Buyers Take Iskandar Investment Berhad Court Over Spa Related Dispute
A group of 63 individuals have recently taken legal action against both Iskandar Investment Berhad (IIB) and property developer Distinctive Resources for allegedly misrepresenting the title of the property units they purchased in the Medini Iskandar Malaysia (MIM) region of Johor approximately ten years ago. These individuals are owners or co-owners of the Iskandar Residences development project in MIM and are represented by three individuals in the case.
This is not the first time that civilians have filed a lawsuit against Malaysian state entities in Johor and real estate developers. In 2020, a similar case ended in damages being awarded to the plaintiffs for misrepresentation and breach of terms and conditions in a sales and purchase agreement (SPA).
IIB is a company owned by the Malaysian federal government and the state government of Johor, established in 2006 to manage investments in Iskandar Malaysia, Johor. Its focus is on developments in the Iskandar Puteri region, with shareholders including Khazanah Nasional and two Malaysian pension funds. Advertisement
The case involves IIB granting a 99-year lease over land in the Iskandar Malaysia region, starting on June 26, 2013, to its subsidiary Medini Land. This lease also includes a 30-year extension until June 25, 2142. Medini Land then sold this lease, with development rights, to Distinctive Resources, the developer. Until Dec 18, 2013, IIB also owned 20% of Distinctive Resources’ shares through Medini Land.
The property in question, Iskandar Residences, was developed through a joint venture between IIB and Distinctive Resources.
Between 2013 and 2014, the 63 plaintiffs entered into SPAs with both IIB and Distinctive Resources. At the time, the property was referred to as a “lease” in the SPA.
In December 2023, one individual noticed that they had yet to receive a strata title for their house, leading to the realization that they had been given a private lease scheme instead of a leasehold title. A leasehold title would entitle owners to full ownership of the land and a strata title, while holders of units under a private lease scheme do not have ownership rights.
This misunderstanding over the terms of the “lease” stated in the SPA sparked the case against IIB and Distinctive Resources.
One of the plaintiffs involved in the ongoing court case stated, “Thousands of us were deceived. We had unwittingly paid upfront for a 99-year long-term lease with no protection of the strata management act as owners. How do we sell a property that we don’t own?” Advertisement
The plaintiff’s claim is that the SPA they signed does not follow the standard terms of Schedule H of the Housing Development (Control and Licensing) Regulations (HDR) 1989, which covers leasehold and freehold properties. They argue that the SPA was modified to introduce a private lease scheme, violating the Housing (Control and Licensing) Development Act (HDA) 1966 and HDR 1989, key legislations governing housing development in Malaysia.
The plaintiffs also allege that IIB and Distinctive Resources engaged in misrepresentation by conduct. Through their agents, they represented and induced the plaintiffs to believe they were purchasing outright ownership of the land, rather than a lease, through words and marketing materials such as brochures, emails, and videos. The plaintiffs also claim that other conduct by IIB and Distinctive Resources constituted misrepresentation, even after the project’s completion.
The plaintiffs are requesting that the court declare the SPA in line with Schedule H of HDR 1989, issue a separate strata title, and register the plaintiffs as owners in the strata title. They also ask that Distinctive Resources be removed as a leasee in the strata titles.
A crowded showroom for Iskandar Residences, the property in question, back in 2013. Photo: Plaintiff’s photo taken in 2013
IIB’s defense is that the plaintiffs’ claims are time-barred, as they filed their action more than six years after the SPA was executed. They argue that the plaintiffs had full knowledge of the facts and did not object to the terms and conditions leading up to this.
IIB also claims that there were no illegal modifications made to the SPA, and that the lease scheme is legitimate and valid. They note that it was approved by KPKT in September 2011 and received approvals from other authorities such as IRDA and the Economic Planning Unit Johor.
IIB denies allegations of misrepresentation, stating that the plaintiffs have not adequately proven that their conduct led to the belief that they were purchasing outright ownership rather than a lease. They also reiterate that the plaintiffs should have had knowledge based on the terms of the SPA.
Distinctive Resources also denies all claims of misrepresentation, stating that the plaintiffs had legal representation and were aware of the terms of the SPA, which clearly stated that it was for the purchase of a lease. They also point out that they have been granted an exemption from complying with HDR 1989 and possess valid advertising permits and a developer’s license.
A similar court case in 2020 ended with damages being awarded to 107 buyers of the Meridin@Medini property development in MIM. The court found that the developer, Tropika Istimewa, had committed misrepresentation and breached housing development laws in the sale of their leasehold properties. They were also ordered to pay damages for late delivery of vacant possession.
When asked about the different perceptions and understandings of the property titles sold in the Iskandar Puteri region, Natazha Harris, CEO of Invest Johor, stated that he was unsure how potential purchasers or purchasers were informed. He added, “What my version is, during the SPA, I was told that the potential purchaser or the purchaser had been informed of the leasehold arrangement right before.” Harris also mentioned that potential purchasers should provide evidence of what was communicated to them.
According to a spokesperson for UEM Sunrise, all their residential properties in Iskandar Puteri are sold under freehold ownership. However, Affiniti Residences, a joint venture between Khazanah and Temasek Holdings, is a private lease scheme.
The plaintiff who contacted about this case expressed concern about the lack of action and attention towards the issue, saying, “Our group of plaintiffs are little Davids fighting multiple Goliaths in Malaysia Court. We cannot win alone, which is why we involve the media, politicians, and regulators. Only a single Chinese newspaper editor responded to my cry for help and introduced connected parties to help.”
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