Management Corporation - Preparing for an Annual General Meeting (AGM)

If you thought you only have to attend meetings at work, think again, if you are a strata development owner. One important aspect of strata ownership is that by law, annual meetings that have to be convened. An annual general meeting (AGM) is a yearly opportunity for owners to be active in their strata development community. From time to time, the elected Council or Owners may want to have other special meetings to conduct business between the AGMs.

These meetings are called the extra-ordinary meetings. This article refers to the Strata Titles Act, 1985 (STA), where strata titles have been issued to the development. For strata developments which are pending issuance of titles, there is another set of legislation – Building and Common Property (Maintenance and Management) Act, 2007 which has almost the same set up for formation of a body to control and govern the strata development.

First AGM - Get your strata titles first

Unfortunately, there are some purchasers who mistakenly withhold transferring of their strata titles for the wrong reasons. We have come across many committee members of Pro Tem  Committees or Residents’ Association who have inside knowledge of the ‘mismanagement’ of the developer and are dissatisfied with the conditions, whether financial or technical, and believe that by withholding the transfer, the developer/original proprietor would not be able to call for the First Annual General Meeting to end the initial period of the Management Corporation (MC).

This belief is wrong for the following reasons:

In an example, of a strata development with 200 units with equal sizes, lets say one parcel‘s share units is 130, the total share units would be 26000 share units. If the original proprietor owns 30 units (unsold units), its share units would be 3900 share units. The required quota to end the initial period would be only be 5525 or roughly 43 parcels (1/4 X 22100 (26000-3900)). This quota excludes parcels registered under the original proprietor.

As you can see, it only takes around one quarter (1/4) of the total parcels to end the initial period to form the owners’ MC. There are some purchasers, who argued that, since they have paid in full for the purchase and have been contributing towards the common fund, they should be allowed to attend the general meetings.

Unfortunately, the law requires that only registered parcel proprietors be allowed to attend these meetings and have a say in how their strata development is run. Some meeting organizers may allow non-registered owners to attend the meetings but without voting or speaking abilities.

STA S.4. -  Interpretation.
"proprietor" refers to a parcel proprietor, that is to say, a person or body for the time being registered as the proprietor of a parcel, as well as to the proprietor of a provisional block, that is to say, a person or body for the time being registered as the proprietor of a provisional block unless expressly provided otherwise;

How important is the First Annual General Meeting?

The Strata Titles Act, 1985 (Act) provides that it is the duty of the original proprietor/developer to convene the First Annual General Meeting within a month of achieving the quota of transferred strata titles.

STA S.4.  Interpretation.

"initial period", in relation to a management corporation, means the period commencing on the day on which the management corporation is formed and ending on the day on which there are proprietors, excluding the proprietor of the lot who is registered as the proprietor of a parcel or parcels or a provisional block or blocks the sum of whose share units is at least one-quarter of the aggregate share units;

If the original proprietor fails to do so, he shall be guilty of an offence and liable on conviction to a fine not exceeding twenty-five thousand ringgit (RM25,000) and to a further fine not exceeding two thousand ringgit (RM2,000) for each day the offence continues to be committed.  The developer is therefore bound by law to convene a meeting whether or not the owners are ready to takeover management and maintenance of the strata development so long as the pre-requisite requirements have been achieved..

The agenda for the First Annual General Meeting is spelled out in the Act as well. The agenda for the first annual general meeting shall include the following matters:

• to decide whether to confirm, vary or extend insurances effected by the management corporation;
• to decide whether to confirm or vary any amounts determined as contributions to the management fund;
• to determine the portion of contribution to the management fund to be paid into the special account to be maintained under section 46;
• to determine the number of members of the council and to elect the council where there are more than three proprietors; and
• to decide whether to amend, add to or repeal the bylaws in force immediately before the holding of the meeting.

These are serious matters which will affect the unit owners and every effort should be taken by the unit owners to attend this meeting. In this meeting, the number of council members will be determined and can only be changed at the next general meeting. These are your fellow owners who would be representing you for the next year or so. Efforts should be made to get to know them.

The first meeting would also decide on whether or not the contributions to the management fund should be varied. Varying, normally would mean an increase as the council members would have to take into consideration, fees or salaries to pay to a management company or for staff employed, replacements or repair works to the common property now that the building has aged or due to neglect, etc.

It is at this meeting where special resolutions are passed to add or amend the By-Law of the strata development. By-laws are for regulating the control, management, administration, use and enjoyment of the strata development. The Act provides a model By-Law, however this is insufficient for most strata developments which have been operating under other governing documents like the Deed of Mutual Covenants, House Rules etc. The MC may by special resolution make additional by-laws, or make amendments to such additional by-laws, not inconsistent with the by-laws set out in the Third Schedule.

All of the governing documents are tools for the Corporation to run smoothly and for the owners to live peacefully within the community. However, it is also not practical for the strata development to create a working By-Law in one day. The By-Law has to be carefully developed / adopted from other documents. In reality, strata property buyers have to prepare in advance before the first annual general meeting is called.

The National House Buyers Association (HBA) has disseminated information and guided / provided general advice to several strata development owners to prepare for transition from developer MC to owners’ MC. Interested parties can approach HBA by appointment on the days the Association’s Advice Centre is opened to the public. Check out www.hba.org.my for more information or write to info@hba.org.my for prior appointments which are normally held on Saturdays when our volunteers are available to do public service.

Business at General Meetings
 
For meetings other than the first annual general meeting, the agenda is normally set out in the by-laws. If not, the Council will normally follow a fairly standard agenda which includes:

The Act and the Corporation` By-laws will determine a parcel proprietor`s voting rights. First, if title to the unit is mortgaged, the end-financier may want to attend the meeting and vote, the owner cannot vote. This rarely happens but the Act requires that the end-financier be informed of this meeting and borrower should get permission to be appointed as proxy to attend the meeting. Second, if a registered proprietor owes money to the Corporation before the meeting, neither the owner nor any mortgagee on that unit can vote. Owners need to understand that they must be current with their contributions and other financial obligations to the Corporation to enable them to vote. They must pay any outstanding amounts the day before the meeting.

Preparation for parcel owners

Just as the Council prepares, so must owners prepare for the AGM. Consider the following steps:

The success of a strata MC can only come from active participation from its members. Whether one participates in the meetings or volunteers to be a council member, strata owners should know that major decisions are made at these meetings and should strive to attend each and every meeting called. The spirit of caring for others in the community can only improve one’s life and not make it worse.