Not everyone is aware of the various land titles that can accompany the property they are buying. In Malaysia, one’s ownership of a property is represented by a land title, which can be a master title, strata title, or individual title. A land title is a document that states the ownership of a property in monetary and legal terms. These land titles vary depending on the buyer’s eligibility, among other factors.
As this article is specifically for buyers of separate property units, we will only be focusing on two land titles namely strata title and individual title. Like any other purchase, knowledge is power!
That said, if you want to know exactly what rights you have as a homeowner and what responsibilities you will have in managing your property, it is imperative to understand the different types of land titles and which land title works best for you.
What is a strata title?
A strata title is a subdivided title issued to individual units of high-rise properties, also known as stratified properties like condominiums, apartments, flats, and retail malls.
It is worth noting that strata titles are not limited to high-rise properties. Even landed properties in gated and guarded communities may fall under the strata title category. Strata-titled landed properties are essentially landed houses that include condo-style facilities.
For strata title, property owners share common facilities and spaces within the development compound such as car parks, elevators, clubhouses, as well as gyms and swimming pools. Each owner is responsible for the upkeep of the property and is obligated to pay the maintenance and sinking fees.
These fees are used to pay for services and to ensure the shared spaces including the condition of the property as a whole are well-maintained.
We have summarised each strata law as shown in the table below to make it easier for you.
Strata Title Act 1985
The Act facilitates the subdivision of buildings or land into parcels and the disposition of titles thereto, as well as purposes connected thereto.
Strata Management Act 2013
Provides proper maintenance and management for buildings and common property.
Strata Management (Maintenance and Management) Regulations 2015
Also known as SMR 2015, it is a set of regulations under the Strata Management Act 2013.
Why is a strata title important to homeowners?
Having a strata title for your residential property is extremely valuable. Even the National House Buyers Association (HBA) strongly advises homebuyers to “get, keep, and preserve” the strata titles to their residential units. This is due to the following reasons:
It serves as proof of ownership of the residential unit.
It can be used as an assurance to banks for loans.
The issuance of the strata title allows you to initiate the formation of the management corporation (MC) by the owners of the residential unit and even participate in it.
It serves as proof of the built-up area of your unit and the apportionment of your share in the total aggregate units, enabling the calculation of the maintenance fees by the Management Committee.
As long as strata titles have not been transferred, the land and the common property are still owned by the developer – who is the holder of the master title.
Having a strata title can avoid complications when the developer comes under liquidation or becomes insolvent.
To facilitate disposal if and when you decide to sell your property. This means you would not need consent from the developer who may impose administrative charges of between 1% to 3% as their “consent fees”.
Strata schemes are specially designed to provide property owners with more control over the space they occupy. The structure of strata titles classifies the management corporation as the owner of the land.
How do you obtain a strata title?
Now you know whyit is critical to have a strata title for your property unit, but how exactly does one obtain it?
Well, for homeowners, you can easily obtain your property unit’s strata title from your developer. However, since the strata title application is done by the developer, it may be difficult for homeowners to track the multiple application stages.
To resolve this, homeowners could contact the developer of the property to ask if they have applied for the strata title and what application stage the property is currently at.
You can refer to the flow chart of the strata title application process below:
Credits to Industry Malaysia
According to the Strata Title Act, the strata title application for your property can start as soon as the construction of your property has completed the ‘Superstructure Stage’.
Before you make your purchase, however, make sure that your Sale and Purchase Agreement indicates the details of the master title. With the master title details in hand, you could conduct a quick search on the e-Tanah system.
If you are still unsure about how strata title works, you can always contact your local land office like the Selangor Land and Mines Office for more information.
What is an individual title?
Individual titles are not to be confused with strata titles. An individual title is a subset of a master title that a developer owns before homeowners purchase the landed properties they sell. In other words, the developer would have to apply to the land office to subdivide the master titles into individual titles and strata titles.
Once the landed property is sold, the legal document is registered under the name of only one person. Meaning, that the individual who purchased the property has complete ownership of that whole piece of land.
Individual titles are usually issued to landed properties – but not if they are gated and guarded with shared facilities and spaces. This comprises terrace houses, semi-detached houses, and bungalows which are the most common landed properties entitled to individual titles.
Unlike the strata title where you need consent from all the other owners of the land, you have the freedom to make any decision on the property as you see fit because you are the sole owner of that land. What’s more, the registration process for individual titles is also faster as they involve fewer owners than strata titles would have. Hence, making the process more straightforward.
How do you obtain an individual title?
An individual title is just as important as its counterpart, and here is how you can get your own.
You see, most property owners generally are entitled to an individual title upon purchasing their property. And the process of obtaining an individual title is the same as getting a strata title, but it is much shorter. An individual title can be applied to issue ownership of a separate parcel or unit of land once the construction of the property is completed by the developer.
Do keep in mind that the duration of your ownership will depend on the type of land (more on this further down).
The land office assigned to your region is involved in both the transfer and the charge of an individual title. For registration, all instruments and necessary documents must be delivered to the land office.
It is also pertinent to note that the registration process differs depending on whether you have purchased your property from a developer or another private party who owned it previously, or if you are transferring your ownership after inheriting it from a relative.
What are the differences between strata titles and individual titles?
For perspective, you must first understand how a master title comes into play.
We mentioned this land title a bunch of times earlier, but we did not go into detail. A master title is an initial document that proves ownership of a property during the construction and development stages. It is normally registered in the proprietor’s and/or developer’s names.
A master title represents the entire development of the property, whereas an individual title or strata title reflects the parcels of land subdivided and separated from the master title.
Still confused? Let us break it down into pieces – cake pieces to be more specific.
Imagine a large, scrumptious cake (with the flavour of your choice, of course). Now think of that cake as the master title. An individual title represents a single piece, removed from the whole cake aka the master title. On the contrary, a strata title is like a cake that has been divided into hundreds of different-sized sections.
There are many differences between these two land titles. So, to recap, here is a handy-dandy table about everything you need to know about strata titles and individual titles:
The differences between an individual title and a strata title are not easily discernible. So instead of assuming which land title will be issued to your property, you should consult with your developer just to be safe.
What are the different types of land in Malaysia?
The more vital thing to look at is the tenure of your land because the tenure can affect a lot of things from property demand to price – and even which land title to be issued to your land. In Malaysia, there are three types of land; freehold, leasehold, and Bumiputera lot.
Below is an explanation – in no particular order – of the different types of land in Malaysia, detailing each land type’s relationship with land titles and ownership. You will also learn about another land type in Malaysia known as the Malay Reserved Land.
A freehold tenure property belongs to the buyer for the rest of his/her life – from the property building to the land it stands on. In simpler terms, the property in its entirety is “free from hold” of others besides the owner. The major benefit of owning a freehold property is that it has higher sales and rental yields.
Freehold properties are usually the preferred choice. This is because buyers are of the impression that these homes are forever, and that the property is easily transferable for generations to come without the hindrance of needing approval from the authorities.
This idea is not exactly true, as some freehold properties require the consent of the state government to transfer ownership. This applies to converted properties that were initially leasehold properties.
The government also has the right to reacquire any land. Based on the Land Acquisition Act 1960, the state can take back freehold land for economic development or public purposes such as MRT and new highways. The affected owners, however, would be compensated.
A leasehold tenure means that the owner of the land on which the property is built is leased or rented for a certain period. On leasehold land, the tenant typically receives ownership of the property for 99 years, and on rare occasions, it can be up to 999 years! The lease period for a sub-sale property will be shorter – typically 30-60 years.
Leasehold properties are less popular in comparison to freehold properties. To most buyers, the “rent” paid for leasehold properties is considered “burned money,” because the owner will receive no compensation once the lease expires.
And when the lease expires, the owner must either return the land to the state government or pay a lease extension premium. As for lease renewals, the property owner will need to visit the land office.
Bumiputera lot or Bumi Lot was introduced in the 1970s as part of Malaysia’s reformed economic policy to increase Bumiputera shares in real estate.
Developers must set aside at least 20% of all property units (whether residential or commercial) for Bumiputeras. Bumiputera refers to Sabahans, Sarawakians, Malays, and non-Malay Muslims.
As the name suggests, this land type is reserved for Malay Muslims only – otherwise known as “Tanah Rizab Melayu”. Properties built on Malay Reserved Lands can only be purchased by Malay Muslim buyers.
In summary, if you plan on purchasing a property in Malaysia, you could end up with one of the following combinations:
Strata title and Freehold
The piece of property you purchased has shared common facilities and a part of the land belongs to you forever.
Strata title and Leasehold
The piece of property has shared common facilities and a part of the land belongs to you depending on the lease duration (30-999 years).
Strata title and Bumiputera Lot
If you purchase a Bumi property with a strata title, a part of that property (units) is yours depending on the terms of land (freehold or leasehold).
Individual title and Freehold
The piece of property you purchased and the entire land belongs to you forever.
Individual title and Leasehold
The piece of property you purchased and the entire land belongs to you depending on the lease duration (30-999 years).
Individual title and Bumiputera Lot
If you purchase a Bumi property with an individual title, you own the property depending on the terms of the land (freehold or leasehold).
Do these land titles affect property value?
The answer is no. Neither strata titles nor individual titles have any direct impact on the property’s value.
But bear in mind that a property’s value and its appreciation potential are determined by many factors other than the land title, including the location, the design concept, and housing demand and supply, to name a few.
Some of you may also be wondering whether getting a strata title over an individual title is a bad deal. And the answer to that question is again, no. It is simply a matter of personal preference and needs.
A land title is vital as it represents ownership of a plot of land and its various rights and privileges. Without a land title, you would not be able to transfer, sell, or use your property as collateral.
So which land title is better; strata or individual? Well, it depends on several factors. In this case, the location is the most decisive factor influencing the availability of the property title. However, each option has its advantages and disadvantages.
In short, a property is more than just the four walls and land you see. To avoid making a decision that you might regret in the long run, ensure to do thorough research. Otherwise, asking for advice from a property agent could save you from all the headaches.