CONFIDENTIAL FACULTY OF LAW - LW/JULY2020/LAW512

QUESTION 1(a)

The issue is whether Nureen could redeem her Property from Halas Bank.

Before redemption process starts, it must be understood clearly that a land or

property is charged to obtain loan and only once the loan has been discharged the owner of
the land may redeem the property back. Redemption is a legal process that took place when
the legal owner under the terms of his loan agreement discharges his obligations imposed
by the bank’s charge or assignment. Once his obligations have been discharged, he is
entitled to have his property redeemed in him free of charge or assignment. In other words,
the charge or assignment will remain until the debt has been paid and that money was
accepted as payment. In the case of Malayan Banking Bhd v Worthy Builders Sdn Bhs &
Ors, it was held that the right to redemption is an entrenched right that the bank will be
obliged to reassign the property to the purchaser upon payment of the loan without any
default. In order to release a property to be sold, redemption process must be gone through.

The first process involved in redemption of property is to get the Redemption

Statement from the developer’s bank. The developer must provide letter of undertaking to
confirmed that the differential sum (if any) has been fully paid. The developer in the letter
must also confirmed whether the title is charged to any bank in particular to bridging
financing. Confirmation that the redemption sum is paid to the borrower’s solicitor must be
deemed to be a payment in progress towards the purchase price under the SPA. In an
undertaking, the consent to transfer SA must be obtained and forwarded to developer’s
solicitor or the borrower’s solicitor the individual title to the property free from encumbrances
for the purpose of registration of Form 16A. In case if a title is charged to a bridging
financing, the undertaking letter will be forwarded to the borrower’s solicitor instead of the
developer.

Next process that is the homebuyer will need to pay the redemption sum to the
developer’s financier to redeem the unit from being charged to the bank. The bank will sign
all the necessary documents to discharge the charge. In case there is a bridging financing
(BF), letter of undertaking from the BF should consist of a redemption statement in respect
of the purchaser’s property. Such undertaking will need to forward the executed Discharge of
Charge in Form 16N together with the original title upon full payment of the redemption sum.
The redemption sum payable to the developer’s financier must not be more than 35% of the
purchase price otherwise, the purchaser is relieved from paying in excess of 50% of the
purchase price until the redemption is settled by the developer. However, if the Discharge of
Charge cannot be registered no refund for the redemption sum. Once the redemption sum is
paid to the bridging financing, the property will be discharged. BF will then execute Form
16N in which to be registered together with Form 14A and Form 16A.

On the facts given, the master title to the condominium was charged to Halas Bank
Berhad (Halas Bank) as a security for a bridging loan granted to MMSB. Assuming that was
not happy when she received an information from MMSB that she has to redeem her
Property from Halas Bank.

In applying to the present case, MMSB was the one to take a bridging loan by
charging the master title to the condominium. By right, since MMSB is the one who took the
loan from Halas Bank, it is the obligation of the MMSB to request and obtain one
Redemption statement from his bank and forward the same document to the purchaser’s
solicitor or the purchaser’s financier’s solicitor. The redemption sum to the developer’s bank
will then be paid from the balance purchase pricer of the property Nureen had bought. The
conventional loan taken by Nureen will be used to pay the loan to Halas Bank as progress
payment of the bridging financing. The developer’s bank will return all the security
documents after the redemption sum has been settled. In advising Nureen on the matter,
Nureen may need to pay the redemption sum to the MMSB’s financier to redeem the unit
from being charged to the Halas Bank however, it must not be more than 35% of the
purchase price. Nureen may claim for any loss she suffered by bringing the matter to the
homebuyer tribunal.

In conclusion, could redeem her Property from Halas Bank once the redemption sum
has been paid to Halas Bank. Nureen may also bring an action to claim for loss that she had
suffered to the homebuyer tribunal against MMSB.
QUESTION 1(b)

Real Property Gains Tax (RPGT) is a tax on chargeable gains derived from the
disposal of a real property or chargeable assets. In other words, it is the imposition of tax on
any person who gained profits from selling his or her property. RPGT is governed by the
Real Property Gain Tax Act 1976 (RPGTA) which was reintroduced effective on 2010 after
exempted all person from paying the tax for disposal of assets in between 2007 until 2009.
Real property in the context of RPGTA refers to the land situated in Malaysia. Land are
defined under section 2 of the RPGTA 1976 which includes the buildings on land, and
anything attached to land or permanently fastened to anything attached to land (whether on
or below the surface). Hence, real property includes any landed property in Malaysia such as
residential properties (apartment, condominium) and commercial properties (office building,
shop houses) and land.

Section 3 of the RPGTA 1976 stated that a tax RPGT is only imposed in respect of
chargeable gain as a result of accruing on the disposal of any real property. In other words, it
is charged on the profit made. Irregardless of nationality, in respect of a chargeable gain
every person will be chargeable with the tax on any disposal of chargeable assets for a year
of assessment (section 6 of the RPGTA 1976). Under section 7(1) of RPGTA 1976 there
is a chargeable gain when a chargeable asset is disposed, and that the disposal price
exceeds the acquisition price. Thus, chargeable gain is the profit made by the vendor from
the sale of the property.

Disposal price of an asset is provided under Para 5 of Schedule 2 to RPGTA 1976

as the amount or value of consideration in money or money’s worth for the disposal of the
asset less the amount of any expenditure incurred in enhancing the value of the property,
amount of expenditure incurred after acquisition in defending his title/right to the property,
and incidental costs in disposing the property. Para 4 of Schedule 2 to RPGTA 1976 states
the acquisition price is the value of the consideration in money or money’s worth given by or
on behalf of the owner wholly and exclusively for the acquisition of the asset less
compensation received for the damage to the property, amount received under any
insurance policy for the damage to the property, and sum forfeited for any intended sale of
the property. Incidental costs in Para 6 of Schedule 2 to RPGTA 1976 refer to the
expenditure wholly and exclusively incurred for the purpose of acquisition or disposal. For
instances, in the case of an acquisition the cost of advertising to find a seller and in the case
of a disposal the cost of renovation and costs reasonably incurred is the incidental costs.
According to section 4 of the RPGTA 1976, the tax charged will be at the appropriate rate
as specified in Schedule 5, however, if there is no profit being made from the sale, RPGT will
not be charged. Part I laid down the rate of tax imposed on an individual who are in the
category of citizen or permanent resident of Malaysia. The rate of tax for a disposal within 3
years after the date of acquisition is 30%, in the 4th year after the date of acquisition is 20%,
in the 5th year after the date of acquisition is 15%, and in the 6th year (for instance after the
5th year) after the date of acquisition is 5%.

On the facts given, Nureen decided to sell the Property at the price of RM860,000. Nureen
spent RM1,200 in advertising the sale of the Property in a newspaper. Nureen was
approached by her friend, Shauraa, who is interested in buying the said property from her at
the price of RM850,000 and Nureen agreed.

In calculating the amount of RPGT that should be paid by Nureen is by the following;

A. Gross Chargeable Gains (GCG) = (Disposal Price – Incidental Costs) –

(Acquisition cost + Incidental Costs)

Incidental cost for

= Renovation + Incidental cost for disposal
disposal
= RM15,000 + RM1,200 + RM10,000
= RM26,200

Incidental cost for

= RM7,000 + RM10,000 + (450x3)
acquisition
= RM 18,350

Gross Chargeable Gains

= (RM850,000 – RM26,200) – (RM680,000 + RM18,350)
(GCG)
RM823,800 – RM698,350
RM125,450

B. Net Chargeable Gains = Gross Chargeable Gains – (10% of GCG or RM10,000,

whichever is greater)

In Nureen situation, the 10% of the GCG is higher than RM10,000. Therefore, RM12,545 will
be deducted from the GCG instead of RM10,000.

Net Chargeable Gains = RM125,450 – (RM125,450 x 10%)

= RM112,905
 C. RPGT = Net Chargeable Gains (NCG) x Rate of Tax

Since the disposal of the property is within 3 years after the date of acquisition, the rate of
tax imposed on Nureen is 30%.

RPGT = RM112,905 x 30%

= RM33,871.50

Therefore, the estimated amount to be paid by Nureen to Lembaga Hasil Dalam Negeri in
disposing the Property is RM33,871.50.
QUESTION 1(c)

The issue is whether Nureen could ignore the notice of demand issued by the management
corporation.

Strata title is defined as the title issued to units or parcels in a high rise building or complex
such as flats, apartments, condominiums and commercial buildings. Each parcel and plot of
land will have its own document of title as this is in accordance to the Torrens system. The
statutes that governed this law is the Strata Title Act 1985 which replaced the older
reference to ‘subsidiary title’ in the National Land Code 1965 to ‘strata title’. Various
amendments have been made to cover the flaw. This has led us to the Strata Management
Act 2013. This statute is to provide for the proper maintenance and management of
buildings and common property and for related matters.

After vacant possession is delivered the strata properties will go through three phases of
management that is by the developer, JMB, and MC. Formation of MC in accordance with
section 57 of the Strata Management Act 2013 provides that after the subdivision of the
building is completed and strata titles for the parcel in the building are issued MC are
created. The first annual general meeting (AGM) of the MC will be convened within 11
months from the date the purchasers are registered as proprietor of the strata building.
According to section 17(3) and 17(4) of the Strata Title Act 1985, MC is a corporate body
that have perpetual succession and a common seal, and which may sue and be sued. The
management corporation will become the proprietor of the common property and the
custodian of the issue document of title of the lot as provided in section 17B (1) of the
Strata Title Act 1985. The main power and duty of the three managements is to collect
maintenance charges from the parcel owners. Thus, they can make additional provisions to
control and manage the use of common property.

In relation to accessory parcels, section 4 of the Strata Title Act 1985 and clause 1 of
Schedule H and J of the HDA defined accessory parcel as any parcel shown in a strata
plan as an accessory parcel which is used or intended to be used in conjunction with a
parcel. Accessory parcels cannot be dealt independently or separately from the main parcel.
This was stated in section 69 of the Strata Title Act 1985. Therefore, accessory parcel is
another small plot of parcel owned by the proprietor of the main parcel and it is included in
the strata title of the main parcel. In other words, the accessory parcel must be dealt
together with the main parcel. For instance, a car parking lot is an accessory parcel. In the
case of Ideal Advantage Sdn Bhd v Palm Spring Joint Management Body & Another, it
was held that in a stratified development, a car park is considered as an accessory parcel.
As accessory parcel, the car park cannot be sold on its own without the principal parcel
being sold. In the case of Doreen Tan Ying Ying v Chong Tet On, it was decided that the
MC was not permitted by the law to sell the parking lot separately from the apartment.
Section 69 was relied by the judge where in this section it states that a parking bay is an
accessory parcel which could not be dealt independently from the apartment in question.

Parcel owner has a duty to pay maintenance charges and sinking fund. Section 52(1) of the
Strata Management Act 2013 stated that in respect to his parcel, each purchaser has to
pay charges, and contribution to the sinking fund for the maintenance and management of
the building to the MC. If any sum remains unpaid by the purchaser in respect of his parcel
at the expiry of the period of 14 days from the date of notice issued, the purchaser are
required to pay interest at the rate of 10% per annum on a daily basis in accordance with
section 52(5) of the Strata Management Act 2013. The amount of charges to be paid
under subsection (1) will be determined by the developer in proportion to the share units
assigned to each parcel.

In a circumstances where the maintenance charges and sinking funds are still not paid, by
virtue of section 34 of the Strata Management Act 2013, the sums become recoverable by
giving a written notice to demand payment of the sum due within the period of 14 days from
the date of service of notice. If the maintenance charges and sinking funds are still not paid,
MC may file a claim in the Strata Management Tribunal and once awards is given by the
Tribunal, the parcel owner must comply. Non-compliance without reasonable excuses will be
an offence and if convicted, will be liable for a fine or imprisonment or both. In the case of
Dato' Manokaran Veraya v Perbadanan Pengurusan Apartment Kayangan & Anor
Appeal, the plaintiff was dissatisfied with the management and service charges of the MC.
He left the unit vacant for years. The plaintiff further claimed that he was not obliged to pay
the maintenance charges as he did not occupy the place. It was held that it is his
responsibility as the registered proprietor to pay the maintenance charges regardless of
whether he occupied his parcel or not.

On the facts given, Nureen has purchased a unit of three-room condominium together with
two accessory parcels from MMSB. However, since delivery of vacant possession on 1 June
2018, Nureen has not been paying the maintenance charges for the Property as she did not
stay in the Property as she has another house in Bukit Damansara. The MC issued a notice
of demand to Nureen requesting her to pay the maintenance charges. The notice of demand
also contained a clause which instructed her not to use the parking bays until the
outstanding amount is fully paid.
In applying the relevant authorities and decided cases, Nureen has a duty as a registered
proprietor of the condominium she purchased even though she does not stay there by virtue
of section 52(1). Referring to the case of Dato' Manokaran Veraya, where the court decides
that payment of the maintenance charges is to be made although he did not occupy the
parcel, Nureen has to pay for the maintenance charges to the MC. The clause that says the
parking lots cannot be used is in accordance with section 69. As there is an issue to the
maintenance charge, it is the right of the MC to include a clause where it barred the usage of
the parking bays since it is to be dealt together with the main parcel which is the house.

Since it is the right of the registered proprietor to pay for the maintenance charges, it is not
advisable for Nureen to ignore the notice of demand because if the sum of maintenance
charges is still unpaid, the MC could bring the matter to the Tribunal. If an award was given,
there is no way for Nureen to escape from paying the charges. Therefore, Nureen should not
ignore the notice of demand to pay for the maintenance charge.

In conclusion, I would advice Nureen to adhere to the notice of demand given by the MC to
pay for the maintenance charges before the lapse of the period of 14 days from the date the
notice is served.
QUESTION 1(d)

Generally, the power of attorney is an agreement which empowers a person to act on behalf of

another person. Section 2 of Stamp Act 1949 provides the meaning of power of attorney as any
instrument to act as a solicitor in any judicial proceeding and empowering that person to act on
behalf of the person except a warrant. Section 157A (1) of the National Land Code 1965 stated that
the proprietor of the alienated land may confers on the donee the power of attorney to make such
application on behalf of the proprietor. When the donee has been appointed as the attorney, he is
able to act for the donor generally or in a specified transaction or series of transactions. The person
authorises the power must have a legal capacity. The procedures to be applied in creating a valid
and enforceable power of attorney are governs by the Power of Attorney Act 1949. There are five
steps in order to create a valid and enforceable power of attorney which includes the formation;
execution, attestation and authentication; stamping; registration at High Court; and registration at
the land office or registry.

The first procedure is to draft the formation of Power of Attorney (PA) document. In drafting the PA,
the donor (the person who appoints another person as attorney) must stated properly and clearly on
the PA document who he wanted the donee (the person who has been appointed or authorised to
act on behalf of the the donor) to be. This PA document should also include all the powers and
authorities to be given to the donee. The document may contain the general power or specific
power. The differences between these two types of power is that for the general power, the donee
may act on all matters on behalf of the donor. Meanwhile, as for the specific power, it only allows
the donee to act on specific powers as stipulated on the PA document. Thus, donee shall not exceed
his power or authority that has been prescribed on the PA document. The donor must prepare at
least 2 copies of the PA document where the original is to be kept by the donee for personal
safekeeping and the copy is to be deposited with the High Court in accordance to section 4 of the
Power of Attorney Act 1949.

The second procedure is the execution, attestation and authentication of the PA document. Section
3 of the Power of Attorney Act 1949 stated that execution of PA document is not valid unless it is
executed and authenticated in the appropriate form in accordance to the First Schedule. If the PA
document is executed by an individual, Form I will be used, meanwhile Form II is used when the PA
document is executed by a company. The person who will be making the authentication of the PA
document is different depending on where the document is executed either inside or outside of
Malaysia. This was provided in section 3(1)(a) and 3(1)(b) respectively. The effect of the PA
document being duly executed and authenticated in accordance to this section is deemed to have
been properly and validly executed and attested. Thus, power of attorney may be used for the
purposes under any written law.

The third procedure is stamping. Stamping needs to be done once the PA document has been
executed and authenticated. Stamp duty to be payable is prescribed in the Stamp Act 1949 under
the First Schedule, item 59. The amount of stamp duty to be payable is RM10.00. However, if power
of attorney is created for the sole purpose of that person to vote as proxy at a meeting of a Company
or Association, such payment of the stamp duty will be exempted. After stamping has been done,
the PA document will need to be registered in both High Court and at the Land Office or Registry.

The fourth procedure is to register the PA document in High Court. Section 4 of the Power of
Attorney Act 1949 stated that a PA document is only valid once it is deposited with the High Court.
Thus, the donor will need to bring both the true copy and the original document to the High Court.
Once the true copy of the PA document has been compared with the original, the Senior Assistance
Registrar will then mark the duplicate copy with the words “true copy”. The fees for the registration
of the Power of Attorney document are as follows; RM25 for registration and RM10 for deposit.
Prior to the execution of PA document, a fee of RM2 will be charged per printed sheet.

The fifth procedure is to register the PA document at the Land Office or Registry. Section 10 of the
Power of Attorney Act 1949 provides that in accordance with section 4 a copy of any document may
be deposited and presented at the office after verification and upon payment of the prescribed fee
will be marked by the Senior Assistant Registrar as certified copy, hence, be an office copy of the PA
document. Once the PA holder has obtained a certified true copy of the instrument from the High
Court, registration of the instrument must be done at the Land Office or Registry. Section 157A (2) of
the National Land Code1965 provides that the application must be accompanied by an office copy of
the PA document and a copy thereof for filing by the Registrar. The Land Administrator may require
from the donee or the donor a statutory declaration or other evidence upon oath or affirmation that
the PA document is at all material time still in force as in accordance in section 157A (4) of the
National Land Code 1965. This also was provided in section 311 of the National Land Code 1965
whereby the Registrar has the power to request the PA holder or donor to produce evidence that
the document is still in force through statutory declaration.

In conclusion, to create a valid and an enforceable power of attorney, the donor must follow
the procedure provided for the creation of power of attorney which are by formation;
execution, attestation and authentication; stamping; registration at High Court; and registration at
the land office or registry. Once all the procedures have been completed, the power of attorney is
then valid and enforceable.