Buyers Take Iskandar Investment Berhad Court Over Spa Related Dispute
A legal battle has been initiated by a group of 63 individuals against Iskandar Investment Berhad (IIB) and Distinctive Resources, a property developer, for alleged misrepresentation and breach of terms in the Johor state’s Medini Iskandar Malaysia (MIM) region, a decade ago. The plaintiffs, represented by three individuals, are all owners or co-owners of the Iskandar Residences development project in MIM. This is not the first case in which civilians have sued state entities and real estate developers in Johor. In a similar case that concluded in 2020, damages were awarded to the plaintiffs for misrepresentation and breach of the sales and purchase agreement (SPA).
IIB, a company jointly owned by the Malaysian federal government and Johor state government, was incorporated in 2006 to oversee investments in Iskandar Malaysia. It focuses on developments in the Iskandar Puteri region and has Khazanah Nasional and two of Malaysia’s pension funds as shareholders. According to court documents, IIB granted a 99-year lease of land in the Iskandar Malaysia region to its wholly-owned subsidiary, Medini Land, in June 2013, with a 30-year extension until 2142. Medini Land then sold this lease, with the right to develop the land, to Distinctive Resources. IIB also previously owned a 20% stake in Distinctive Resources but sold it on Dec 18, 2013, 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 respective SPAs with IIB and Distinctive Resources. However, in December 2023, they discovered that they had been misled and were not given a leasehold title as promised in the SPA, but a private lease scheme instead. This meant that they did not have ownership rights to the land and could not obtain a strata title. This discovery prompted the legal action against IIB and Distinctive Resources. The plaintiffs claim that the SPA was modified without their knowledge to include the private lease scheme, which violates the Housing (Control and Licensing) Development Act (HDA) 1966 and Housing Development (Control and Licensing) Regulations (HDR) 1989, the key housing development legislations in Malaysia.
Furthermore, the plaintiffs allege that IIB and Distinctive Resources misrepresented themselves and induced the plaintiffs to believe that they were purchasing outright ownership of the land, rather than a lease. This was done through marketing materials such as brochures, emails, websites, and videos. The plaintiffs are seeking a declaration that the SPA should conform to the standard terms set out in Schedule H of HDR 1989, the issuance of a separate strata title, and their registration as owners in the strata title. They also request that Distinctive Resources be removed as a leaseholder in the strata titles. When approached for comment, IIB declined as the case is ongoing.
Distinctive Resources, on the other hand, denies all claims of misrepresentation and maintains that the plaintiffs were represented by solicitors and received legal advice before executing the SPA. The company points out that the SPA clearly states that the purchase was for a lease, and marketing materials also made this clear. Additionally, Distinctive Resources argues that the claim is time-barred, meaning that it has been brought after the stipulated time limit. They also note that they have received approvals from relevant authorities, including the Ministry of Housing and Local Government, for their private lease scheme.
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A similar court case in 2020 saw 107 buyers of another property development in MIM Johor successfully suing the property developer for misrepresentation and breaching housing development legislations. The court declared the SPA invalid and awarded damages for misrepresentation, breach of terms, and late delivery of vacant possession. When asked by about the different strata titles sold to retail investors, a state agency set up to facilitate investments into Johor, stated that they were unsure how potential purchasers or purchasers were communicated to, to lead them to have different perceptions or understandings. They also stated that purchasers should be able to provide evidence of the misunderstanding, and all parties should be treated fairly.
UEM Group and Sunway Properties, two major real estate developers in Johor state, confirmed that their properties in the Iskandar Puteri region were sold under freehold ownership. However, Pulau Indah Ventures, which is a joint venture between Khazanah and Temasek Holdings, acknowledged that Affiniti Residences is under a private lease scheme. The plaintiff, who is one of the 63 individuals involved in the ongoing court case, expresses concern over the potential neglect of the private lease scheme in favor of the Forest City project in the Johor-Singapore Special Economic Zone. He also laments the lack of support from the authorities, which has led them to seek help from the media, politicians, and regulators. The court has yet to reach a decision on the case.