Here is the biggest question when it comes to the ownership of a stratified property: How you can make sure your management works for, and not against you?
Section 15 of the Strata Management Act, 2013 (Act 757) (SMA) was drafted with the intention of ensuring a smooth transition from developers to a Joint Management Body (JMB) or Management Corporation (MC).
It is generally agreed that the current Strata Titles Act, 1985 (Act 318) is difficult to understand whilst the Building & Common Property (Management & Maintenance) Act, 2007 (Act 663) is too shallow and has its set of teething problems.
It is indeed an astronomical problem those who rely on the prevailing laws to determine their rights, benefits, obligations and duties. Many homebuyers complain about the difficulties involved in obtaining from the developer necessary documents required to effectively form a JMB or MC.
The management and maintenance of a subdivided property is the most important factor in ensuring the continued value and enjoyment of all. More assistance to purchasers/owners for the periods mentioned below is needed, especially in light of the confusion that has arisen, especially from the perspective of the purchaser/owner. Issues include:
(a) JMB stage;
(b) what to do before forming the MC;
(c) the transition from developer-controlled to owner-controlled and MC-controlled.
Similarly, purchasers have the right to know from the outset (at the time of purchase) the exact amount of their contributions to the management fund and not rely on the “fair and justifiable” proportion to be made known to them only later, after the developer’s surveyor has done the survey and calculation.
As the amount determined is the actual amount, is it sufficient for the actual maintenance and management of the common property? It is only fair that purchasers know in advance what their contributions entail.
It is not uncommon to find owners stressed out with the rocky transition when the JMC is moving from developer-controlled to owner-controlled, or from JMC (with developer’s part participation) to MC. To make matters worse, the relationship between the developer and the owners has often been strained due to issues like poor management and maintenance, and high contribution levies.
The new SMA addresses these issues from the outset – from the JMB stage, when purchasers/owners assume the power to manage their property.
HBA memorandum dated 12 June 2003
HBA had made numerous recommendations since its existence to all related ministries; one of which was in the form of a written memorandum, as early as 12 June 2003, to Datuk Dr Tan Kee Kwong, the then Deputy Minister of Land & Co-operative Development during the ‘Mesyuarat Pendidikan Untuk Bangunan Bil 3/2003’ which has finally become a reality in the introduction of the SMA legislation.
HBA made the relevant recommendations that could enhance the subdivided property’s management and maintenance whether developer-controlled, JMB or MC-controlled. The current Strata Titles Act does not provide for the transfer of documents that are crucial for the MC in order for them to fulfill its role and obligation.
Similarly, JMB, formed under Act 663, faced problems (transfer of documents) from developer-controlled to be inherited by the duly constituted JMB. At the Select Drafting Committee where HBA was a permanent member, we have emphasised that there must be:
- Documents prepared by the developers for the 1st AGM — namely Notice of AGM; an annual budget detailing the opening balance in the management fund and sinking fund (surplus or deficit); estimated income from all sources, estimated expenditures from the management funds; the total of all contributions to the management fund and sinking fund; a financial statement with details of opening and current balances in the funds; income and expenditures by special levy, etc;
- Documents which the developers must present at the 1st AGM — namely all plans required to obtain a building permit and any amendments to building permit plans; any documents in the developer’s possession that indicate the location of pipes, wires, cables, chutes, ducts or other service facilities; all contracts entered into by or on behalf; the registered strata plans; the names and addresses of contractors, subcontractors and persons who primarily supplied labour or materials to the project; all warranties, manuals, schematic drawings, operating instructions, service guides, manufacturers; list of owners with their parcel lot addresses, parking lot numbers, unit entitlement; names of end-financiers: assignment of voting or other rights by parcel proprietors; etc;
- Documents to be inherited after the 1st AGM — transfer control of money; keys to the administration office; the audited accounts of the maintenance account and the sinking fund account; updated financial statement to be delivered within a stipulated time frame; ensure insurance coverage continues; etc; and
- Budgets and Special Fund — HBA believes that the developer should prepare and disclose the initial budget to ensure accurate estimate of projected operating cost and special fund. Owners should get and deserve the full disclosure by their stratified property developers and the opportunity to develop the budget.
Strata Management Act, 2013
HBA is pleased that our call has been heeded by the lawmakers. In Parliament the Strata Management Act (SMA), which then was at its Bill stage, was strenuously debated by both political divides in the Dewan Rakyat and despite the Minister of Housing and Local Government having been queried on numerous issues, this issue of “Handing over by developers to the JMB” was supported by all the Members of Parliament. It even had the unanimous support of the Honorable Senators in Dewan Negara.
We now produce herewith Section15 which reads, inter alia:
Section 15 – Handing over by developer to the joint management body
1. The developer shall, before the developer’s management period expires —
(a) transfer all balances of moneys in the maintenance account and the sinking fund account, after payment of all the expenditures which have been properly charged to the accounts, to the joint management body;
(b) hand over to the joint management body —
(i) the administration office set up by the developer under paragraph 9(4)(a);
(ii) the audited accounts of the maintenance account and the sinking fund account or, if such accounts have not been audited, the unaudited accounts;
(iii) all the assets of the development area;
(iv) all records relating to and necessary for the maintenance and management of the buildings or lands intended for subdivision into parcels and the common property of the development area; and
(v) all invoices, receipts and payment vouchers in respect of the maintenance account and sinking fund account.
2. If only unaudited accounts have been handed over under subparagraph (1)(b)
(ii), the developer shall, not more than three months after the expiry of the developer’s management period, hand over to the joint management body the audited accounts up to the date of transfer of the balances of moneys referred to in paragraph (1)(a).
3. Without prejudice to the generality of subparagraph (1)(b)(iv), the developer shall deliver to the joint management body copies of all of the following documents:
(a) all approved plans for buildings or lands intended for subdivision into parcels relating to the development area;
(b) any document in the developer’s possession that indicates, as far as practicable, the actual location of any pipe, wire, cable, chute, duct or other facility for the passage or provision of systems or services, if the developer has reason to believe that the pipe, wire, cable, chute, duct or other facility is not located as shown on an approved plan or an approved amended plan;
(c) all contracts entered into by the developer in respect of the maintenance or management of any building or land intended for subdivision into parcels and the common property comprised in the development area;
(d) a copy of the schedule of parcels or the amended schedule of parcels filed with the Commissioner under subsection 6(1) or (2), if applicable, or a copy of the proposed strata plan filed with the Director under the provisions of the Strata Titles Act 1985, if any;
(e) the names and addresses of such contractors, subcontractors and persons who supplied labour or materials to the development area during the construction of any building or land intended for subdivision into parcels and the common property comprised in the development area;
(f) all warranties, manuals, schematic drawings, operating instructions, service guides, manufacturer’s documentation and other similar information in respect of the construction, installation, operation, maintenance, repair and servicing of any common property, including any warranty or information provided to the developer by any person referred to in paragraph (e);
(g) the register of all parcel owners of the buildings or lands intended for subdivision into parcels; and
(h) the original copy of all insurance policies effected under this Act.
4. Any developer who fails to comply with subsection (1), (2) or (3) commits an offence and shall, on conviction, be liable to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both and, in the case of a continuing offence, to a further fine not exceeding five thousand ringgit for every day or part thereof during which the offence continues after conviction.
There is a corresponding Section 55 in the SMA that relates to the same issue from developer-controlled to MC entitled: ‘Handing over of control to Management Corporation’.
The SMA though passed by Parliament in 2012 has since been implemented (June 1, 2015).