Chris Tan, Founder and Managing Partner of Chur Associates gives the rundown on strata living.
Strata living is fast becoming a way of life in Malaysia, currently roughly 30% of the country’s population is living in strata-title buildings. The term “strata” was first introduced legally in 1985 in response to the mushrooming of multi-storey structures as a result of urbanization taking place in major cities; Kuala Lumpur, Penang, and Johor Bharu.
Strata came under the spotlight recently with the implementation of the Strata Management Act 2013 (SMA 2013) on June 1, 2015, replacing Building and Common Property (Maintenance and Management) Act 2007 (BCPA 2007). The new enactment stands to correct the limitations of its predecessors, where it now provides clearer and more stringent provisions on the management of stratified in Malaysia, including residential, commercial or even a mixed-use development.
Many owners of strata properties, however, are still not aware of what strata actually means and what rights the SMA 2013 entitles them to. Dispelling the common misconception that strata properties refer only to high-rise units, Chris Tan, Founder and Managing Partner of Chur Associates, explains that strata properties are not limited to condominiums and apartments, gated and guarded landed developments, also known as ‘horizontal strata’ falls under this category as well.
Speaking at the recent Malaysian Property Expo (MAPEX) 2015 fair, Chris mentioned that strata owners are no different from shareholders of a public listed company. This is because the value of their residence (strata property) is dependent on its upkeep and condition. Just like how a well-run company will experience climbing share prices, a well maintained and properly managed residence will see appreciation in value. The maintenance of strata buildings is supported by the service charges (SC) and sinking fund (SF) collected from residents.
Monthly payments for maintaining common facilities and common property in the development such as swimming pools, elevators, and security services.
Covers future capital expenses, which are not as frequent such as the painting of the faÁade and refurbishment or replacement of fixtures. The fund’s amount must be enough to cover all the development’s expenses; it is usually collected in advance and a charge of 10% of the service charge is customarily applied.
Sadly, in Malaysia, strata residents have yet to adopt the ‘community living’ concept as many shirk away from their duties in settling their service charges on time. Chris provided the sobering statistics – only 50% of strata residents in Malaysia pay their service charges on time. He pointed out that there are some property owners who, at times, cannot afford to pay the service charges, and as a result, the strata management fails to perform the necessary repairs and other facelifts due to the lack of financing.
Joint Management Bodies (JMB) and the other group of strata owners, however, can now rejoice with the SMA 2013 coming into play. Errant strata owners can no longer get away scot-free as the implementation of the SMA 2013 saw the establishment of the Strata Management Tribunal (SMT), which states that any strata owner who fails to pay service charges can be brought before the SMT for an order to pay up.
The SMA 2013 presents a clear outline of the responsibilities and limits of authority among developers, local governments, and residents.
Strata owners should be aware of their rights and responsibilities now more than ever. As Chris stressed, developers will not be managing the strata property forever; hence its owners will have to take full responsibility for the entire building eventually.
The new act highlights on the basis of strata living – self-management and self-sufficiency. Chris went on to share with the audience the 10 basic rights and obligations of a strata owner:
1) Provide mandate direction to the management
A JMB is tasked to manage and maintain the common property in strata developments from the time of delivery of vacant possession by the developer to the purchasers until the Management Corporation (MC) is formed. The MC can only be established after strata titles have been issued and at least, a quarter of the aggregate share units have been transferred to the owners. This gap in time of forming the MC is also meant to be a grace period for the owners to learn the trade of managing their own property with the holding hand of the developer.
As a strata owner, you effectively own a part of the ‘company’, hence, you would have a say in its matters. Strata owners should attend their Annual General Meeting (AGM) as the condominium (strata property) is their investment, and they should play an active role in appointing the board of members and the representatives for condo-owners. As an owner, you will have access to the financial accounts and if you are unhappy over a matter, operating or otherwise, you are able to do something about it collectively. Another important reason to attend the AGM is because the meeting will also see the tabling of the maintenance budget for the following year. Owners will want to ensure that a good budget is planned (one which will generate sufficient income collection of SCs) in order to accommodate for the required maintenance works in the year.
2) Right to request for an Extraordinary General Meeting (EGM)
To provide timely intervention in any issues, the Chairman of the committee council shall convene for an EGM within 6 weeks of receiving requisition in writing from strata owners who are together entitled to at least a qualter or 25% of the aggregate share units. There have been instances where owners are disgruntled due to biases such as the awarding of maintenance works’ contracts to family members/friends of the management and the misuse of funds. In the case where the management does not oblige to entertain the request for an EGM, owners can then seek help from the Commissioner of Building (COB) or the SMT.
3) Right to request for inclusion in the agenda
Owners also have the right to voice out their opinion and discuss any matter that they find important, by requesting for an inclusion in the agenda of an EGM or AGM, provided that they hand in a notice at the management body’s registered office no less than 7 days before the meeting.
4) Right to vote during AGM and EGM
In order to exercise this right, owners will have to settle all of their outstanding service charges prior to the AGM or EGM. Those who fail to do so will not be allowed to cast a vote for any resolution. Each parcel of land (unit) will be entitled to one vote, on a show of hands, and on a poll, the number of votes shall correspond with the number of share units or provisional share units attached to the parcel or provisional block.
A co-strata owner may vote by means of a jointly appointed proxy, or by oppointing any one of theme. For example, a proxy who is representing his wife who owns a unit will be able to cast a vote on her behalf. One matter to take note, however, the proxy is is not allowed to be a committee member if he is not an owner.
5) Right to request for the review of SC and SF
In the event where owners are unsatisfied with the SC or SF being implemented by the management, where for example they do not agree to an increase in SC; they could apply for its review to the Commissioner of Buildings (COB). The COB will then determine the right amount that should be charged or get a registered property manager to recommend the said amount.
6) Statutory presumption
Should there be any inter-floor leakage – dampness, moisture or water penetration on the ceiling or any furnishing material attached to the ceiling, the owner of the upper floor shall be responsible to the said leakage in the absence of proof to the contrary. This means that the owner of the above unit will have to foot the bill for repair works.
7) Right to file a claim under the SMT
Every strata owner’s rights are protected under the SMT, where any dispute related to strata management falls under the jurisdiction of the SMT. Established under the Urban Wellbeing, Housing and Local Government Ministry, the SMT was formed to provide feasible solutions to disputes on the failure to perform a function, duty or power imposed by SMA 2013.
With a pecuniary jurisdiction up to RM250,000, the SMT enables for the solving of disputes at minimum cost – as no legal representation is allowed (thus eliminating high legal costs) and it has cheaper filing fees as compared with a court proceeding.
Strata owners will be glad to know that an award will be made without delay and where practicable; within 60 days from the first day of a hearing. Another plus point is there is no time bar in filing a dispute claim, strata owners are eligible to claim for the recovery of charges or for any defect at any given time.
8) Right to file a claim against Common Property Defect Account
Common Property has a defect liability period of 24 months, for residential property, similar to the one for your strata unit. Strata owners have the alternative to claim for any defect in their common property such as leakages or faulty elevators within the defect period.
Before the handing over of units, developers will have to submit 0.5% of the estimated construction cost or RM 50,000; whichever is higher with the COB. This amount is to be deposited into a statutory account as a provision for any possible defect in the development. Should the sum be insufficient to cover any expense, the developer must top up the remaining amount.
9) Right to set up a Subsidiary Management Corporation (SMC)
The MC now may establish SMCs to represent the interests of a particular group of parcel proprietors who are entitled to the exclusive benefit of a limited common property.These areas must be clearly defined and marked on a special plan, which must be submitted to the Director of Survey.
This is especially useful for mixed developments, where the owners of commercial units do not utilize certain common property, for instance, an office unit owner will not use the swimming pool facility. Hence, it would be feasible to assign separate sub-MCs, which will be in charge of the respective group, besides enabling the implementation of specific SC for residential, office and retail owners respectively. A sub MC could be also created for the limited use of a common property. For instance, the allocation of a private rooftop garden for the use of penthouse owners only.
10) Right to dispute the legality of attachment of Moveable Property
The COB has the right to issue an attachment for strata owners who fail to pay their service charge on time. A Warrant of Attachment (Form A in the third Schedule of SMA 2013) will be issued, following which the COB would hire people to confiscate the defaulter’s removable property (car, settee, television, etc). If the attachment is done in error, however, owners can then apply to the Magistrate’s Court for the release of their property within 14 days from the date of attachment.
Love thy neighbours! – that is the advice Chris has for strata owners. The community of strata residents must realize the importance of living in harmony and cooperation besides taking charge to protect the very investment that they live in. After all, a ‘company’ will function optimally only when all its owners participate.