Top FAQ about Deposit for Defects and Strata Title Transfer
Common Property Deposit for Defects Account FAQ.
Question: It is unfair and unreasonable for developers to pay deposit for defects in the common property in addition to stakeholder sum held by solicitor which already cover the cost of repairing defects to the building & common areas.
Answer: The retention sum held by the lawyer is in respect of defects within the parcel (Strata Unit) and is a percentage of the purchase price of the a parcel (Strata Unit). It does not cover defects in the common property or common facilities, such as lifts, common area fire fighting and electrical system, swimming pool, guard house, gymnasium equipment, road and drain, landscape etc. [Section 92, Strata Mannagement Act 2013 or SMA].
There is no provision in the Act on how the deposit will be utilized for the rectifications. Should individual owner apply? JMB has no contractual relationship in this aspect. Can they act on behalf of the owner? How is the deposit to be controlled?
The deposit for defects is to be utilized to rectify defects in the common property or common facilities if developer fail to do so [Sec 92, SMA and Regulation 50, SMR].
All deposit will be placed under the Common Property Deposit for Defects Account during the defect liability period of the common property [Regulation 50, Strata Management (Maintenance and Management) Regulations 2015 (SMR)].
The control of deposits for defects rest with the Commissioner of Building or COB [Regulation 50, SMR].
The Regulation 50(3) of SMR allow for the following persons to make a claim against the Common Property Deposit for Defects Account:
Purchaser, Proprietor, JMB, MC, Sub-MC, Managing Agent appointed by the COB and any other interested person, with the permission of the COB. As common property and common facilities are jointly owned by all parcel owners, it is better for the JMB or MC to carry out any rectification (if developer fail to so). The JMB or MC will be acting on behalf of all parcel owners.
A claim against the Common Property Defects Account shall be made in Form 27 together with payment of the prescribed fee.
How COB notify developer to rectify defects in the common property?
Upon receipt of Form 27, the Commissioner shall within fourteen days give a notice to the developer specifying:-
(a) The defects of the common property which are required to be rectified.
(b) The time within which the rectification works shall commence.
(c) The time within which the rectification works shall be completed.
(d) The rectification works shall be carried out with due diligence to the satisfaction of the Commissioner.
If the developer is unable to complete the rectification works within the time period specified in the notice, the developer shall at least seven days before the expiry of the time period apply to the Commissioner for an extension of time, who may in his discretion, grant or refuse any extension of time. [Regulation 51, SMR].
Can the Comissioner of Building appoint registered architect, registered engineer, registered quantity surveyor or registered building surveyor to rectify the defects of the common property?
If a notice given to the developer under subregulation 51(1) has not been complied with by the developer or has not been complied with to the satisfaction of the Commissioner, the Commissioner may appoint a registered architect, registered engineer, registered quantity surveyor or registered building surveyor, as the case may be, for any of the following:-
(a) to quantify the works necessary to rectify the defects of the common property.
(b) to carry out or cause to be carried out all or any of the rectification works.
The Commissioner shall give the developer notice of the appointment of the registered architect, registered engineer, registered quantity surveyor or registered building surveyor within seven days of such appointment and upon receipt of such notice, the developer shall not be entitled to carry out or continue with any rectification works without the written consent of the Commissioner. [Regulation 52, SMR]
What is the recovery of expenses by Commissioner in relation to Common Property Defects Account?
The Commissioner may recover all expenses reasonably incurred by him in the exercise of his powers under this Part in relation to the Common Property Defects Account, and where the cost of the rectification works exceeds the deposit or further sums paid by the developer, the developer shall pay the shortfall within fourteen days after receiving a written notice from the Commissioner, failing which the developer shall pay interest at the rate of ten per cent per annum on a daily basis. [Regulation 53, SMR].
What is refund of unexpended deposit or further sums in relation to Common Property Defects Account?
Any unexpended deposit or further sums deposited with the Commissioner together with any accrued income thereon, shall be refunded to the developer by the Commissioner on the expiry of the defect liability period of the common property, or in the case where a notice to the developer to rectify the defects has been issued by the Commissioner under subregulation 51(1), upon the completion of the rectification works to the satisfaction of the Commissioner, whichever is later. [Regulation 54, SMR].
Transfer of Strata Title. What happens if parcel owners did not transfer their names into the parcel title?
There is no Law compelling the transfer. Without transferring the title, the owner has no right to vote and to stand for election for the Management Committee of the Management Corporation.
Memorandum of Transfer or MOT (also known as Instrument of Transfer), is a legal document prescribed by the National Land Code 1965, which is used to effect the transfer of the property, once the strata title is issued, from the developer to the purchaser.
“Perfection of Transfer”, means the process of the changing of the name of the registered proprietor from the developer’s name to the current owner’s name.
Government has proposed that stamp duty for transfer be paid upfront and all MOT forms duly signed. Once the strata title is issued, transfer can be effected by the lawyer without any delay.