JOHOR/SINGAPORE: Singaporean Sebastian Tan bought a three-bedder condominium unit in Johor for about S$275,000 (US$184,000) several years ago, a price that some consider a bargain.
But during a recent chat with a lawyer friend, he realised that he is not the legal owner of his purchased property.
Mr Tan believed it was a 99-year leasehold unit, but instead, it was sold to him under a private lease scheme (PLS), which is unique to some properties in Malaysia.
Under the PLS, a buyer does not own the property, but instead buys a lease – almost like a rental agreement – for a period of time, for instance, 99 years.
The developer retains ownership. The buyers are considered tenants, and they have limited rights to rent or sell.
In contrast, Singapore does not have a similar concept.
LEGAL BATTLE OVER CONDO PURCHASES
Mr Tan had to ballot to get his hands on his condo unit, which he said has now “dropped tremendously” in value.
CNA understands Singaporeans purchased at least 20 per cent of the units in this project, with some buying more than one unit.
“There is some disappointment because we were thinking that we were buying a leasehold property, but only to find out that it is a private lease scheme… and for us to not be able to at least realise the potential of investment,” said Mr Tan.
He is among about 100 homebuyers locked in a legal dispute with a Malaysian developer, after finding out that they are not the legal owners of their purchased units.
They claimed that the developer was not upfront about the conditions of their deals, and want the strata title legally changed to give them full ownership.
“I think we are looking for a fair and reasonable outcome for everyone,” said Mr Tan.
He added that even if a premium has to be paid to convert his current condo unit into a leasehold property, it would be worth it.
About 170 home buyers, mostly Singaporeans like Mr Tan, are in a WhatsApp group discussing next steps. Some are still wondering whether they could rent, sell or refinance their property.
VALUE OF PROPERTIES AFFECTED
Malaysian lawyers told CNA that the PLS is legal.
But confusion can sometimes happen because buyers sign on a standard sales and purchase agreement (SPA).
“The SPA means you deserve the ownership and you deserve the strata title, separate from the master title,” said Malaysian lawyer Chee Hui Bing of Chris & Partners Advocates & Solicitors, Johor.
“But in PLS, all you get is just a longer so-called tenancy. You get a 99-year lease period.”
Such buyers do not have the ownership rights as they might for a Singapore property.
A Singaporean lawyer said the value of the property might also be affected.
Mr Tris Xavier, head of the integrated property practice group at Yuen Law, said those thinking about selling the unit would then be “selling the right to stay in it”, and not the property itself.
“The calculation for that, you can imagine, is very different. It should actually almost be akin to rental,” he added.
A check by CNA found that at least 70 condo buyers filed a complaint in June with Singapore’s Council of Estate Agencies against the real estate agency that marketed the property to them.
But from court documents seen, the developer argued buyers should have been aware, and that the PLS is valid and legitimate. They added that buyers also have passed the legal period to make any claims.
Conveyancing lawyers and real estate agents urged buyers to read the fine print when buying a property overseas, and to seek legal advice on the various terms and conditions.
“It’s important to understand the landscape of property in the country that you are actually investing in,” said Mr Xavier of Yuen Law.
“There are many things that maybe are not entirely clear to the layman, and I think it’s important to actually get a professional who actually works in that country to guide you through the process,” he added.
“Oftentimes, it’s not easy just to Google things out. So it’s always great to have a legal professional to guide you through what exactly you’re purchasing.”
Mr Ruben Koh, senior director and head of international residential sales at real estate firm Savills Singapore, said “more savvy buyers will tend to look for local agencies first, as buying overseas properties come with risk”.
INTEREST IN JOHOR PROPERTIES
Johor is among the most popular locations for Singaporeans looking to buy properties abroad.
Singaporean businessman James Lim, for instance, bought a freehold apartment across the Causeway for its convenience.
Mr Lim, who has a factory in Malaysia and has plans to set up a second one in the Johor-Singapore Special Economic Zone (SEZ), said many Singapore firms want to move their manufacturing to the zone.
Analysts said more foreign direct investments such as data centres and logistics hubs are driving up sales and prices of private homes in Johor Bahru.
Condo prices saw a nearly 30 per cent increase in the first half of this year, compared with before the COVID-19 pandemic.
Savills Malaysia group managing director Paul Khong said Johor’s affordability, lower costs of living, and the increased connectivity from across the Causeway are some factors attracting Singaporean buyers.
Mr James Puddle, head of residential development sales for Southeast Asia at real estate firm JLL, said: “We’ve seen people looking to retire there, or maybe buy a second home.”
Some Singaporeans see buying properties in Johor as an investment, especially with various developments including the SEZ, he added.
The political environment also gives investors “the needed confidence on stability and consistency of investment policies”, said Mr Samuel Tan, founder and CEO of Olive Tree Property Consultants.
“A pro-business government is critical to assure investors of the long-term benefits.”
Mr Kenneth Soh, country manager at PropertyGuru Malaysia, said the interest from Singaporeans is largely concentrated in the JB area due to the proximity to Singapore.
But he noted that there are many other investment opportunities around Malaysia.
“There are more developments of new townships,” he said. “They have their own hospital, education hub, shopping malls, and these make it a lot more livable.”