titles, which involve stamp duty payments and registration fees, the government suffers from delayed revenue, which may run into millions of ringgits. 

The Real Estate and Housing Developers’ Association (REHDA) said the government will not lose this revenue, but it is a question of when, reported The Star.

“It is a timing of the revenue,” said REHDA president Datuk Soam Heng Choon.

This delay in collection deprives not only the federal government of stamp duty revenue, but also the state land offices of registration fees, and the lawyers, their fees.

Read the difference between Strata Title and Individual Title here! 

The stamp duty payable to the Inland Revenue Department is based on a scale. The rate is 1% for the first RM100,000 or RM1,000 per parcel.

For properties worth more than RM1 million, the rate is 4% or RM40,000. The tax is based on the purchase price under the sales and purchase agreement.

Aside from this, the delay also affects the state land office’s revenue because the procurement of strata titles is also subject to registration fees which amount varies from state to state. For instance, in Selangor, the amount ranges between RM50 and RM1,500.

The buyers also have to pay legal fees.

“The strata title is a very important document, but owners fail to realise its significance,” said Soam.

For example, if such document falls into dishonest hands, another person can apply for a loan or lay claim to the property.

The problem arises, however, from the fact that the present legal provisions require developers to apply for strata titles with vacant possession, but do not compel the buyers to collect them.

Consequently, “owners do not collect the titles because they are already enjoying the property. They see no reason to fork out additional money to do the necessary to procure them, despite they being proof of ownership,” said the National House Buyers Association (HBA) honourary secretary-general Datuk Chang Kim Loong.

For instance, Ann, a condominium unit owner who bought the same ten years ago, still sees no need to collect her title.

Such lack of interest is brought by the fact that she is already enjoying the property and she does not want to incur the additional cost. More so, she can also sell the property even without the strata title.

Considering that the issue has long been prevalent, the problem became serious enough that the government had to “enact new statutory provisions, amending existing ambiguous laws (to plug the loopholes) and repealing redundant sections of the Acts to achieve this much-needed transformation,” according to Chang.

Under Section 40A of the Strata Titles Act 1985, the owner can be fined no less than RM1,000 or not more than RM10,000 for failing to collect the document, and the developer for failing to apply for it.

However, for unknown reasons, this provision was deleted in 2015 by Strata Title Amendment Act 2013 which took effect on 1 June 2016.

Property Real Estate Lawyers Association president Datuk Pretam Singh Darshan Singh said the provision was re-introduced as Section 19A, but it was not gazetted.

Until today, “developers do not have legal recourse to force buyers to collect their strata titles. There must be a legal avenue to do force buyers to pay the necessary dues and do the necessary,” he added.

 

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Nicholas Kong
Real Estate Negotiator
Dutama Properties
nick8089333@gmail.com
(+60) 12-8089333