A corporation refers to a body corporate that engages in the management and administration of the common areas found within a development. By provision of the law, all projects that are developed as sectional property are mandated to form a corporation. As a prerequisite, an application for the registration of a corporation is made in tandem with the registration of a sectional plan. This serves to ensure that the registration of a sectional plan and issuance of certificate of title or certificate of lease to the respective unit owners results in the automatic formation of a corporation. It is therefore upon the Registrar to register the corporation leading to its formation.
The importance of having a corporation formed immediately after registering a sectional plan is to ensure that proprietors of various developments are not left susceptible to the ills and shrewd mannerisms of management companies. Management companies tend not to operate within the confines of the law often to the disadvantage of a unit owner.
Regardless of the automated process of registering a corporation, certain instances arise where a sectional plan is registered without the registration of a corporation. An example would be the requirement of long term leases to be converted into sectional units as provided for by Regulation 18 of the Sectional Properties Regulations 2020. Upon their conversion, the need for the formation and registration of a corporation would arise. Long term lease developments that are susceptible to this provision are with respect to:
(a)Developments where all the units have been transferred to their respective owners whilst reversionary interest of the common areas have been held in trust for the owners as noted on the title.
(b)Developments where all the units have been transferred to the respective owners and reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for the owners
(c)Developments where part of the units have been transferred to the respective owners and the reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for the owners.
Reversionary interest refers to the right to resume ownership of land (property) subject to the fulfilment of certain conditions. Thus where property under long-term leases or common areas is held in trust on behalf of the unit owners whether by written agreement or as indicated in the title, the same would qualify for conversion from long term leases to sectional property leading to the formation of a corporation. it therefore follows that once conversion takes places, the management company in respect of long-term leases that is the subject of conversion shall be required to transfer all its assets and liabilities to the corporation within a period of one year from the date of its registration.
Despite the above provision, certain long-term lease developments are exempted from the process of conversion therefore not requiring the formation of a corporation. These include:
(a)Where it is expressly stated that reversionary interest belongs to the developer or lessor or management company and not as trustee.
(b)Where the property comprises of large mixed-use development and phase development where it is stated by written agreement that reversion shall be retained by the developer or the management company.
(c)Where there exist projects of strategic national importance, substantial transactions and special economic zones which by their nature renders it impractical to relinquish reversionary interest.
Registration process
The registration process would entail the following:
(a)Unit owners of a particular development may apply for its registration by using Form SP 7 which lists out all the respective unit owners applying for its registration.
(b)The application is lodged with the Registrar for registration.
(c)The Registrar issues a certificate of corporation as represented by Form SP signifying the formation of a corporation.
