To ensure that your condominium complex is in good condition, everyone needs to chip in and pay fees. But what happens when a unit owner fails to do so?
1. How many types of maintenance fees are there?
Condominiums are considered as strata properties, developments or schemes where buildings or land are carved out into different lots or ‘parcels’. Under the Strata Management Act 2013 (SMA), the management bodies of the condominium need to provide proper maintenance and management for the buildings and common property, as well as other related matters.
To achieve this, each condominium unit owner will need to pay fees to these management bodies. The two typical fees are:
1. Service charge
Monthly payments for maintaining common facilities and common property in the development such as swimming pools, elevators, and security services. Also known as maintenance fee.
2. Sinking fund
A reserve fund collected from the strata owner for future expenditure. Examples include the painting of the facade, refurbishment works, or replacement of fixtures.
2. How a condominium maintenance fee is calculated?
To derive the share units in a strata scheme, there is a standard formula under the Fourth Schedule of the Strata Titles Rules 2015. It is as the following:
Operating expenditure / Total share units in condominium development = Maintenance fee to be paid
A unitholder can request a review from the commissioner if he is unhappy with the amount of the maintenance fees determined by the developer or JMB. The commissioner will then determine or instruct the JMB or developer to appoint a property manager to recommend an amount for the maintenance fees.
For more investing tips and tricks, drop by our Mid Valley Home & Property Fair from 17-20 January 2020. Sr Faizal Fuad will be speaking on the importance of service charge & sinking fund in strata living. If you pre-register, you will be entitled to a free 2019 Property Market Report.
3. Do I really need to pay the maintenance fees?
Yes, a unit owner needs to pay for maintenance fees. Section 12(5) of the Strata Management Act 2013 states this. As a unit purchaser, you will have to pay the management within 14 days of receiving a notice from them. If you fail to do so, you will be legally defined as a defaulter. This is as stated in the Strata Management (Maintenance and Management) Regulations 2015 (SMR 2015).
Under Regulation 6(2) of SMR 2015, the management is also allowed to charge you interest on the amount owed, starting from the end of the 14 days until the date you pay up, at 10% per annum or any rate that the management decides.
4. What happens if you don’t pay your condominium maintenance fees?
The management body can exercise its power if you fail to pay the maintenance fees. The JMB can sue you in court or the Strata Management Tribunal if you fail to pay the outstanding charges within 14 days of being served with a written notice by the JMB.
The management can take the following actions:
- They can forcibly enter your unit (within 14 days of receiving the written notice).
- They can also seize movable properties. The items will be auctioned off to settle the outstanding charges. Items that are usually seized from raids include electronic items like smartphones, televisions and other electrical appliances.
- The management body can display your name in a list of defaulters together with your unit number and amount owed.
- Your access card to your residential complex will be deactivated without prior notice. You will be charged a maximum of RM 50 to reactivate the card.
- You are required to sign in when entering the building if your card is deactivated. A security guard will have to follow a defaulter to the unit every time he enters the compound.
- Your access to common facilities will be suspended. That includes car park lots that have been assigned to you.
- Your name will be blacklisted in CTOS and CCRIS which may negatively affect any future bank loans. You might not want to mess with this.
- There could be fines and imprisonment as well. Strata owners who fail to keep up with their maintenance fees could be committing a criminal offence. They may be liable to a fine not exceeding RM 5,000 or imprisonment for a maximum of three years, or both. In case of a continuous offence, a further fine not exceeding RM 50 per day could be imposed.
However, management CANNOT do the following:
- Block access to your home.
- Cut your electricity or water supply.
5. Can maintenance fees be paid in instalments?
Management can choose to enter into instalment agreements to settle your outstanding debts. This option is available under Regulation 6(6) of SMR 2015. These agreements will be on terms that the management deems fit. They can, for example, create terms of the agreement to reward you for paying instalments diligently. For example, they can reward you by not deactivating your access card.
Living in a strata development means living in a community. Every strata property owner needs to know his or her rights and obligations as this entails a lot of different sets of rules and responsibilities. Maintenance fees are meant to ensure that the community is harmonious and well-maintained. If you have problems paying your fees, it is best to discuss it with your condominium management.
Edited by Rebecca Hani Romeli