Top FAQ about Deposit for Defects and Strata Title Transfer

deposit-for-defects

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.

Common Property Deposit for Defects Account. 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. [92 (1)]

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 lift, common area fire fighting and electrical system, swimming pool, guard house, gymnasium equipment, road and drain, landscape etc.

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? [92 (1)]

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, SMR].
The control of deposits for defects rest with the 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). In so doing the JMB or MC is acting on behalf of all parcel owners.

Transfer of Title. 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. 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. This regulation was proposed in the Strata Titles (Amendment) Act 2013 under Section 19A, but it was not enforced. Subsequently, Section 19A was deleted in the Strata Titles (Amendment) Act 2016 which was gazetted on 9 September 2016. Thus, currently there is no Law compelling the transfer.

This compilations of FAQ was according to survey carried out by REHDA Institute.

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