Tropika Istimewa, a subsidiary of Mah Sing Group Bhd managed to reverse the Johor Bahru High Court’s decision that ordered the developer to pay liquidated ascertained damages to the purchasers, TEM said. The Court of Appeal also dismissed the purchasers’ cross-appeal over the quantum awarded to them by the High Court.
The COA unanimously found that the High Court had erred in deciding the award. This is because the vacant possession to the property in question was delivered to the purchasers within the duly extended period in 2017, following the extension granted by the Housing and Local Government Ministry, were deemed valid, and the purchasers had also had received their strata title.
The court documents state that it was made abundantly clear that the 107 property buyers were purchasing a lease.
Court documents state that The Land Office of Johor and Iskandar Regional Development Agency have issued guidelines for foreign buying of property in Medini Iskandar. These state that the concept of ownership in Medini Iskandar is “premised upon a lease”.
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Will private lease schemes cease to exist?
In January, The Edge Malaysia reported that IIB has issued offer letters to developers of private lease scheme properties in Medini Iskandar with an option to convert their properties to freehold at a RMB8 psf for the underdeveloped gross floor area.
IIB is reported to have said the move is part of its commitment in “fostering growth within the Johor-Singapore Special Economic Zone (JS-SEZ) freehold development is now possible in Medini”.
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Medini Iskandar, which is minutes away from the 2nd Link by car, is designed to attract foreign investors by offering them various incentives such as the RM1 million minimum property price threshold and lifting the quota for property transfers.
Medini Iskandar comprises 2,230 acres of which Sunway Bhd owns 700 acres with as much as 29 million sq ft of undeveloped GFA. The freehold land at Medini Iskandar (owned by IIB) is foreigner-friendly. “There is no minimum sum or quota for foreigners buying units in a project, no bumi quota, and no low-cost component. All other developments require a low-cost component, bumi quota and a minimum sum for pricing,” says Gerard Soosay, CEO, Sunway City Iskandar Puteri.
“We have built around 4 million sq ft, and we have another 25 million to 29 million sq ft undeveloped,” Soosay confirms.
Does this mean that SCIP is willing to pay the additional RM200 million?
“We are in discussions and looking to signing off to convert the balance of undeveloped land by August,” is all Soosay would say, declining to confirm or deny any of the numbers.
Difference between a private lease scheme and buying a property
In a private lease scheme, IIB is the owner and lessor of the freehold land. The developer is the first lessee. The buyers of the 99-year private lease scheme units are not the owners but are second lessees.
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IIB has leased the land (under the private lease scheme) to various developers including Mah Sing, a joint-venture between Khazanah and Temasek Holdings, and Sunway Bhd. These developers are the first lessee. They construct properties. The lease terms of 99 years plus 30 years are “sold” upfront to buyers – who become the second lessees of the private lease scheme.
Private lease schemes are not prevalent in Singapore where property ownership is governed by a series of Acts including The Land Titles Act, the Land Titles Strata Act, the Residential Property Act (relating to the restriction of ownership of residential property by foreign persons), and The Building Maintenance and Strata Management Act 2004.
In October last year, The Edge Singapore reported that 63 owners (63 plaintiffs) of Iskandar Residences, developed by Distinctive Resources on land owned by IIB, are taking legal action against both. When the 63 plaintiffs entered into respective sales and purchase agreements (SPA) with IIB and Distinctive Resources the property in the SPA was referred to as a “lease”.
However, it was only in 2023 that the 63 plaintiffs realised they had been given a private lease scheme instead of a leasehold title after one individual noticed he had yet to receive the strata title to his unit. A leasehold agreement entitles owners to outright ownership of the land and would have entitled property owners to a strata title. Holders of units under a private lease scheme do not have ownership rights.
Based on conversations, it appears that IIB has written to developers with undeveloped land, and the decision to convert to freehold titles could be on a case-by-case basis depending on negotiations.
The Edge Malaysia says owners of condominium units acquired via private lease schemes could be able to convert their units to freehold with the payment of RM10,000 per unit. How this would work remains a mystery.
While many buyers, in particular the Singapore-based buyers of private lease schemes, would prefer to convert their units to freehold ownership status, some other owners of private lease scheme properties may not be eager to convert. How the issue of a development where some units carry freehold title and some units are private lease schemes, is resolved remains to be seen.
