Lai Chee Hoe Speaks on How Strata Management Can Impact Property Owners
Need to change (part 1)
(Stay tuned for the second portion of this article next week, where we will delve into other essential areas and provide deeper insights into the topics at hand.)
In Articles 1 and 2 on Jan 18 and 25, 2025 respectively, JPN and I (we) outlined the parameters and explained why a change is necessary. In this week’s article, we present some of our wish lists. The list below does not represent the actual amendments but rather the initial proposals being actively discussed among stakeholders.
We are currently discussing ways to streamline the definition of unanimous resolution in both the Strata Management Act 2013 (SMA 2013) and the Strata Titles Act 1985 (STA 1985). The goal is to ensure uniformity when interpreting these laws, particularly in matters such as leasing parts of the common property, which requires unanimous resolution under the STA 1985.
Harmonising the legislation would provide clarity on how a management corporation can grant a lease of the common property to generate income. Unanimous resolution is also the threshold required for terminating a strata scheme, which represents one of the most significant milestones in the lifecycle of a strata scheme. Given its importance, maintaining a high threshold is necessary. Additionally, the process for terminating a strata scheme should also align with the forthcoming Urban Renewal Act to ensure consistency.
Tackling nuisance
Currently, mechanisms for addressing the abatement of nuisance are primarily expected to be handled by the local authorities under the Local Government Act 1976 (LGA 1976) and the Street, Drainage and Building Act 1974. For example, Section 81 of the LGA 1976 identifies nuisances such as animals being kept in a way that constitutes a nuisance, while Section 82 provides the mechanism for addressing such issues.
However, we understand that despite complaints made to local authorities, notices to abate nuisances may not always be issued. To enhance efficiency, we propose empowering developers, Joint Management Bodies (JMB) and Management Corporations (MC) with mechanisms within the Strata Management Act 2013 (SMA 2013) to handle nuisance issues directly.
Property management
Under the Strata Management Regulations 2015 (SMR 2015), non-registered property managers are allowed to manage and maintain strata schemes, provided they lodge a bond with the JMB or MC. However, the Valuers, Appraisers and Estate Agents (Amendment) Act 2017, which introduced Part VB into the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (VAEAPM 1981), expanded the scope to include property managers as a regulated professional category.
This amendment prohibits non-registered property managers or management companies from operating, which has caused concerns among unlicensed property managers. While there is a desire to maintain consistency with VAEAPM 1981, we have been informed that there are insufficient numbers of licensed and registered property managers and firms to meet current demands.
As of August 2024, statistics reveal that only 597 firms are licensed by the Board of Valuers, Appraisers, Estate Agents and Property Managers to practice property management. Of these, only 332 firms specialise purely in property management, while the remaining 265 are primarily valuation firms or estate agencies, although they are also licensed to practice property management.
When compared to the existing strata schemes, the numbers highlight a significant imbalance. The 597 licensed property management firms are responsible for serving 22,898 strata schemes, comprising 1,953,917 strata units (statistics provided by JKPTG as of 2022). This equates to a ratio of one firm for every 38 strata schemes or one firm managing approximately 3,273 strata units.
The overarching goal is to maintain high standards for property managers and firms, ensuring they possess adequate knowledge, skills and an understanding of basic legal requirements. This, we believe, will ultimately benefit all strata owners and improve the management of strata properties.
Addressing operational challenges
We recognise the operational challenges that arise in practice. For example, if the issuance of the JMB certificate is delayed, it becomes impossible to open a bank account, preventing the Developer from transferring funds into the JMB's account within the legally mandated one-month period. To address this, we are actively engaging with various stakeholders to streamline the transition process and avoid unnecessary delays.
Issuance of certificates
We have initiated discussions with the COBs in Kuala Lumpur and Selangor and plan to extend these engagements to other COBs to explore ways to expedite the issuance of JMB certificates. Currently, it may take some COBs approximately two months from the date of the JMB's first AGM (28 days plus one additional month). Delays can be further exacerbated if the Developer or JMB fails to file the meeting minutes within the stipulated timeframe, potentially resulting in adverse consequences for strata proprietors.
Opening and maintenance of bank account
We will be meeting with the Association of Banks in Malaysia to streamline the process of opening bank accounts for JMBs and MCs. Opening such accounts should be as straightforward as setting up business accounts. Expediting this process ensures a smooth transition and enables the JMB or MC to efficiently take over charge collections and service provider payments.
Key documents for opening bank accounts
(a) The primary document to verify establishment should be:
(i) For a JMB – the certificate of JMB.
(ii) For an MC – the certificate of MC.
(b) To identify account signatories, we will propose the following:
(i) Refer to the Minutes of Meetings of the committee or general body (post-AGM).
(ii) During the preliminary management period, refer to the Developer’s resolution appointing a signatory on behalf of the MC (as AGM minutes will not yet exist).
This process ensures the JMB or MC can seamlessly perform its functions and facilitate the transition of account signatories after each AGM. This allows newly elected committee members to quickly assume responsibility for maintenance and sinking fund accounts, ensuring service providers are paid and financial affairs are managed efficiently.
Addressing bank account freezes
Freezing bank accounts due to internal disputes or faction complaints within the JMB/MC disrupts operations and negatively impacts proprietors. Account freezes should only be a last resort and should be supported by a court order after the court has assessed the merits of the case. While complaints should not be taken lightly, the courts are best suited to determine whether such drastic action is warranted.
E-strata lodgment
We are also advancing the setting up of a centralised e-lodgment system to be adopted in Peninsular Malaysia and Labuan for all strata schemes. This centralised e-Strata system should integrate with JPN’s e-SPA portal to seamlessly extract relevant information, enabling more efficient management of strata schemes. The adoption of technology and its benefits will be further elaborated in a subsequent article.
Lai Chee Hoe is the litigation partner of Chee Hoe and Associates (CHA).
* If you have any specific subject matter you feel strongly about which requires amendment, kindly email to info@cheehoe.com OR izzah@kpkt.gov.my - source: https://www.starproperty.my/news/need-to-change-part-1/131183
In last week’s article on Feb 1, 2025, JPN and I (we) outlined the parameters and explained why a change to the Strata Management Act 2013 (SMA 2013) and the subsequent Acts is necessary.
Providing greater clarity
While we aim to uphold the wisdom of the previous drafting team, the rights to vote and eligibility for election must be clearly defined. Multiple parcel owners should be allowed to vote and stand for election based only on parcels with no arrears.
However, we may remove the eligibility of immediate family members to take office on behalf of multiple parcel owners, as verifying their relationship with the parcel owner is not feasible.
Additionally, we will facilitate the appointment of another proprietor to fill any vacancy by the remaining members – preferably the candidate with the next highest vote – by removing the phrase “occurs otherwise than” under paragraph 3(5) of the Second Schedule of the SMA 2013.
Chairman of proceedings
We would like to clarify that any proprietor, whether a sole proprietor, co-proprietor, corporate proprietor or proprietor operating under a society or statutory body, is eligible to chair an annual general meeting (AGM).
It should be made clear that the casting vote is an additional vote to the deliberative vote. A casting vote may only be used in the event of a tie and does not mean that the chairman has two votes at all times.
The current regulations make it clear that not all contracts are prohibited from having a tenure longer than 12 months. A simplistic reading of the current regulations, with a broad-brush approach, is not only inaccurate but also confusing. We will provide a pathway for contracts that can extend beyond 12 months.
Prescriptive illustrations for meeting procedures
We will illustrate to clarify the existing regime, reminding that an AGM must be held every calendar year, with a maximum interval of 15 months between meetings. Additionally, we will likely move the penal provision from Regulation 34 of the Strata Management (Maintenance and Management) Regulations 2015 (SMR 2015) into the main body of the Act and impose penalties on each Joint Management Committee member and/or Management Committee member who fails to adhere to the timeline.
We are exploring options to prevent a corporate proprietor from appointing a proxy to attend a general meeting. This change is intended to eliminate confusion when a proxy is a director of the corporate parcel but is disqualified from election under Paragraph 2(8) of the Second Schedule, SMA 2013.
However, we will maintain that a corporate proprietor may still be represented by a corporate representative. As part of this, we will introduce a prescribed corporate representative form into the regime.
Codifying court’s procedures
The Court of Appeal in
Perbadanan Pengurusan Solaris Dutamas v Suruhanjaya Tenaga Malaysia & Anor [2022] 6 CLJ 219 (which was later affirmed by the Federal Court) upheld the principle that what the SMA does not expressly or impliedly authorise must be considered as prohibited when interpreting the powers of the Management Corporation (MC).
With this in mind and to encourage greater clarity, we may need to explicitly outline additional powers for the Joint Management Body (JMB) or MC, such as:
> Expanding the use of funds in the maintenance account;
> Allowing the use of funds outside the boundary of a scheme;
> Providing incentives to proprietors who pay charges in advance (for instance, on a quarterly basis).
At the same time, we will explicitly prohibit the JMB/MC from:
> Transferring funds from the maintenance account to the sinking fund account or vice versa;
> Waiving the requirement to pay charges into the maintenance or sinking fund accounts;
> Waiving late payment interest.
Just and reasonable charges
The second principle we wish to introduce is drawn from Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu and Pearl Suria Management Corporation (the
Pearl Suria case).
We aim to expand the test of just and reasonable, which should further mean:
> Charges introduced reflect the actual or expected expenditure;
> Charges are neither inadequate nor excessive.
Enhancing enforcement capabilities
We will be guided by the case of Badan Pengurusan Bersama Paradesa Rustika v Sri Damansara Sdn Bhd (Federal Court) [2013] 9 CLJ 813 in reassessing the powers granted to the Commissioner of Buildings (COB).
To enhance enforcement capabilities, we may consider granting COB additional powers and will engage with the Attorney General’s Chambers (AGC) to seek blanket consent for COB to issue compounds for strict liability offences.
We will further refine the jurisdiction of the tribunal. As part of this process, we may reassign jurisdiction over defects related to parcels, common property and buildings to the House Buyers Tribunal.
Given the increasing complexity of strata schemes, we will establish more robust criteria for implementing different rates of charges.
Simplifying handover process
Under the current regime, once the MC is established, a bank account can be opened in the MC’S name, even during the preliminary management period. The account’s signatory may be the developer’s authorised representative but the account itself must be under the MC’S name.
This approach is intended to simplify the transfer of control over the account rather than transferring the account itself from one party to another.
Additionally, we are exploring the possibility of handing over documents in soft copy format. The adoption of technology in this process will be discussed separately.
We do not intend to mandate that as-built plans be certified by consultants, as we aim to avoid imposing additional conditions on the handover process. However, as-built plans will remain a compulsory requirement for handover.
Balancing Interests
We are considering whether funds payable into the common property defects account should be consolidated into the Housing Development Account (HDA). This change would also apply to non-housing strata schemes following amendments to the Housing Development (Control and Licensing) Act 1966.
We aim to impose stricter requirements to ensure developers display the schedule of parcels – whether for single-phase or multi-phase developments with provisional blocks – to all purchasers before the sale. This measure will ensure buyers fully understand the scheme they are purchasing into, leaving little room for disputes over their awareness of the overall strata development.
We are exploring ways to relax the threshold for amending the schedule of parcels, particularly regarding provisional share units assigned to provisional blocks. This flexibility would allow developments to better align with the evolving needs of the community.
Office bearers to be elected by general body
We are discussing whether the office bearers should also be elected at the general meeting by the general body instead of being elected by the committee members. We hope this will improve accountability.
Tackling core strata issues
This is one of our key focus areas. We aim to streamline the process for:
> Opening investigation papers;
> Conducting investigations; > Issuing compounds; and/or > Prosecuting wrongdoers. As part of this effort, we will seek blanket consent from the AGC to empower the COB to issue compounds and initiate prosecutions. We believe the full enforcement of prosecutorial powers is essential for stricter implementation of the law.
If you have any specific subject matter you feel strongly about which requires amendment, kindly email to info@ cheehoe.com OR izzah@kpkt.gov.my. - By LAI CHEE HOE, The Star
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