Establishment of Share Unit Formula For Strata Res

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International Journal of Engineering & Technology, 7 (2.

29) (2018) 119-124

International Journal of Engineering & Technology


Website: www.sciencepubco.com/index.php/IJET

Research paper

Establishment of share unit formula for strata residential


buildings and its implication to buyer and unit owner
Rubiah Md Zana*, Dr Siti Nur Alia Roslana, Nur KhairulFaizah Mustafaa & Asma Senawib
1,2,3Faculty of Architecture and Built Environment, Infrastructure University Kuala Lumpur, Kajang, Selangor, Malaysia
4Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA, Seri Iskandar Campus,
Sri Iskandar, 32610, Perak, Malaysia
*Corresponding author E-mail: rubiah@iukl.edu.my

Abstract
Stratified development has become a trend nowadays and still expanding to suit with the scarcity of land. During the implementation of
the early Strata Titles Act, there are many issues and disputes raised in terms of its legislation, rule and regulation, implementation, man-
agement and maintenance. One of the issues is the establishment and implementation of share unit formula to strata building. Recently,
the government of Malaysia has formulated and approved the new Act which is called the Strata Management Act 2013 whereby several
amendment has been made to strengthen and improve the current exercise and give a new breath to strata building development. The
objective of this paper is to study the establishment of Share Unit Formula for strata residential building in Klang Valley and the implica-
tion of the new provision to house buyers and unit owners. A quantitative survey has been done by conducting interviews with the pro-
fessionals in the industry. The findings of the research revealed that there are many advantages obtained by the house buyers and unit
owners due to the latest enforcement. Besides promotes transparency and accountability in the housing development industry, it is also
help to encourage an efficient application of simultaneous vacant possession of Strata Title to the unit buyers.

Keywords: Establishment; Share Unit Formula; Strata Management Act 2013 (Act 757); Implication; Buyer and Unit Owner

for strata building in Klang Valley and to identify implication of


1. Introduction ………… the new provision of Share Unit formula to house buyers and unit
owners.
Over the years stratified buildings especially in the Klang Valley
and other major cities have mushroomed as a testimony to the
Malaysia’s prosperity and development. In Malaysia, multi-storey
2. Literature Review
buildings are considered strata type of development. Some choose
to own a strata unit especially condominium due to the luxury 2.1. Stratified Building Management and Introduction
of extensive facilities and services provided, as well as the high to Share Unit
prestige bestowed to this new modern living concept while some
were forced to buy high rise units as they cannot afford to Stratified residential properties are becoming the choice of devel-
buy landed property. Looking at the housing development trend, opers in urban areas due to land scarcity and high land prices.
the problems on the management of high rise residential buildings Stratified property development maximizes density within the
has become a serious issue in the country since the Stata Title Act allowable planning standards (2, 3). Land matters in Malaysia
(1), Act 318 imposed. The STA 1985 sets to regulate the registra- always refer to National Land Code enacted and consolidate the
tion of strata titles and the day to day operation of strata manage- laws relating to land, land tenure, registration of title, land dealing
ment and maintenance. Various complaints from the parcels own- etc. Construction of condominium, apartment, flats and high-rise
ers or residents of stratified residential building pertaining to the building in in the urban areas such as Kuala Lumpur, Johor Bharu
management of their building have been increasing from day to and Penang is a phenomenon due to scarcity of land and high land
day. During the implementation of the early Strata Titles Act, costs. Strata Title is a document of title which endorsed by the
there are many issues and disputes raised in terms of its legisla- land administrator for the whole parcel of a subdivided building
tion, rule and regulation, implementation, management and (4). As the number of stratified building increasing, issues related
maintenance. One of the issues is the establishment and imple- to high-rise or stratified buildings are increasing as well. Through-
mentation of Share Unit formula to strata residential building out years of implementation of the Strata Titles Act 1985 (Act
which resulted to delay in title issuance, neglect from developer, 318) it is seen unable to resolve issues. Many problems have cre-
improper information on building development, poor management ated in strata title type of residential which required Management
etc. Almost every day we come across, at least, one article related Corporation (MC) in managing and maintaining the strata build-
to the problems in strata living, particularly in the low and medi- ings (5). In 2007 the government formulated and approved the
um cost schemes where the developers and other related parties Building and Common Property (Maintenance and Management)
tend to run away from solving the issues. Therefore, this paper Act 2007 (Act 663) to provide framework for the establishment of
objectives are to study the establishment of Share Unit Formula Joint Management Body (JMB) and the appointment of Commis-
Copyright © 2018 Authors. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium, provided the original work is properly cited.
120 International Journal of Engineering & Technology

sioner of Building (COB) to administer the Act. The act is now parent. Local Authority and Land Office have implement a system
replaced by the new Act which is called the Strata Management and certification of share unit determination for Strata Develop-
Act 2013, Act 757 (6). ment in Malaysia. This system would require the licensed land
The concept of high-rise or stratified residential is not something surveyor to apply for the certification. Upon approval of the certif-
new in Malaysia, the purchaser will be provided with variety of icate from the Land Office, it then will be submitted to COB at
amenities and facilities for each of the development to attract buy- Local Authority before commencement of the ground work.
ers. The buyer will be liable to pay for service charges for the
management and maintenance of the common properties (3). Un- 2.3 Formula Computation of the Allocated Share Unit
fortunately, the misconception of sharing facilities and sharing of Parcel
responsibilities towards the payment of maintenance fees become
the major issues of defaulters and huge outstanding amount of
The share units of a parcel are the area of that parcel multiplied by
maintenance fees (7). The share unit element was first introduced
the weightage factor for that type of parcel and the weightage
in Act 318 as to require the collection of maintenance and man-
factor for the entire floor parcel. If there is any accessory parcel,
agement charges collected in proportion to the “Allocated Share
the area of the accessory parcel is multiplied by a weightage factor
Units”. Unfortunately there is no details explanation on the estab-
for that accessory parcel. If there is more than one accessory par-
lishment of the Share Unit formula in the Act. The Share Unit
cels, the formula for calculation shall be applicable to each acces-
definition is the number assigned to each parcel by the developer’s
sory parcel and it shall then be added accordingly. Both the value
licensed land surveyor to determine the maintenance charges,
of the parcel and accessory parcel shall be added to determine the
sinking fund and other outgoings, to be paid by each parcel owner
total share units.
in an equitable and transparent manner. Based on the improvement
The formula is as follows:
of the provision, the Share Units are computed based on area,
usage, size and location of the accessory parcel using the pre-
Table 1: Unit Share Formula
scribed formula under the First Schedule of Strata Management Share units of parcel = (A x F1 x F2) + (B x F3)
Act 2013 (6). Share Units shall be determined before any sale so Share units of land parcel = (A x 0.8) + (B x F3)
that purchasers aware the onset of their share of payment to the Source: Strata Management Act 2013, Act 757
building. The payment of the maintenance fees also applicable to
developers with unsold units. Each parcel is allocated with share The calculation of share unit consist of two formula which are the
unit and is shown on the strata plan. The owner of a penthouse formula for share unit of parcel and share units of land parcel. The
will have bigger share units, thus more voting rights as compared difference between these two formulas is that the share unit of
to an owner of an intermediate unit. A parcel owner with a bigger parcel is used to calculate the share unit for standard high-rise
share unit will have to pay higher maintenance charges. strata building while the share unit of land parcel is used for strata
landed property which implements the concept of gated and
guarded residential type. For the share unit of parcel; there are
TWO (2) variables to derive to the share unit amount. Variables
number one is A where it is presented as area of the parcel times
with both F1; the weightage for the type of parcel as specified in
Schedule A and F2;the weightage for the overall floor parcel as
specified in Schedule B. The total will be accumulated with the
second variable, Variable B where the area of the accessory parcel
times with F3; the weightage for the accessory parcel as specified
in Schedule C.
For the calculation of share unit of land parcel, there are also
TWO (2) variables involves, variable number one is A; where it is
presented as area of the parcel times with 0.8 while variable num-
ber two is B where the area of the accessory parcel times with F3
which actually the weightage for the accessory parcel as specified
in Schedule C. Total amount will be accumulated to form the final
share unit amount. The total number of 100 units is assumed in
Table 2, below as according to (4), based on Dewan Bandaraya
Kuala Lumpur statistic on FABIABCIA Malaysia & PPK Seminar
Fig 1: Flowchart of Strata Act Introduced in Peninsular Malaysia (2008) stated that the total number of strata development project
for the whole Malaysia at that time was 9,319 residential projects
with total of 1,232,848 parcel units which is equivalent to 100
units per project. This formula will thus become the foundation of
2.2. New Rules for Share Unit Formula Gazetted in SiFUS which refer to the certificate of share unit formula.
Strata Management Act, 2013
Table 2: Table Calculation of the Share Unit Formula
The Section 6 of the new SMA 2013 stated that it is compulsory No Type of Total Share Unit Calculation
that a developer cannot sell any parcel from stratified properties Development Parcel
whether commercial or residential building unless the Schedule of Unit
Parcels has been filed with the Commissioner of Building (COB). 1 Residential 100 a) Floor Area of parcel x Factor 1
b) (Area or parcel) x (1) x (1) +
Thus, it is incumbent upon the developer’s licensed land surveyor (Area of
and registered architect to certify that the building or land is capa- accessory parcel) x (0.25)
ble of being subdivided. There has also stated a developer has to 2 Commercial 100 (Area of parcel) x (0.85) x (1) +
display the Schedule of Parcels in a conspicuous location at the (Area of accessory parcel) x (0.25)
point of sale so that purchasers know what they are getting even- Source: (8)
tually especially information relating to the size of the unit, size of
accessory parcel, share unit and the maintenance charges amount
for the unit. With the share units being calculated according to the
First Schedule of the SMA 2013, sharing of responsibility in
maintaining the common areas will be more equitable and trans-
International Journal of Engineering & Technology 121

Table 3: Sample computation of the share unit formula be carried out smooth and efficient. As the SiFUS certificate ap-
Ar Ar U proved and issued, the developer would then file for Schedule of
Use
To L Pa ea/ (AxF ea/ (A nit parcel to COB department at Local Authority. Schedule of Parcels
of F F F
we ev rc A 1xF2 B xF Sh is a document shows the proposed share units of each parcel or
Par- 1 2 3
r el el (M ) (M 3) ar
2 cel 2 proposed parcel and the total share units of all the parcels. In the
) ) e
case of a phased development, the schedule of parcel shows the
Apar 0. 85
67 3.7 proposed quantum of provisional share units for each provisional
B 10 82 tmen 1 1 82 15 2 .7
7 5 block. Total share units of all parcels, including provisional block,
t 5 5
is normally referred to as the aggregate. Schedule of Parcels
(SOPs) must be filed with the COB before the developer can sell
2.4. Procedures of Strata Title Application Prior to Va- any parcel or proposed parcel under S.6 (1) SMA 2013. The new
cant Possession regime of law requires the developer to comply with all the pre-
requisites before proceeding with any sales of the parcel. The
According to the development process in Malaysia, the housing major pre-requisite requirements include the payment of all pre-
project begins with the land acquisition stage and ends with sell- miums and fees to the relevant authorities and bodies; land and
ing of housing built. Planning control comes in at the process of strata title survey; approval of building plans and allocation of
getting statutory approval when application is submitted to the share units. The SOPs are prepared by developer’s licensed land
local planning authorities and Land Office (9). For stratified build- surveyor, comprising of location plan, storey plan and delineation
ing the latest provision in SMA 2013, Act 757 has stated that with plan which drawn based on approved building plans. It shall show
the new provision, there will be new rules where the Strata Title all the parcels with dimensions, areas, share units, all accessory
will be issued simultaneously at the end of vacant possession stage. parcels, common properties using the same format as approved
Figure 2 shows the Flowchart of Strata Title Application Prior to strata title plans. The developers cannot simply exclude out any
Vacant Possession for strata building as per the guideline process- common property and accessorized as they like which frequently
es on SiFUS & Strata Title produced by REDHA Version 02 (10). happened and reported previously. Under S.6 (3) of SMA, devel-
For any new development after implementation of SMA 2013, oper’s licensed land surveyor and registered architect have to cer-
developer who involves in development of strata building in the tify on the SOPs that the buildings or lands shall be capable of
country will obtain a planning permission upon the approval by being subdivided.
Local Authority. Planning permission is the early step during pre- The next step is for developer to apply for advertisement permit or
liminary stage before construction start. After obtaining planning developer’s license from Ministry of Urban Wellbeing, Housing
permission, developer will then submit Building plan to the Local and Local Government (KPKT). The authority will not issue any
Authority for approval. The submission of building plan is im- permit unless all documentation including SiFUS certificate at the
portant in a form of architect drawing to present a design idea and earlier stage is approved and satisfied. Upon the issuance of the
concepts of the development before construction commence by permit, the developer would then allow to do marketing and sale
building contractor. At this stage will continue to apply project to the public. Construction will also start to commence at this
number from Jabatan Ukur dan Pemetaan (JUPEM). stage. As the construction entering the superstructure stage, devel-
oper would next apply for certificate of completion and compli-
The next stage after obtaining project number, develop will en- ance (CCC) along with Strata Title. Strata Title is a certificate
gage a registered land surveyor to prepared all required documents issued by Land Office to the owner or purchaser of unit parcel to
and calculation as stipulates in the STA. The calculation of share prove their ownership of the unit. Developer is responsible to
unit formula will be done in details by land surveyor and submit to apply for the Strata Title as their obligation toward the project and
Land Office. Upon receiving a complete documentation from land purchaser. The application will be done at the Land Office and
surveyor, the Land Office will check and investigate the draft Strata Roll will be filed accordingly. The final strata title will be
document before approval and endorsement. Developer or Land issued to purchaser at the early stage of vacant possession.
Surveyor will required to submit 6 sets of documents including, all
relevant land issues are settled such as land conversion of that site,
payment of land premium, status of Title, etc. They must also
provide the proof of receipt of payment for Land Premium if relat-
ed, an approval letter for qualified Title application certificate by
Land Office. This is only applicable if the land is held under Qual-
ified Title or Final Title yet to be issued. Proof receipt of Quit
Rent for the current year, any letter of appointment of Licensed
Land Surveyor which will be involved in the development project,
proof receipt of surveying fees paid to Land Surveyor Board, the
document of Share Unit formula which has been approved by
Land Office. If there is any changes due to any amendment to
Building Plan which has been issued with SiFUS, new application
must be submitted to the Land Office for approval and new certif-
icate will then be issued. Besides that, other document that re-
quired is Schedule of Parcels signed by Licensed Land Surveyor
and Architect or Engineer and finally the Approved Building Plan.
All plans must be signed by Licensed Land Surveyor (LLS) and
architect. Once the application approved by the Land Office, de-
veloper will lodge SiFUS and submit another 6 sets of Schedule of
parcel to COB. Upon approval, COB will acknowledge and retain
1 set of Schedule and distribute other sets to developer, The Land
Office and JUPEM. A complete documentation will be accepted
while approved SiFUS certificate would be issued immediately by
the Land Office. SiFUS refers to the Certificate of Share Unit
Formula which will be issued by Land Office prior to the com-
mencement of sale of strata properties. The objectives of the new
provision are to ensure the application process of Strata Title can Fig 2: Flowchart of Strata Title Application Prior to Vacant Possession
122 International Journal of Engineering & Technology

4. Methodology agreement for certain statements in this research. The formula of


Frequency Analysis is as follows;
Percentage (%) = n/N x 100%
4.1. Research Methodology Framework Where:
n = no of respondents
This research is a quantitative research study where primary data N = Total number of respondents received
and secondary data are used for data collections. For primary data,
interview survey was carried out which involves authority and
housing society while relevant articles on strata management was 5. Analysis
selected for secondary data collection. Through this study there
are two (2) objectives to be achieved. To study the establishment For the analysis part, there are TWO (2) sections of question that
of Share Unit Formula for strata building in Klang Valley and to has been asked during the interview session. The first part of the
identify implication of the new provision of Share unit formula to section is to identify the respondent profile while the second sec-
house buyers and unit owners. Based on Figure 3 below, there are tion is to test respondents’ understanding on the Share Unit For-
five (5) stages applied in the research methodology framework. mula and its implementation throughout experiences and involve-
The method was adapted from the book, dissertation research and ment in their professional practices.
writing for construction students by (11). Based on the framework,
Stage 1 is the earlier stage where problem statement were
identified where the issues of the late issuance of strata title and
the new implementation of the new Share Unit Formula
implemented in the new strata development process in Malaysia.
From there, two objectives were obtained and the scope of the
study was established as a limitation to the research. This research
focusing on Klang Valley area where most of strata developments
located here. Stage 2 basically is a stage where it involves reading
and critically appraising what other people has written from the Fig. 4: Professions involved in interview survey
previous researches.
Next is Stage 3 where data collection were obtained through
structured interview survey where questions were presented in the
same order and with the same wording to all the interviewees.
The interview survey had implemented the in-depth group
interviews where respondents were selected because of the topic
and their wide knowledge in strata development process (12).
Targeted group for this research including professional authorities
and industry players are chosen as they have knowledge in Fig. 5: Respondents’ involvement in SiFUS and Strata Title Application
stratified Act implemented in Malaysia and clearly understand the
new provision of share unit formula. The main respondents are Respondents were from different backgrounds to participate in the
authority bodies including officer at Local Authority offices, Land research survey. From the feedback received, half of the total re-
Office, Ministry of Urban Wellbeing, Housing and Local spondents are servicing the government sector while the rest are
Government (KPKT) and practitioners. It can be concluded that practitioners from the private sector. Based on the above Figure 4
the data collection through a combination of standardized shows that we have obtained a lot of input on SiFUS procedures
interview survey and secondary data collection from the Act, and from professionals for this research purposes. The highest re-
books is the best method for the purpose of this research. 100 spondents are those government officers from government body
respondents were contacted from the earlier data collection stage and local authority at 32.7% followed by property manager 28.8%,
where only 52 respondents were completely reverted the response land surveyor 17.3%, architect 11.5% and developers 9.6%. Based
to us. on the literature review and supported by result from respondents
in Figure 5 these are the professionals that involve directly and
Stage 4 is the analysis of data collection which were collected indirectly in SiFUS and Strata Title application as stipulates in the
from the previous stage. All analysis was done through descriptive SMA 2013, Act 757. Directly involved means that the person play
statistical analysis using frequency distribution where analysis was a role or duty in the whole application procedures as stated in
conducted using SPSS software programme and discussions were Figure 2 example Developer, Land surveyor, Architect and Gov-
presented at this stage as to explain reasons for all feedback from ernment Body & Local Authority while indirect involvement
the interview session (13). The final stage of the methodology is where the person involve after approval or issuance of the title
the Stage 5 where it represent the final finding and conclusion of example property manager and government body &local authority.
this research. In the event of application been rejected the process will be ex-
tended and amendment will be required in order to proceed (10).

Fig. 3: Research Methodology

4.2. Frequency Analysis

Frequency Analysis depends on the percentage of respondents Fig. 6. Factors that caused late issuance of Strata Title to Purchaser
giving the same answers. It is used to measure the degree of
Based on Figure 6 above, there are several factors that might be
reasons for late issuance of Strata Title to purchaser in Malaysia.
International Journal of Engineering & Technology 123

This is not a new issue as it has become frightening to many strata mand increase the property prices higher compared to strata build-
unit purchaser and owners as some have to wait for years for this ing without individual title.
to happen. The figure above shows 57.7% of respondents agreed Furthermore, it also a good chance for owner and purchaser to
that poor compliance of rules and regulation is the major factor form MC earlier upon the opening of strata register at Land Office.
that caused the late issuance of the Strata Title (4). Followed by According to Tan Ai Leng from The Edge Market online in their
no cooperation from developer 25.0% where according to Nicole latest news in September 2017 stated that property without the
Tan and Sumathi murugiah in (2007), many cases reported devel- Strata title, the building would not be able to form JMB or MC
oper fail or taking longer time to apply for Strata Title as they had and would require to appoint liquidator for Strata Title application
gone bankrupt which left the building with outstanding application (15). Lastly the new provision allow the purchaser to access the
(14). Furthermore, 11.5% shows poor cooperation from authority information on the share unit factor for their unit and the amount
as respondents blamed authority for delaying the approval process of maintenance fees that would be charged on them upon the pur-
as according to Kamaruzzaman et al. (2010) improper documenta- chase. This is benefit to owner and purchaser as it will be easy to
tion as stated in section 9 and 10 of STA 1985 is another issue determine maintenance charges, sinking fund and other outgoing
which resulted late issuance of the title (1). The lowest response for all residents including developer’s unsold units (10).
was 5.8% where respondents choose poor cooperation from unit
owner as the factor where their ignorance on their right and re- 7. Conclusion
sponsibilities on usage of the common property as well as pay-
ment of maintenance fees that caused the delay (15). Enforcement
on penalty for project delay would encourage the developer to In a nutshell, the late issuance of Strata Title is one of the main
focus on their completion stages and delivery period as to avoid issues related to stratified residential buildings. This research ex-
the penalty. plains the provision of the latest SMA 2013, Act 757 on imple-
mentation of the new Share Unit formula to obtain SiFUS and
Strata Title procedures and the implication to buyers and unit
owners. Later, the implication and benefit of the new provision
and regulation will be justified by using frequency distribution. As
a results, the new provision require many related professional such
as Architect, Land Surveyor, developer, etc to involve and under-
stand the overall procedure as to ensure accuracy and to avoid
misleading to the implementation. The crucial part is where the
Fig 7: The benefit of new provision to buyers and unit purchaser new formula will be used to get the approved certificate, SiFUS
before issuance of Strata Title by The Land Office. The calcula-
Based on Figure 7 above, result shows the respondents’ perception tion of the share unit have to be accurate and true following the
on the benefit of the new provision in SiFUS and Strata Title ap- land office and Jupem approval before proceed. Without the issu-
plication. From the result, 90.4% of the professional respondents ance of SiFUS certificate, the next process would not be continued
agreed that the new change in provision and regulation is a new thus the development would not proceed. The implication result of
hope for purchaser and unit buyer as it would benefit them even- the new provision can be established as a guide to determine the
tually. realistic of the new enforcement of the SMA 2013, Act 757 and
STA 1985, Act 318 as to solve the late issuance of Strata Title to
6. Implication purchaser, fraud cases by developer and project abandonment
from it root causes and to ensure the interest of future buyers and
unit owners are protected thus the Strata Title guaranteed to be
Firstly, as discussed earlier Strata Title is a proof of ownership of
delivered to them as promised.
stratified building own by unit owners or purchasers. In the ab-
sence of the title the owner or purchaser are the most suffer as
they would not have the right to indefensibility of title provide by References
the National Land Code 1965. Hence, there is no security of own-
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