Are you aware of the differences in property titles? Purchasers of residential units in Johor’s Medini region in 2013 and 2014 are likely to have been caught off guard by different wording in their sale and purchase agreements (SPA). This is particularly relevant for Singaporeans keen to relook at Johor, given the excitement around the Johor-Singapore Special Economic Zone (JS-SEZ) and the upcoming rapid transit system (RTS) in 2026.
Notably, some residential properties in Medini, an area within Iskandar Puteri in Johor, were sold in 2013 and 2014 as private lease schemes and not as 99-year leasehold condominiums, as some Singapore-based media reported.
The main difference between private lease schemes (PLS) and 99-year leasehold condominium units is that holders of PLS do not have ownership rights. For instance, many in Singapore would be familiar with the management corporation strata title (MCST). An owner of a Singapore 99-year leasehold condominium would own a certain share value in the MCST, which entitles the owner to certain rights, such as selling the unit or, at some point, joining in a collective sale of the land on which the property stands. The owner would also have responsibilities such as paying property tax and management fees for the managing agent to take care of the common areas.
In 2013, Afiniti Residences was a popular joint venture launched by Khazanah Nasional and Temasek Holdings. The land is owned by Iskandar Investment Berhad (IIB), an investment company partially owned by Khazanah.
A spokesperson for Pulau Indah Ventures, which is a 50-50 joint venture between Khazanah and Temasek, explains: “The Afiniti Residensi units are under the Medini Lease Structure (MLS), which is a private lease scheme; a long-term 99-year lease by the landowner/proprietor IIB. The 99-year lease ends May 31, 2111. IIB has made it available for upfront request for lease extension by developers, and we have taken up the option and extended the lease period for another 30 years immediately upon expiry of the 99 years.”
The Edge Singapore has also reached out to Khazanah and Temasek for a comment.
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The Edge Singapore has not seen the SPA for Afiniti Residensences. It has seen the SPA for the Iskandar Residences, which clearly states that the purchaser is buying a lease but would still need to pay “quit rent”, a form of property tax, to the owner of the land. It also states clearly that the proprietor (IIB) is the owner of the land.
There are three players in a PLS: the owner of the land, IIB; the developer, who is also the seller of the PLS; and the purchaser or the leaseholder, who is, in effect, a tenant.
Based on the research paper A Case Study of Strata Lease Schemes In Malaysia: Features and Uniqueness, the application for strata title will be done by the developer on behalf of IIB. Upon issuance of the strata title, IIB will be the sole owner of all the strata units as the Management Corporation holder, which owns and controls the common property. The research paper was written by Nur Huzaifah Zainal and Salfarina Samsudin from Universiti Teknologi Malaysia; Fatin Afiqah Md Azmi from Centre for Real Estate Studies (CRES), Institute for Smart Infrastructure and Innovative Construction (ISIIC), Johor Bahru; and Siddiqa Amin from Lahore College for Women University.
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“Medini schemes have two layers of leasing. The lessor, who is the original land proprietor, enters into a lease-purchase agreement with the first lessee who will develop the land. Upon completion of the development, the lessee (developer) will sell down the lease of each parcel to an individual end purchaser (subsequent lessee),” the report says.
In a strata scheme, a proprietor has an ownership right to the land, but in a strata lease scheme, a proprietor is a lessor to a registered lease. A lessee only has the right of possession due to the lease interest within a lease term, the research paper explains.
In the strata lease scheme, a Joint Management Board (JMB) may form among strata unit buyers, but there is only one owner for all strata parcels. That single owner becomes the management committee or MC. Unfortunately, despite being just long-term tenants, the lessees of PLS have to pay quit rent, which is similar to a property tax. In addition, lessees have to pay for the upkeep of the common property.
“We ‘owners’ pay our share every quarter since the handover in 2018. Now I appreciate more why this quit rent (land tax) is collected by the management office. Usually, the apartment owner is billed directly by the land office. In our case, the management office collects from all units and pays the government on behalf of the land owner,” gripes a lessee who bought a lease at Iskandar Residences in 2014 and has now started a lawsuit against the developer and IIB (see story on Page 6).
Malaysian lawyers have indicated a “very common misunderstanding of the distinction between a leasehold property and a lease. With a leasehold property, the land title will be registered in the purchaser’s name. As an owner of a leasehold property, he or she is free to sell or rent out the property. A lease is essentially a long-term tenancy, where the lessor (landlord) remains the landowner. The “purchaser” in such a case is merely a lessee (tenant) whose name would only appear in the land office record as a lessee. He will not be able to sell/transfer the lease to another unless the terms of the SPA expressly allow him to do so.”
Medini schemes were intended as lease schemes to encourage foreign direct investment in the Medini property market. The targeted buyers were foreign investors and expatriates, with no ownership transfer to these buyers.
In Singapore, too, there are subtle differences between owning an HDB flat and a 99-year leasehold condominium unit. “When you buy a condo, you own the unit and jointly own a portion of the land together with the other owners. This gives you some rights, as such collective sales can take place, and you can sell the land collectively,” a property analyst explains.
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“In contrast when you buy an HDB flat, you only own the unit, but not the land on which the property stands. You can transfer ownership of the unit only,” the property analyst adds.
Therefore, it is always important to read and understand the SPA or get a lawyer to do it for you.
Photo credit: Bloomberg
