Articles


An overview about the strata management in Malaysia

By

Bhavani Vadivelu (Head of Litigation Department)
Nuriahtun Maria Samad (Senior Associate)
Fadhil Hazmi Mohd (Associate)
Mayoori G Pannir Chelvam (Associate)


Hakem Arabi & Associates

Introduction



Strata management simply means managing and maintaining common property, common area and common facility in stratified development. A clear definition of Common Property is illustrated in Section 4 of the Strata Titles Act 1985 (Act 318) (hereinafter knows as STA 1985) and in Section 2 of the Strata Management Act 2013& Regulations (Act 757) as a piece of land in the strata which is shared by two or more parcel owners and which is not inclusive of any parcel subdivision particularly1. As for the other definition of Common area and facilities it is normally defined by the respective developers in the Sales & Purchase Agreement.

These developments include residential and mixed development. A mixed development means a development which comprises not only residential but commercial development such as shopping mall, hotel and etc.


Strata Titles Act 1985 (Act 318)



Rekindling the history on strata management in Malaysia, prior to 2007 purchasers or parcel owners were totally in the dark as they had no clue about strata management with regards to their own building. This was because the developers were in full control of the respective buildings. Why is it so? This is because prior to 2007, the relevant provision of law regulating strata management was under the STA 1985. Under this Act until the developer delivers individual strata title to each parcel owners, they remain in total control of the building. This also goes without saying that the management and maintenance of the building are in the hands of the developer during this period of time.2

What does the developer do under the Act 318? The developer has a contractual obligation to collect whereby the Purchasers on the other hand have the same obligation to pay the service charges, sinking fund charges and statutory outgoings charges from the purchasers for the upkeep of the building. All these monies are held by the developer in an account known as building maintenance fund.

How does the developer collect the charges from the purchasers? The developer appoints a management company to collect the monies, and over and above this, the same management company is given the power to assist the developer to manage and maintain the common area, common property and common facilities of the building. The Purchasers are always left clueless as to how the process of appointing the management companies or in carrying out their duties respectively. The purchasers were always at the mercy of the developer in managing and maintaining their own building.

Due to this, innumerable problems and headaches for the purchasers arose in various manners due to the developer’s and management action. The main problem is when the developers fail to deliver the strata title to the purchasers in a timely manner, causing a tremendous delay and in not keeping account of the monies collected on behalf of the purchasers for the management and maintenance of the building.

There was a plethora of misappropriation cases by the developers and their management companies. It is however a norm that even today some of the older development is yet to be issued with strata titles. This is simply because the developers prior to 2007 take the chance to hide behind the STA 1985. One has to wonder whether the control and manipulation by the developer was the reason for the delay in the delivering the strata title to the purchasers.


Building and Common Property (Maintenance and Management) Act 2007 (Act 663)



The Government of Malaysia led by the then former Prime Minister Abdullah Ahmad Badawi realised that the purchasers of high-rise buildings needed the protection and guidance of the law against the sneaky developers. In 2007, the Act 663 was passed and came into force.

What was so special about this Act?Well for the first time in Malaysia, the law introduced an interim legal body known as Joint Management Body (“JMB”)3 with the thought that it will solve the issues of the Developers asserting too much authority over a particular building. What does this body particularly do? This body is given the rights and powers to manage and maintain the common area, common property and common facilities of its own building together with the developer until all the purchasers of that building has be issued with strata titles.4 The duties and powers of the JMB has been spelt out specifically in the Act.

The next important question that arises is whether the Act 663 face any problem after its enforcement? The answer is YES! To begin with, the purchasers were inexperienced to run the show and because the developer was part of the JMB, there lacked the co-operation between both the purchasers who are elected to be in the Joint Management Committee (JMC) and the developer. This made the task difficult for the JMC to manage and maintain their building.

Both the purchasers and the developers were also disgruntled with the voting rights provision which only allowed all parties to have only one vote to be used in any Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) irrespective of how many units an individual owns or developer owns.

The JMC whilst has the task of managing and maintaining the building on behalf of all the purchasers as provided by the Act 663, instead of taking care of the building, the JMC decided to take care of themselves monetarily thus “little napoleons” begun to rule. The Act 663 was later on found to be not comprehensive enough to tackle the strata management issue forcing it to be repealed some years later.


Strata Management Act 2013 (Act 757) & Regulations



This Act came into force in June 2015 and had improvised the short comings of Act 663. Together with this Act there was also Strata Management (Maintenance and Management) Regulations 2015 passed. Though this Act was somewhat better compared to the Act 663, the question that arises now “is the maintenance and management of the common area, common property and common facilities smooth sailing”? The answer is NO.

The continuing problems between the developers and the purchasers never ends. Although the new Act and its Regulations is in place with regards strata management, the developer in most development seemed to breach the provisions of Act 757 causing the rise of litigation matters in court between the purchasers and developers.

Parcel owners or registered proprietors of the parcels who continue to default in the payment of service charges, sinking funds charges and statutory charges causes difficulties for the JMB or the Management Corporation (MC) to upkeep the building in good condition. What is a MC? A MC is a corporation established upon completion of issuance of Strata whereby at least 25% of the Parcel Owners have transferred the Strata Title into their respective names.

Parcel owners or registered proprietors of the parcels who breach the Deed of Mutual Covenants (DMC) with regards the common area, common property and common facilities, by laws under the Regulations or house rules is another major hindrance for the JMB or the MC to perform their duties expeditiously. The issue of “little napoleons” still lingers on under Act 757.


CONCLUSION



Now, high-rise or stratified development is popular in Malaysia. However, the need still arise for a proper guidelines to be laid out under the law whereby with strict enforcement by the authority such as Commissioner of Building (COB) and compliance by all parties involved to the provisions of the Act 757 for the strata management to be improved.



Citation



1 Strata Plus, “ What is Common Property” https://www.strataplus.com.au/resource/common-property/ accessed on 30 April 2020

2 S Bhag, “Flats, Condos and Apartments: The Star” (The Star Online,20 April 2017) https://www.thestar.com.my/opinion/columnists/law-for-everyone/2017/04/20/flats-condos-and-apartments-there-are-three-clearly-defined-periods-of-management-for-the-maintenanc accessed on 28th April 2020

3 Laws & Legal, JMB Malaysia, “Maintenance of a building”, http://jmbmalaysia.org/laws-legals/ accessed on 28 April 2020

4 Joseph W, “What is Joint Management Body (JMB) or Management Corporation (MC?):Property Management News(27 September 2013)” http://www.gmssolutions.com.my/blog/what-is-joint-management-body-jmb-or- management-corporation-mc/ accessed on 28 April 2020