| By South China Morning Post | ||
| Thursday, 26 April 2012 15:50 | ||
HONG KONG/KOTA KINABALU (April 26): Disgruntled owners of villas in a luxury development in Malaysia — half of whom are from Hong Kong — are preparing to take legal action against one of the country's largest developers, claiming it is nearly one year in arrears on "lease back" rental payments due to them.
The action is being proposed by about 100 owners of villas in the Nexus Residence development in Kota Kinabalu.
The group of owners, 49 of whom are from Hong Kong, plan to file their complaint against Karambunai Corp Bhd with the Malaysian Board of Arbitration.
Matt Burden, one of the owners seeking back-payment, bought a 1,500 sq ft villa in the development off plan in 2007 for HK$4 million (RM1.58 million). The deal included a "lease back" component guaranteeing buyers an annual return of 7% of their purchase price for five years.
Karambunai came to Hong Kong in 2006 to market the first phase of the beachfront luxury residential project at the Mandarin Oriental Hotel. The project was eventually completed in 2009 and all 243 villas have been sold.
The buyers who opted for the "lease back" arrangement agreed to allow the project's management firm, Nexus Bay Resort Karambunai (NBRK), to rent out their villas to tourists, mostly from Europe, Burden said. Under the agreement, owners were also entitled to occupy their properties for 20 days per year at no charge.
"The first year [2009] was quite good," Burden said. "Then in 2010, payments became less regular, although we still received feedback from the resort that we would be paid the following month. But in 2011, there were no payments and no correspondence either."
The affected owners banded together last month to establish the Nexus Property Owners Association (NPOA), as the first step in pursuing legal action to recover the rental income they claim is owed to them by KCB.
Alvin Leong, a partner at the law firm Shelley Yap in Kota Kinabalu, told the South China Morning Post that the firm was now in the process of starting arbitration on behalf of more than 100 Nexus Residence owners for non-payment of rents.
"The owners are from all over the world and most are from Hong Kong," he said.
Other buyers joining the action come from Britain, the United States, South Africa and Singapore.
Leong said the firm would send Karambunai a letter on behalf of the owners, demanding back payment of their outstanding rent. If the dispute could not be settled within 30 days, according to the hotel sublease agreement signed between the owners and NBRK, the matter had to be settled by the Board of Arbitration in Malaysia, Leong said.
Burden estimated KCB owed the group a total of some US$6 million (RM18.36 million) as the majority had bought their villas on "lease back" arrangements.
Another Nexus Residence owner, Danny Danielis, who bought his villa through the marketing agent Colliers International in Hong Kong, said it would be financially difficult for individual owners to bring legal action against the developer. "Bringing this group together, we will be able to share the legal costs," he said.
Karambunai and NBRK, through its lawyers Lim Guan Sing & Co, acknowledged in an email sent to the South China Morning Post that a suit was initiated by a property purchaser "over the same subject matter, viz, alleged outstanding rentals arising out of the leaseback arrangement".
The email added that the case was ordered by the High Court of Kota Kinabalu, Sabah, on April 4, 2012, to be stayed pending reference to arbitration.
"There has been no appeal against that decision," it said. "NBRK takes the stand that millions of dollars have been paid in rental and any comments on the disputed sums should await the outcome of arbitration with cost awarded in favour of NBRK."
Karambunai is substantially engaged in property development and the tourism industry in Sabah and Borneo. It owns 1,215 hectares of land across the country, and has net tangible assets of more than RM800 million.
Property consultant Colliers International declined to comment with legal action pending, but it said due diligence would be conducted whenever the firm offered overseas projects for sale in Hong Kong.
"We will follow the industry standard in conducting due diligence. Works include site visits, company searches, meetings with the developers' directors or shareholders, financial position, construction progress and finished standards," a spokeswoman at Colliers International said.
A Consumer Council spokeswoman said complaints by buyers of overseas property for investment purposes would not be handled by the council.
"We only address complaints by property end-users," she said. — SCMP
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