Regulate property management! Forum on Strata Management in Penang

IT is understandable for the Strata Management Act to attract much public interest. There are (or will soon be) more people living in high-rise strata properties than in landed properties, given the rapid urbanisation and rising land prices in Malaysia.

The issue of the Board of Valuers, Appraisers and Estate Agents (BVAEA) seeking to regulate property management is controversial. Since the BVAEA is a body under the Finance Ministry, isn’t it odd that the Finance Ministry rather than the Housing Ministry is trying to regulate property management?

Most people have a pretty good idea about the job of a property manager and would conclude that it is a generalist’s job.

There should not be too many restrictions attached to a generalist’s job, such as that of a sales manager or a supermarket manager.

The opinion of HBA honorary secretary-general Chang Kim Loong on the role of a property manager is a bit overstated.

Property managers are at all times employees of MCs and JMBs and never the other way round.

Lives and property worth millions of ringgit are the prime responsibilities of employers and not the employees.

It is an exaggeration to say that lives and property worth millions are being entrusted to property managers to care, control and manage.

However, it may be a good idea to regulate the property manager’s job, but it would be more appropriate if it came under a board in the Housing Ministry with input from engineers and architects.

It would be less appropriate to come under a board in the Finance Ministry, as property management has more to do with building than finance.

By A CONCERNED CITIZEN Kuala Lumpur

Forum on strata management

A SEMINAR on the Strata Management Bill 2012 as well as the Strata Titles (Amendment) Act 2012 will be held at Auditorium C and F, Level 5, Komtar, from 10am to 4pm on Jan 13.

Komtar assemblyman Ng Wei Aik said many people were unaware of the new bill’s contents, including how to handle strata management disputes.

“The bill provides better protection for property owners. It is important that they know their rights,” he said at a press conference.

He said lawyer Lee Khai would talk on the application of the Strata Management Bill while licensed land surveyor Chuang Kuang Han would talk on Strata Titles Application and Problematic Cases.

Registration fee is RM30 per person which includes buffet lunch and lecture notes.

The public, including management corporations, joint management bodies and residents associations are invited to attend.

For more details, contact Ng’s service centre at 04-2270215/017-4108914/012-4290163, fax 04-2278215 or e-mail dapkomtar308@gmail.com before Jan 8.

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Good property management, maintenance add value

Stratified developments becoming a way of life

As stratified developments become a way a life, good maintenance and management have become an issue.

 

EARLIER this year, a new set of property managers replaced the previous one in the condominium that Siti lives. Not having a current account, she paid her quarterly management fees in cash. She was told that the receipt would be put in her postbox. It never came and she soon discovered that the property management company had absconded with the money.

As stratified developments which include condominiums, service apartments and gated and guarded projects become a way of life, good maintenance and management have become an issue.

Good management and maintenance will improve the value of the asset. This applies to all segments of the property market, be it residential, commercial or industrial.

Hence, the third reading of the Strata Management Bill 2012 on Monday is crucial, says Assoc-Prof Ting Kien Hwa, head of Centre for Real Estate Research at Universiti Teknologi Mara.

“Currently, property management is part of a service provided by valuers, who are regulated by the Board of Valuers, Appraisers and Estate Agents.

The work of valuers can be broadly divided into three areas property management, valuation work and real estate agency work.

This means that property management is a regulated profession and delinquents risk having their licence suspended.

For the last five to six years, managing stratified properties has become an issue, he says. As more of us live in gated and guarded developments, and high rise condominium and serviced apartments, property management is evolving to become a lucrative industry.

Ting says the Board of Valuers is in the process of creating a third register to accommodate property managers. Valuers and real estate agents are governed by two registers and the Board of Valuers are working on creating a third one for property managers.

Says Ting: “This is a similar situation as in the early 1980s when there were many illegal real estate agents. They were given a one-year period to register with the board.”

Ting says the duty and responsibilities of property managers go beyond just collecting money and managing a property. The word “managing” covers a whole gamut of expertise and responsibilities. These include insurance valuation, the appropriate rate of service charges to levy on owners, managing service providers like security guards and cleaners, gardeners and managing tenants and rental rates among other duties.

Depending on whether it is a residential or commercial property, some issues may overlap.

To claim that valuers want to monopolise the property management industry is incorrect, Ting says.

“Some parties say they want to liberalise' the profession. Just as engineers and architects are regulated by the Institute of Engineers and Pertubuhan Akitek Malaysia respectively, so property managers are regulated by the Board of Valuers because property management is part of the work of valuers. This is the situation in the United States, Britain and Australia. Shall we then liberalise' the achitecture and engineering profession by allowing more people who are untrained to practise as architects and engineers because architects and engineers are monopolising' the industry?” Ting asks.

Ting says this argument to liberalise the profession and cut out the monopoly does not hold water at all.

He says there are currently 8,000 trained property managers in the country and every year, 450 more graduates enter the job market.

The local public universities provided courses in property management in the late 1960s because they knew there would be a need for this.

Malaysian Institute of Professional Property Managers president Ishak Ismail says: “The Government was visionary enough to foresee a time when stratified housing will become part of the Malaysian property landscape. The first condominium was Desa Kuda Lari in the KLCC area.

“Today about four million people live in stratified projects. About 80% of all the stratified projects are managed by joint management bodies and management committees. About 20% are outsourced and of this about 58% are managed by illegal property managers.”

Ishak said over and above the various issues that fall under property management, two sets of skills are needed the hard skills in managing the property and the soft skills in people management.

He says there is a need to put in the proper regulations to regulate property managers in order to improve the value of our property assets. There must be no conflict of interest because it involves public money, be it house owners or tenants of commercial properties, he says.

By THEAN LEE CHENG The Star

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Is property building management a professional?

Have separate board 
WE refer to the letter “Leave it to professionals”, (see article below) on the issue of strata management.

Building management is not a profession: it is a multi-disciplinary management function encompassing a wide range of skills such as engineering, architecture, accounting, law, vocational skills, etc.

It cannot and should not be the exclusive domain of any particular profession like registered valuers.

No country has laws that specify that only registered valuers admitted as property managers pursuant to Section 21(1)(a) of the Valuers, Appraisers and Estate Agents Act, 1981 (VAEA Act) can undertake property management.

To put things in perspective, the Building Management Association of Malaysia (BMAM) is not objecting to registered valuers managing stratified properties.

What we are strongly opposed to is the creation of a monopoly favouring registered valuers if the Bill is signed into law in its present form.

The Board of Valuers, Appraisers and Estate Agents is offering to open a sub-register for non-valuer managing agents to be admitted as property managers.

We are not accepting the board’s proposal as it would only further entrench its monopoly over property management, given that the admission, suspension and even eventual deregistration of non-valuer property managers will be at the sole discretion of the board.

We are calling for the establishment of a separate multi-disciplinary Board of Building Managers under the jurisdiction of the Housing and Local Government Ministry with regulatory support from the Commissioner of Buildings (COB).

There are more than 4,000 stratified projects (80% of them residential) in Malaysia at the moment, and about five million Malaysians belonging to the low and middle income groups live in them.

Since the common properties and facilities in the flat and apartment premises cannot be sold or subdivided and are meant for the exclusive use of the residents, all that the owners need is a building manager to maintain the common areas and facilities, and not a property manager whose portfolio includes leasing, collection of rent, promotion of sales, etc.

A building manager appointed by the joint management body (JMB) or management corporation (MC) upon mutually agreed terms and conditions of scope of work and remuneration would be significantly cheaper than a property manager whose fees are subject to a schedule under the VAEA Act.

The building manager is only expected to carry out his duties and responsibilities according to the terms and conditions of his appointment as well as the instructions of the JMB or MC Management Committee.

All fiduciary responsibilities, particularly the management of the Building Fund Account, are undertaken by the JMB or MC pursuant to the Building and Common Property (Maintenance and Management) Act, 2007 and the Strata Titles Act, 1985.

These records are submitted to the COB every year after the annual general meeting.

PROF S. VENKATESWARAN
Secretary General
Building Management Association of Malaysia

Leave it to professionals

THE public deserves an unbiased understanding beyond the shadow play leading up to the third reading of the Strata Management Bill 2012 in parliament.

The proposed Act stipulates that a managing agent for stratified property must first be free from any potential conflict of interest (i.e. independent) and secondly, a registered property manager.

The Act replaces the Building and Common Property Act, which did not emphasise that such functions are to be performed by a registered property manager.

The key problem is that property management at present is also practised by an unregulated group and such parties are not accountable to a regulatory body unlike registered persons i.e. property professionals or chartered surveyors.

The new Act aims to rectify this disparity by uniformly regulating all property managers of stratified properties.

Under the Valuers, Appraisers and Estate Agents Act (VAEA), a Registered Property Manager must possess:

1) An academic qualification from an approved institution of higher learning or recognised professional examinations; and

2) Pass the Test of Professional Competence set by the regulating body.

These robust standards and established processes are aimed towards registering professionals of sound qualifications and adequate competency levels.

A registered property manager is continuously subjected to a code of conduct, professional standards and various stipulations under VAEA to ensure they discharge their duties in a manner that serves the public adequately and to the highest possible industry standards.

The registration of property managers and firms is undertaken by the Board of Valuers, Appraisers and Estate Agents Malaysia (board).

The board, a governmental regulatory body under the purview of the Finance Ministry, was set up in 1981 to regulate Estate Agents, Valuers, Appraisers and Property Managers in Malaysia.

It is legislatively empowered to deal with complaints from the public and take disciplinary action against any errant registered persons or firms, including stripping them of their licence and barring them from further practice, amongst other possible disciplinary measures.

Given the established competency requirements and standards imposed on registered property managers, I cannot see beyond reasonable logic for such professionals to utterly fail in their professional duties to a joint management corporation, management corporation or individual owner.

The board, in the spirit of laissez-faire, has opened the registration of property managers to include these non-regulated practitioners.

Property management was always the domain of property professionals but only in recent history, primarily property developers and others have set up property management businesses to rival property professionals for the property management trade but in an unregulated fashion, taking advantage of the limitations of statutes. This is where the battle lies and the public should take notice.

If a non-regulated practitioner wishes to practise as a property manager in efforts to legally comply with the greater standards as demanded by the new Act, I cannot see why they should shy away and not readily subject themselves through the established process and competency test in order to become a registered property manager.

The process is not designed to penalise individuals but to assess if a candidate has the required level of competency, in order to be accountable to the public as a practising professional.

The merit of regulating the property management profession far outweighs any self-serving agenda, and the public must insist for high standards in lieu of the nation’s Vision 2020 agenda.

To the lawmakers and members of Parliament, my plea is to make the right decisions in cognisance of standards, accountability and professionalism.

The last thing we want is a mushrooming of “urban slums” in our beautiful country.

A. PADMAN  Kuala Lumpur - The Star, Nov 5 2012

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Managing strata properties in Malaysia

I LIKE to highlight the rather difficult and controversial issue of the management (and maintenance) of stratified properties, particularly flats, apartments and condominiums, in the context of the proposed Strata Management Act, 2012 which is expected to be tabled during the upcoming session of Parliament.

The Building Management Association of Malaysia (BMAM) is the only multi-stakeholder organisation (established in 2009) representing the collective interests of chambers of commerce, developers, engineers, architects, shopping and high-rise complex managers, management corporations (MCs), joint management bodies (JMBs) and managing agents.

However, BMAM was not nvited to participate in the workshops and discussions held by the National Land Council and the Housing and Local Government Ministry when the draft Bill was deliberated, although the implementation of the Act will have consequences that will directly affect BMAM stakeholder-member organisations.

According to the information available to us, the Bill states that only licenced valuers who have been admitted as Property Managers pursuant to Section 21(1)(a) of the Valuers, Appraisers and Estate Agents Act, 1981 (VAEA Act) to manage and maintain stratified (or subdivided) buildings as managing agents.

No such restrictions exist in the current laws that regulate building management, namely the Strata Titles Act, 1985 (ST Act) and the Building and Common Property (Maintenance and Management) Act, 2007 (BCPMM Act).

Building management is a multi-disciplinary occupation and cannot be exclusive to the valuers alone.

The JMBs and MCs want to have the independence and opportunity to appoint any fit and proper person, or appropriate entity, as managing agent on a “willing seller-willing buyer” basis on mutually agreed terms and conditions.

The Bill, by restricting building management and maintenance to valuers, would create a monopoly, and is inconsistent with the spirit of the Competition Act, 2010, which clearly discourages the creation of monopolies.

Though building owners (JMBs and MCs) and Real Estate Investment Trusts (REITs) have been exempted from this ruling, most JMBs and MCs, led by volunteers, do not have the time, skill, expertise or experience to manage and maintain their buildings, and neither can they afford to appoint a registered property manager as a managing agent.

JMBs and MCs would be required to pay a management fee in compliance with their Fee Schedule, excluding other operating costs such as staff salaries, electricity, water, cleaning, security, etc.

We will soon see the mushrooming of more urban stratified slums and ghettos, thereby defeating the objectives of the Government’s squatter resettlement programmes and public housing projects.

The fiduciary responsibilities of the MCs and JMBs have been clearly stated in the ST Act and the BCPMM Act on the management of the Building Maintenance Fund and the Sinking Fund.

The managing agent appointed by the JMB or MC to manage and maintain the subject properties is only required to perform these functions for and on behalf of the JMB or MC. A registered property manager is therefore not required.

The MCs and JMBs only need building and facilities management for their common properties.

Since common properties and facilities cannot be sold, and most residential building owners do not lease their common properties to third parties as they would need them for their own use.

Many non-valuer managing agents have several years of experience in building and facilities management.

They have also been admitted as members and registered building managers by BMAM upon satisfying the required admission criteria.

They are qualified and skilled in building management, operations and facilities maintenance, and have also subscribed to a professional building management liability insurance policy entered into between a local insurance company and BMAM.

Any attempt by the ST Act to split managing agents as valuers and non-valuers will be detrimental to the growth and development of the building management industry in Malaysia.

It will result in the loss of valuable management talent in the industry. It will also have serious social implications on the upward career mobility of qualified and experienced local building managers, many of whom are bumiputras.

The Commissioner of Buildings (COB) should be the sole regulatory body to
supervise and oversee the management and maintenance of stratified buildings in Malaysia.

The involvement of third parties, who have no ownership interests in the properties, will not only erode the COB’s authority but may also result in unnecessary layering, additional costs (with no proportionate increase in service quality), corruption, rent seeking and abuse of power.

PROF S. VENKATESWARAN
Secretary-general
Building Management Association of Malaysia

Lure of Penang sees spike in property prices

GEORGE TOWN: The scarcity of land on Penang island and its lure as a tourist destination and a second home for foreign retirees have caused residential property prices to soar by more than 25% over the past five years.

According to real estate valuers, the prices are among the highest in Malaysia, which is why the Consumers Association of Penang claimed that only the rich could live on the island a world heritage city.

A survey by The Star revealed that condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive which front the sea are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.

Crowded skyline: High-rise buildings dot Gurney Drive, which was once a sedate, low-density area where locals came to relax. — K.T. GOH / The Star

Even pre-war houses in the inner city for example, in Campbell Street have been snapped up mostly by non-Penangites, who have turned them into boutique hotels or simply kept them because of their architectural beauty.

The prices of the houses have rocketed from about RM500,000 in 2007 to approximately RM800,000 today an increase of about 30%.

Raine & Horne Malaysia director Michael Geh said the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a rise of over 25% in prices of condominium units.

Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.

The medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Burmah Road, Jelutong Road and Sungai Pinang have not been spared.

“These have seen over a 25% increase in prices over the past five years,” Geh said.

An apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000,

Geh said the rise in property prices had driven many people to buy homes in Seberang Prai, where property prices are a third of those on the island.

“But we are seeing property prices on the mainland rising as well,” he added.

An apartment in Butterworth town is now selling for RM250,000, compared to RM180,000 five years ago, while a terrace house now costs RM500,000, compared to RM300,000 in 2007.

Mushroo ming buildings : A file picture showing Penang’s Gurney Drive in 2008. Many high-rise projects have sprouted there since.

Given the rise of raw materials prices and the scarcity of land, property prices in Penang were expected to continue rising, Geh added.

Meanwhile, Penang Barisan Nasional chairman Teng Chang Yeow said there were only one or two major hillslope projects during the previous administration. Now, there were hillslope projects all over the island.

He said the present guidelines on hillslope development were adequate, but the state government should be more stringent in enforcing them.- The Star/Asia News Network

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How to get the best price of your property's resale value?

Nobody likes to buy a home with something that requires big money to modify or repair

While the adage “location, location, location” is still considered the ideal gauge for your property’s resale value, there are other factors that can still play a part in helping you get the best price when you part ways with your home.

One of the things to consider is the upgrades or renovations that you may have made to the property. While making improvements to a home can be a good thing, there are some additions that can make or break your property’s resale value.

The following are some home upgrades that will dampen your property’s resale value.

Poor renovation

It’s one thing to make renovations to your home – and another thing when those upgrades requires further improvements!

“Nobody likes to buy a home with something that requires big money to modify or repair,” says property investor Kamarul Ariff.

He gives an example of a property he had purchased that had a “badly-renovated roof.”

“The roof obviously had some bad leaks in the past but the renovations were very poorly done by the former owner. Unfortunately, when people go to inspect property, not many check to see if the roofing is in good condition. After all, most homebuyers or investors check out a property when the weather is clear anyway.”

Kamarul recalls that after buying the property, it rained heavily - indoors!

“There were leaks everywhere! When I finally got an expert to check the roof, I discovered that there were badly done patches made to some holes on the roof, which only worsen the leaks.

“In my opinion, it’s better to spend a bit more money and get a good job done than to stinge and get poor workmanship. In the long run, nobody benefits.

“It’ll affect your resale value and the buyer who’s looking for his dream home ends up buying into a financial nightmare.”

P. Lalitha, a home-buyer, shares a similar sentiment.

“The apartment I bought had poor floor renovations in the bathroom. Of course, it was my neighbour who lived below that alerted me of this.”

Upon inspection by an expert, she discovered that the cement used by a previous owner for the flooring was of poor quality.

“Renovations were not just done, they were badly done. So much so that it cost me a fortune to fix them. My advice for future home-buyers? Check every inch of your house. To home sellers, if you want to get the best resale value for your home, get your renovations done by an expert,” Lalitha says.

backyard swimming pool (Photo credit: Wikipedia)

Permanent upgrades

Some homeowners make upgrades to their property for personal gratification without taking into account the fact that they may need to sell it in the future. However, these renovations hardly do anything when it comes to resale value, nor do they make it easy to sell.

“Among them are fixtures such as swimming pools and wall modifications,” says KL Interior Design executive designer Robert Lee.

“Having a swimming pool can increase the price of a home, but it also comes with extra responsibilities that not everyone wants. If you’re a senior citizen and not the active sort, you’d probably need to hire someone to clean and maintain the pool you’d probably never use.”

He also points out that major works done to a property’s structure, such as to its walls, can be hard to undo.

“There was this large family living in two adjacent terrace houses and they made a huge arch in the wall between the two houses. When it came to selling, they had a huge problem!

“They also wanted to sell off the house as soon as possible and refused to patch-up the wall.”

Other structural changes, like turning a three-bedroom apartment or house into a two rooms can also put a damper on resale value, says Lee.

“If you’re selling a two-bedroom apartment and your neighbour is selling a three-bedded one at the same price, which property do you think a buyer will you go for?”

Home-Deco Art Sdn Bhd director Rachel Tam says having a distinct paint job won’t affect a home’s potential resale value.

“Some people paint their homes in all kinds of colours, like a kindergarten,” she chuckles.

“But it won’t affect a property’s resale value. It’s not permanent and can be easily replaced. Besides, the first thing most homebuyers do is give it a new coat of paint anyway.

Unexpected outcome

Some upgrades can be so extreme that they no longer look like what they were initially set out to be.

“We knew of someone who bought a single-storey house for RM250,000 and spent about RM200,000 to build a second level. When he sold it, he only got RM300,000,” says Lee.

“Some renovations that place a property beyond its original architecture will not increase its resale value,” he adds.

Tam notes that some people turn their homes into an office or place to conduct business, which may or may not affect the property’s resale value.

“It depends on how extensive the renovations are. If you’re just converting one room into an office, then it’s fine, as the future owner won’t need to do much or anything at all to convert it back into an ordinary room.

“However, if you’re going to start raring animals or live stock there, which may include additional structures to contain them, then this could be a put-off for potential homebuyers who are looking for a basic place to live.”

By EUGENE MAHALINGAM eugenicz@thestar.com.my

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Malaysian High-end property expected slower

Slower high-end property sector

By EUGENE MAHALINGAM eugenicz@thestar.com.my

PETALING JAYA: The Malaysian Institute of Estate Agents (MIEA) expects a slowdown in the high-end residential property sub-sector this year as potential buyers are likely to maintain a cautious approach in light of the economic uncertainties in Europe and the United States.

“There is a lot of caution now due to the uncertainty in Europe and the United States. With fear of a potential spillover effect, most buyers are adopting a wait-and-see' approach,” said MIEA president Nixon Paul.

“We don't expect to see any slowdown for property transactions within the RM300,000-to-RM600,000 range and believe there will still be a lot of activity within this segment.”

Paul said the various “checks and balances” by Bank Negara to control the increase in household debt would also affect residential property transactions.

Starting this year, banks have been using net income instead of gross income to calculate the debt service ratio for loans.

According to reports, this is a pre-emptive move by Bank Negara to contain the rise in consumer debts. The guidelines cover housing, personal and car loans, credit cards, receivables and loans for the purchase of securities.



The MIEA is the authorised body representing all registered estate agents in Malaysia.
Paul said there was an over-supply of condominium units in the country and that rental rates for such units could be affected.

Despite this, he said, it would be a good time now to invest in the high-rise market for long-term investors.

“We are one of the cheapest in the region and if you are looking to invest over the long term, say 10 years, now is a good time to get into the condominium market. Over the next decade, prices will appreciate.

“But if you're dependent on rental income to service your loan, I wouldn't advise it.”

Paul noted that rising property prices in Malaysia had forced many people to buy homes further away from the city.

“I do feel sorry for the average guy, but if you look anywhere else in the world, it's a natural progression. Those who can't afford it live further away from the city.

“It's happening in cities all over the world. Out of necessity, you'll see more people buying condominiums instead of landed property.”

Paul said one of the main issues facing residential property transactions today was the big disparity between the intended property price and valuation price.

“A buyer and seller might agree on a particular price but the valuation might not be the same. When that happens, the loan application procedure becomes a problem and the deal ends up getting aborted,” he said.

Separately, Paul said the commercial property sub-sector would be buoyant this year.

“It's going to be a buzz! Most investors are shifting to commercial from residential because they feel this sub-sector is more resilient, especially in a downturn,” he said, adding that there was pent-up demand for commercial property in Malaysia.

“We believe that the industrial sub-sector will also be quite active. Property prices in Bukit Jelutong and Glenmarie are at an all-time high.”

Paul said the office sub-sector might face a slowdown due to oversupply in space.

“There is an oversupply of office space. Rentals in prime locations such as KLCC may not be affected but not those located in the outskirts of the city,” he said, adding that major shopping complexes, especially within Kuala Lumpur, would continue to experience good take-up this year.

Despite the global uncertainty, Paul said that property was still the “best place to invest in.”

“It's still the safest place to put your money in. These days, a lot of people are shifting their investments into property. You can hedge yourself well against inflation when you invest in property,” he said.

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