Once the dust has settled, and the Joint Management Bodies (JMB) or Management Corporations (MC) have been duly formed and owners elected as Committee or Council members, the next daunting task for the Committee or Council is to appoint suitable person/s or company to perform the management duties.
Often, faced with limited funds new JMBs or MCs (‘Corporation’) decide to hire owners or council members to perform the duties required of the Corporations. After all, these individuals have an interest in the building, have been long time residents to know about the history of the development and are likely to do a good job. However, there are several considerations that should be addressed before the corporation decides on whom to hire to manage their buildings.
Who can appoint managing agents
For JMBs, the power to arrange and secure the services of any person or agent to undertake the maintenance and management of the common property of the building lies with the Body but the elected Committee may perform this task unless there is a restriction imposed or direction given by the Body at a general meeting. (Refer to - Building and Common Property (Management & Maintenance Act 2007 Sections 8(2)(b & 11 (1).
Whereas, for MCs, the elected Council has the power to employ agents and servants, for and on behalf of the MC. (Refer to: Strata Titles Act 1985 Second Schedule Section 6).
The Commissioners of Building (COB) has also got the power to appoint managing agents in both JMBs and MCs if the COB is satisfied that the maintenance and management of the building is not carried out satisfactorily by the developer, JMB or MC.
Why does the building need to be managed at all?
A building will not manage itself, and there is much to be done if the members of the corporation are to enjoy the services to be provided and the building kept in good repair. Insurance needs to be put in place and renewed on time, bills need to be paid and services maintained and local authority and legal requirements must be met.
No matter who manages the building, there are certain tasks to be carried out; there is little variation in these whether the building is a low-cost flat, a luxurious condominium or a commercial strata development. Whoever is responsible for the management of the building - whether it is the developer, JMB or MC will have significant duties and responsibilities under the contracts and under the respective legislation.
In considering the practical ramifications of appointing a professional managing company or an in-house management team, it is important that members of the Corporations understands the legal implications so that they can make better informed decisions.
a) Self managed by Committee / Council Members
Newly formed Corporations sometimes adopt self-management to cut down on management fees or they are ‘fed-up’ with bad service rendered by previous managers. However in most cases, self-managed corporations are not in the best interest for anyone involved. Management is a full time affair and new council members may not have the essential infrastructure to deal with the management of strata property efficiently and expeditiously.
To start with, there are a lot of legalities involved in most of the aspects of managing a strata property. Whereas a management company will understand these legalities and their rights both in terms of unit owners and staff, it takes a lot of work for individuals to become familiar with the fine print; and any mistakes may end up costing the corporation more.
Factors to consider:
- Size and type of development.
- Profile of members of the Committee / Council including their educational or professional background and personal traits.
- Knowledgeable office-bearers prepared to voluntarily dedicate much of their time.
- Long term – whether dedicated council members are able to provide their services for long term.
b) Employment of in-house management staff
By employing individuals to be the staff for the Corporation, the Corporation enters into an employer-employee relationship. This is a different situation than where the property management company directly employs individuals to provide services for the Corporation.
As an employer, the corporation has obligations to the government and the employee including the requirement to withhold statutory deductions, such as income tax and contributions to the Employees Provident Fund and Social Security Organisation.
The corporation also has obligations to the employee under the Employment Standards Act (i.e. payment of wages, providing a statement of wages and maintaining employee records). Even after the employment relationship has ended, the strata corporation may be liable to the employee for further compensation, such as holiday pay and overtime or even termination / retrenchment benefits.
Accordingly, it is important for the corporation to keep a detailed record of the employment relationship, the hours worked, holidays taken, etc. in order to comply with the Employment Act and to have adequate records in the event there is a dispute between the employee and the corporation.
The Corporation can be held vicariously liable to third parties for the acts of its employees, including statutory violations, breaches of contract and negligence. Accordingly, great care should be taken in selecting and supervising employees. In light of the foregoing, a corporation should ensure that it has appropriate insurance coverage to address all potential liabilities
Factors to consider:
- who can be hired;
- a written contract of employment; and
- the potential liabilities of the corporation that will result from the employment relationship.
Engaging a property management company
If the Corporation’s priority is practicality and efficiency, which no doubt new JMBs and MCs should consider, it would be better off engaging a professional management company.
There are many benefits of professional management, which must be balanced against the fees which members of corporations will have to bear. Professional agents will bring an organize approach to the estimation, calculation, collection and dissemination of funding, the timetables for repairs and inspection and supervision of works.
Their assessment of what must be done, and when, will be independent of private interests and preferences and based solely upon their duty to all members of the corporation to keep the buildings in good repair.
The process of collecting in funds and the responsibility for taking steps to recover unpaid charges will be removed from the individual committee or council members of the corporation.
Under Section 21 of the Valuers, Appraisers and Estate Agents Act, 1981, only authorized registered valuers, appraisers and real estate agents are allowed to manage a property on behalf of the owner for a fee. If the agent is a member of professional association professional indemnity insurance will be an automatic condition of membership. However, the existence of the cover, and its extent, must be checked. Where a JMB / MC delegates tasks to a managing agent the JMB / MC remain legally answerable for any neglect, omission or mistake by the agent and must be sure that the agent has the means for compensation or damages. Considering that lives and multi-million dollar property are at sake, can you afford not to?
Factors to consider:
- Registered property managers.
||The National House Buyers Association (HBA) is a voluntary, non-governmental organization manned by unpaid volunteers. For more information, check out their website at http://www.hba.org.my|