Buyers Take Iskandar Investment Berhad Court Over Spa Related Dispute
A group of 63 individuals have filed a legal case against Iskandar Investment Berhad (IIB) and property developer Distinctive Resources, alleging that they were misled about the title of the property units they purchased in the Medini Iskandar Malaysia (MIM) region in Johor 10 years ago. The plaintiffs are all owners or co-owners of the Iskandar Residences development project in MIM and have been represented by three individuals in this case.
This is not the first time that Malaysian state entities and property developers have faced legal action from civilians in Johor. In a similar case that concluded in 2020, plaintiffs were awarded damages for misrepresentation and breach of the sales and purchase agreement (SPA).
The Tampines Avenue 11 mixed-use plot can be seen on a map, with its advantageous location near two executive condominium sites. One of these sites, located at Tampines Street 62, is currently open for tender, while the other is the successful 618-unit Tenet which was launched last December. Additionally, the newly added Parktown Residence Condo is situated naturally within this flourishing area.
IIB, which was incorporated in 2006 to oversee investments in Iskandar Malaysia and focuses on developments in the Iskandar Puteri region, is jointly owned by the federal government of Malaysia and the state government of Johor. Khazanah Nasional and Malaysia’s pension funds are shareholders.
The case involves the following: IIB granted a lease over land in the MIM region to its subsidiary, Medini Land, for a period of 99 years starting on June 26, 2013, with a 30-year extension until June 25, 2142. Medini Land then sold this lease, with the right to develop the land, to Distinctive Resources. At the time, IIB also owned 20% of the shares in Distinctive Resources through Medini Land.
Through a joint venture between IIB and Distinctive Resources, the Iskandar Residences property was developed.
Between 2013 and 2014, the 63 plaintiffs entered into individual SPAs with IIB and Distinctive Resources. The property stated in the SPA was referred to as a “lease” at the time.
In December 2023, one of the plaintiffs noticed that they had not received the strata title to their house and discovered that they had been given a private lease scheme instead of a leasehold title. A leasehold agreement would entitle property owners to outright ownership of the land and a strata title, while holders of units under a private lease scheme do not have ownership rights.
This misunderstanding about the terms of the “lease” in the SPA led to the filing of the case against IIB and Distinctive Resources.
One of the plaintiffs involved in the court case says, “Thousands of us were deceived. We unknowingly paid upfront for a 99-year lease with no protection under the strata management act. How do we sell a property that we don’t own?”
The plaintiffs claim that the SPA they signed was not in accordance with the standard terms of Schedule H of the Housing Development (Control and Licensing) Regulations (HDR) 1989, which pertains to leasehold and freehold properties. They argue that the SPA was modified for the introduction of a private lease scheme, violating the Housing Development (Control and Licensing) Act (HDA) 1966 and HDR 1989, which are key legislations governing housing development in Malaysia.
They further allege that IIB and Distinctive Resources misrepresented the terms of the “lease” in the SPA through their agents, inducing the plaintiffs to believe that they were acquiring outright ownership of the land. This was done through words and marketing materials such as brochures, emails, websites, and videos. The plaintiffs also claim that there were other instances of misrepresentation, some of which continued after the completion of the project.
The plaintiffs are seeking a declaration that the SPA should conform to Schedule H of HDR 1989, the issuance of separate strata titles, and registration of the plaintiffs as owners in the strata titles. They also want Distinctive Resources to be removed as a leasee in the strata titles.
When reached for comment on the ongoing case, IIB declined to comment as the case is still ongoing.
Distinctive Resources denies all claims of misrepresentation, stating that the plaintiffs were represented by lawyers and had legal counsel during the execution of the SPA. They also argue that the SPA clearly stated that the purchase was for a lease, and marketing materials made it clear that it was a leasehold property. They also claim that the SPA is time-barred.
Similarly, Distinctive Resources denies all claims of misrepresentation, stating that the plaintiffs had full knowledge of the terms and conditions of the SPA and did not object to them before the case was filed. They also claim that they have been granted an exemption from complying with HDR 1989 and possess the necessary permits and licenses.
This is an ongoing case, and no decision has been reached by the court yet.
A similar case involving a property development in MIM concluded in 2020 when 107 buyers successfully sued their property developer for misrepresentation and breach of housing development legislation. The court held that the developer had misrepresented the type of title being sold in the SPA and awarded damages for misrepresentation and late delivery of vacant possession.
When asked about the different titles being sold to retail investors, the CEO of Invest Johor, which facilitates investments into Johor, stated that he was unsure how potential purchasers were informed. He also mentioned that the purchasers should provide proof of what was stated in the document.
In response to the claim, UEM Group and Sunway Properties, two major real estate developers in Johor, stated that all their properties in Iskandar Puteri are sold under freehold ownership. However, Pulau Indah Ventures, which is involved in another project in the region, acknowledged that the development follows a private lease scheme.
The plaintiff involved in this ongoing case stressed his concerns about the potential neglect of this private lease issue and his determination to pursue this case against the big state actors. He also mentioned that the group of plaintiffs is reaching out to media, politicians, and regulators for support.