Malaysia’s Court of Appeal has ruled that developers must only impose a nominal administration fee if its buyers, who have already paid for the property, need to obtain its consent to utilize the property title pending the issuance of separate strata titles, reported the New Malaysia Times.
This is after the court only allowed the master title holder Master Platform to charge an administrative fee of RM500 instead of RM65,000 to property buyer/owner KAB Corporation, after the latter asked the former to assign the property to a bank so that KAB’s related firm Impiana can get additional revolving credit facility.
While it’s common industry practice for developers to impose an administration fee for consent requests pending the issuance of separate strata titles, and the contract between the parties is silent on the fee amount, Master Platform wanted to charge an administrative fee of RM65,000.
It wanted KAB and Impiana to pay the fee, which translates to 1.0 percent of the credit facility’s sum, before it would grant its consent to assign the property to the bank. But both parties filed a legal case against Master Platform for charging an exorbitant amount, with the legal proceeding reaching the Court of Appeal in 2015.
According to the plaintiff’s attorney Dato’ Seri Rajan Navaratnam, the administrative fee should only be nominal as KAB has already fully paid for the property and has become the property’s absolute beneficial owner.
On the other hand, the developer or the master title holder is merely a bare trustee that holds the property in name, as a separate strata title has not been issued. In addition, he noted that the developer is legally obligated to apply for separate strata titles for its property buyers.
Given that the property buyer has already fulfilled its financial obligation to the developer, KAB and Impiana should not be liable for any administration fee prior to the issuance a separate strata title.
Rajan highlighted that the only reason why the property buyer is asking the developer to assign the property title to another party on behalf of the buyer is that it has been remiss in its duties to promptly apply for the issuance of a separate strata title. Thus, the developer should be prohibited from profiting from its negligence.
The Appellate Court panel, led by Datuk Vernon Ong and consisting of Datuk Has Zanah Mehat and Datuk Harmindar Singh Dhaliwal, agreed with Rajan’s argument. Therefore, it laid down a landmark ruling preventing property developers from charging excessive fees for their consent, while awaiting the issuance of separate strata titles.
In particular, the court ruled that while developers have the discretion to charge such an administrative fee, it must only be nominal.
Image source: ToughtCo
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