Investors to sue for back rent

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 capital of Sabah state in eastern Malaysia.

The group of owners, 49 of whom are from Hong Kong, plan to file their complaint against Karambunai Corp Bhd (KCB), which is listed on the Malaysian stock exchange, with the Malaysian Board of Arbitration.

Matt Burden, one of the owners seeking back-payment, bought a 1,500 square foot villa in the development off plan in 2007 for HK$4 million. The deal included a 'lease back' component guaranteeing buyers an annual return of 7 per cent of their purchase price for five years.

Malaysian-listed 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.