Strata Living: Plugging the loopholes

Strata Living: Plugging the loopholes

At a recent Real Estate and Housing Developers Association (REHDA) seminar, several industry experts discussed on how the Act has affected strata management and what must be done to improve the quality of strata living in Malaysia.

Moderated by Chris Tan, Founder & Managing Partner of Chur Associates, the panel consisted of Tan Sri Datuk Eddy Chen, President of Malaysia Shopping Malls Association & BMAM; Roshan Karthi, Senior Legal Officer at Strata Management Tribunal and Ngian Siew Siong, former MD of Sunway City Bhd and past chairman of REHDA Selangor.

The discussion’s key takeaways included:

Management bodies must know their stuff

The Strata Management Tribunal (SMT) was established to provide feasible solutions for disputes on the failure to perform a function, duty or power imposed by SMA 2013. Sharing some statistics, Roshan said that as to date, the number of cases that have been filed equaled 966 and of these, 435 have been settled.

However, Roshan revealed that there have been cases of abuse by recalcitrant strata owners, who manipulate the by-laws in the SMA 2013 to work to their advantage.

Pursuant to Section 107 (SMA 2013), a purchaser is entitled to file a property defect claim to the SMT. Nonetheless, if the unit is residential and falls under the Housing Development (Control and Licensing) Act 1966 (HDA), any claim for defects under the purview of the HDA shall fall under the Tribunal of Homebuyer Claim (THC).

As the SMT has a much higher pecuniary jurisdiction at RM250,000 as compared to the THC’s RM50,000; an unscrupulous few will purposely delay their claim to a period exceeding 12 months, as they are then able to file under the SMT and obtain higher reimbursements.

Roshan urged committee members of Management Corporations (MCs) and Joint Management Bodies (JMBs) to familiarise themselves with both the Acts to ensure that they do fall victim to these profit-seeking individuals.

Ngian echoes Roshan’s sentiment and encourages committee members to attend available seminars and courses held by Commissioner of Buildings (COBs) in their respective areas. Another tip is to acquaint themselves with REHDA’s handbook detailing the obligations, duties and rights of management bodies.

Are some of the laws too harsh?

Touching on the effectiveness of the SMA 2013, Roshan personally believes that the Act, even though it addresses the limitation of the previous one, still requires a few more improvements.

The main issue is the management body’s liability; where members risk personal liability actions. MCs and JMBs not only have to deal with many filing requirements but an oversight could result in a penalty of RM250,000 or a 3-year jail term or both. A hefty price to pay for a voluntary duty, most will say.

Case in point, Roshan revealed that the liability clause has received much backlash from strata owners who have voiced out that it is unfair to punish them when they are already doing voluntary work.

Many MCs and JMBs have in fact sent in proposals to the Urban Wellbeing, Housing and Local Government Ministry to abolish the liability clause, a move which is supported by Roshan as he believes that it will encourage more strata owners to participate in the management of their buildings.

Another case is the Common Property Defects Account, where developers must pay a deposit of 5% of the estimated construction cost or RM 50,000; whichever is higher to the COBs. According to him, developers are actually already bound by the Act to ensure that their projects are free from defects. He feels that the deposit is redundant as it only serves to financially squeezed developers.

Most will be glad to know that there have been a few proposals submitted to the ministry by various stakeholders for certain amendments to improve the act. They include members of the SMT themselves as well as the National House Buyers Association (HBA).

Incorporating additional House Rules 

Prior to the SMA 2013, strata owners are required to enter into a Deed of Mutual Covenant (DMC) or by its other name, ‘House Rules’. The DMC is an agreement of mutual undertaking between the developer and the purchaser, which is done simultaneously upon the signing of the Sales and Purchase Agreement (SPA).

As the new Act now prescribes by-laws that function as the house rules, it begs the questions – is the DMC needed? And what if developers wish to implement additional house rules?

Additional rules may include safety and security issues, the keeping of pets or guests’ freedom in utilizing Limited Common Properties.

According to Ngian, a developer may during the developer management period, make additional or supplementary by-laws, provided that they do not contradict with the by-laws prescribed under Section 150 of the Act. These could then be adopted through a special resolution by the JMB.

How to deal with bad paymasters

The case of strata owners defaulting maintenance fees is still the largest thorn in the side of most management bodies.

Under the new Act, defaulters are required to pay the amount owed within 14 days of being asked to in writing by the MC. Failure to do so will result in interest being charged on the amount owed at 10% per annum calculated on a daily basis.

The prescribed by-laws also empower the management body to cease any electronic access cards and usage of the common facilities for owners who have defaulted in their payment. MCs are also allowed to display a defaulters’ list showing the amounts owed on notice boards in the development.

However, Chris warns that the committee members must be careful in its execution and consider the possibility of defamation issues as the information displayed may be protected under the Personal Data Protection Act 2010. Even if they feel it is called for, MCs are prohibited from displaying slanderous statements such as “Cheaters”, “Free-loaders”, or “Wanted!”.

MCs may select to take further action on strata owners who still turn a blind eye towards outstanding service charges, namely by visiting the COB to obtain a warrant that allows MCs to rescind the defaulter’s moveable property and auction it off.

The problem that crops up here, however, is that in most cases, the defaulter’s property does not belong to him and are on hire-purchase instead such as television sets and refrigerators.

Besides that, if the strata owner is bankrupt, the removable property belongs to the Director General of Insolvency. In dealing with the many layers of the whole process, MCs will end up wasting a lot of time and spending an even bigger sum of money than what was owed by the strata owner in the first place.

Thus, Roshan suggests MCs to file a summons or a claim in the SMT or in a court of competent jurisdiction for the recovery of said sum instead of wasting time on a warrant.

The filing fee for a claim is RM100, which is good news for MCs that are in a financial constraint and have a long list of owners who have defaulted in their payments.

Embracing Community Living – The need for education

When you sign a strata contract, you are agreeing to be part of a community – a concept which is not embraced by many as clearly shown by owners’ lack of participation in management and the perennial problem of many owners not paying their service charges.

Commenting on the apathetic attitude of many strata residents, Chris says that education is the most important aspect in fine-tuning peoples’ mindset and attitude towards living harmoniously in strata developments. As he puts it, community living is not something new. For years, living in kampungs and even tamans have been harmonious and governed by the voluntary “Rukun Tetangga” as a mean of self-help and cross guarding for community living.

Chris feels that education should start young and community living must be inculcated in schools as part of civic education. A subject with the right framework will go a long way in teaching the younger generation about the responsibilities and importance of participation in a community.

Tan Sri Datuk Eddy Chen, President of Malaysia Shopping Malls Association & Building Managers Association of Malaysia (BMAM) added that developers must play their part in educating  owners in relation to strata living. He feels that all developers should create a purchaser manual highlighting the ‘house’ do’s and don’ts. When a guide is established, there will be a higher probability for tenants to be more responsible in keeping the common property clean and well-maintained.

As shared by Ngian, one of the seats in the JMB is reserved for the developer. Hence, developers should take this opportunity to elect and place someone who will not only make a difference in addressing management issues but also competent enough to advise the property managers on related matters.

In A Nutshell

The management and maintenance of strata properties have become important issues in an era where land has become scarce and expensive. The management of strata in Malaysia has gone through various amendments since it was first introduced in 1985 and without a doubt, there will always be updates in the law.

A legal mechanism is not enough for prosperous strata living though; the ‘human factor’, which provides for self-management of strata buildings is very much vital as well.

This article was first published in the iProperty.com Malaysia July 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine.  Better yet, order a discounted subscription by putting in your details in the form below!

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