A group of 63 people have taken legal action against Iskandar Investment Berhad (IIB) and property developer Distinctive Resources for alleged misrepresentation over the title of property units they purchased in the Johor state’s Medini Iskandar Malaysia (MIM) region some 10 years ago. All 63 are owners or co-owners of the Iskandar Residences development project in MIM and are represented in the case by three individuals.
This is not the first time a lawsuit has been filed by civilians against Malaysian state entities in Johor and real estate developers. A similar case, which concluded in 2020, awarded damages to plaintiffs on the count of misrepresentation and breach of terms and conditions of a sales and purchase agreement (SPA).
IIB is a company owned by the federal government of Malaysia and the state government of Johor, incorporated in 2006 to oversee investments into Iskandar Malaysia, Johor. It focuses on developments in the Iskandar Puteri region. Khazanah Nasional and two of Malaysia’s pension funds are shareholders.
The case is as follows: IIB granted a lease over the land in Johor state’s Iskandar Malaysia region for a term of 99 years starting on June 26, 2013, to its wholly-owned subsidiary, Medini Land. It also has a 30-year extension ending June 25, 2142. Medini Land then sold this lease with a right to develop the land to Distinctive Resources, the developer. IIB also owned 20% of the shares in developer Distinctive Resources up until Dec 18, 2013, through Medini Land.
Through a joint venture between IIB and Distinctive Resources, the property in question, Iskandar Residences, was developed.
Between 2013 and 2014, the 63 plaintiffs entered into respective SPAs with IIB and developer Distinctive Resources. The property in the SPA at that time was referred to as a “lease”.
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In December 2023, the plaintiffs realised that they had been given a private lease scheme instead of a leasehold title after one individual noticed they had yet to receive the strata title to his house. A leasehold agreement entitles owners to outright ownership of the land and would have entitled property owners to a strata title. 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 kicked off the case against IIB and Distinctive Resources.
One of the plaintiffs involved in the ongoing court case says: “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 owner. How do we sell a property that we don’t own?”
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The plaintiff’s claim
The plaintiffs claim that the SPA they originally signed does not follow the standard terms of Schedule H of Housing Development (Control and Licensing) Regulations (HDR) 1989, which concerns leasehold and freehold properties. They say this SPA was modified for the introduction of a private lease scheme.
They argue that this modification violates the Housing (Control and Licensing) Development Act (HDA) 1966 and HDR 1989, key legislations governing housing development in Malaysia.
The plaintiffs further allege that IIB and Distinctive Resources had acted in a way that constitutes misrepresentation by conduct. Through their agents, IIB and Distinctive Resources had represented to the plaintiffs and induced them to believe that they were acquiring outright ownership of the land, rather than a lease. This was done through words and other marketing materials such as brochures, emails, websites and online videos.
The plaintiffs contend that IIB and Distinctive Resources had also engaged in other conduct constituting misrepresentation, some of which continued past the point of the project’s completion.
The plaintiffs request that the courts grant a declaration that the SPA will conform with Schedule H of HDR 1989, issuing a separate strata title and registering the plaintiffs as owners in the strata title. Distinctive Resources should also 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
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IIB’s defence
IIB’s defence is that the plaintiff’s claims are time-barred, as they had brought their action against them more than six years from the date of execution of the SPA.
IIB claims that the plaintiffs had full knowledge of the facts at all times with no objections to the terms and conditions prior to this.
IIB claims that there were no illegal modifications made to the SPA. IIB states that the lease scheme is legitimate and valid, noting that it has been approved in September 2011 by KPKT. It also claims that it received approvals by various authorities including Iskandar Regional Development Authority (IRDA), Economic Planning Unit Johor and others.
IIB denies any allegations of misrepresentation, contending that the plaintiffs have failed to adequately prove that their conduct led the plaintiffs to believe they were acquiring outright ownership rather than a lease. Furthermore, IIB reiterates that the plaintiffs should have or ought to have knowledge based on the SPA terms.
IIB denies all allegations on the grounds set out above, among others.
The Edge Singapore reached out to IIB for a comment on the ongoing case, but the company declined to comment as the case is ongoing.
Distinctive Resources’ defence
Distinctive Resources denies all claims for misrepresentation, contending that the plaintiffs were represented by solicitors and received legal representation leading to the execution of the SPA. Additionally, Distinctive Resources notes that it is expressly stated in the SPA, including in the preamble, clauses and annexures, that the SPA was for the purchase of a lease.
Furthermore, Distinctive Resources states that they did not at any time represent to the plaintiffs that they would obtain freehold title over the parcels or any equivalent and that marketing materials made clear they were purchasing a lease.
Similarly, Distinctive Resources also notes that the claim should be time-barred.
Distinctive Resources contends that the SPA makes clear that they are merely a leasee over the land, with the right to sell leases and that the terms of the private lease scheme were spelt out in the SPA. As such, Distinctive Resources claims that the 63 individuals were at all times aware that it was merely a lease.
Distinctive Resources notes that they have been granted an exemption from complying with HDR 1989 by the Ministry of Housing & Local Government and possess a valid advertising permit and developer’s licence (ADPL).
On these grounds and others, Distinctive Resources asks for the plaintiff’s claims to be dismissed.
This is an ongoing case and the court has not reached its decision yet.
Where’s Medini Iskandar Malaysia? Photo: Google Maps
A similar court case in 2020
This is not the first time that this has happened. In 2018, 107 buyers of another property development in MIM Johor successfully sued their property developer for misrepresentation and for breaching the housing development legislation.
The property development, The Meridin@Medini, is situated on freehold land owned by Iskandar Investment Berhad. Similarly, IIB leased this land to Medini Land for 99 years from Apr 15, 2013, who then sold the lease to Tropika Istimewa, the property developer.
The court held that Tropika Istimewa had committed misrepresentation by selling a lease under the SPA. Furthermore, the court granted a declaration that the SPA was invalid as it was in breach of HDA 1966 and HDR 1989, National Land Code 1965 and Strata Titles Act 1985.
Accordingly, the court awarded damages for misrepresentation and breach of terms and conditions under the SPA and ordered the developer to pay for damages for late delivery of vacant possession.
Different perceptions?
When questioned by The Edge Singapore about the claims over different strata titles sold to retail investors, Natazha Harris, CEO of Invest Johor said he was unsure how potential purchasers or purchasers were communicated to, to lead them to have different perceptions or understandings. Harris was participating in Invest Malaysia, an annual investor conference by the Bursa Malaysia in Johor on Sept 26.
“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,” says Harris. Invest Johor is a state agency set up to facilitate investments into Johor.
“For the purchaser, they will need to come out with some kind of proof about what the document mentioned, so that it will be more fair for me to comment. We have to be fair to all parties,” he adds.
UEM Group and Sunway Properties are two big real estate developers in Johor state. When asked by The Edge Singapore about the property titles sold by their respective groups in the Iskandar Puteri region, a spokesperson for UEM Sunrise says: “We can confirm that all our residential properties in Iskandar Puteri, Johor, are sold under freehold ownership.”
UEM Sunrise is the flagship company for township and property development businesses of UEM Group and Khazanah Nasional. However, Pulau Indah Ventures acknowledged that Affiniti Residences, a joint venture between Khazanah and Temasek Holdings is a private lease scheme.
The plaintiff, who contacted The Edge Singapore about this ongoing court case, explains his relentless pursuit in taking two big state-related actors to court.
“I worry that all the invisible forces would prioritise the other Forest City project first, or totally ignore the private lease screw up, and move on to sell more freehold properties within the Johor-Singapore Special Economic Zone,” he says.
“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 reverted to my cry for help and introduced connected parties to help."
