19/09/2007 By National House Buyers Association
Published in Iproperty Magazine
If you thought you only have to attend meetings at work, think again, if you are a strata development owner. One important aspect of strata ownership is that by law, annual meetings that have to be convened. An annual general meeting (AGM) is a yearly opportunity for owners to be active in their strata development community. From time to time, the elected Council or Owners may want to have other special meetings to conduct business between the AGMs.
These meetings are called the extra-ordinary meetings. This article refers to the Strata Titles Act, 1985 (STA), where strata titles have been issued to the development. For strata developments which are pending issuance of titles, there is another set of legislation – Building and Common Property (Maintenance and Management) Act, 2007 which has almost the same set up for formation of a body to control and govern the strata development.
First AGM – Get your strata titles first
Unfortunately, there are some purchasers who mistakenly withhold transferring of their strata titles for the wrong reasons. We have come across many committee members of Pro Tem Committees or Residents’ Association who have inside knowledge of the ‘mismanagement’ of the developer and are dissatisfied with the conditions, whether financial or technical, and believe that by withholding the transfer, the developer/original proprietor would not be able to call for the First Annual General Meeting to end the initial period of the Management Corporation (MC).
This belief is wrong for the following reasons:
Any existing grouses do not negate the fact that the transfer of strata titles completes the sale and purchase agreement.
Grouses have to be handled collectively, and the MC or Joint Management Body (if strata titles are not issued yet) is the legal body to oversee the common complaints of their bodies.
Now that the required sum of the aggregate share units have been reduced to one-quarter (1/4) from one third (1/3) following the recent amendments to the STA, other owners will not agree with the committee but will go ahead and do what is legally necessary to transfer their own titles to themselves and effectively be qualified to attend the first annual general meeting called by the original proprietor or developer.
In an example, of a strata development with 200 units with equal sizes, lets say one parcel‘s share units is 130, the total share units would be 26000 share units. If the original proprietor owns 30 units (unsold units), its share units would be 3900 share units. The required quota to end the initial period would be only be 5525 or roughly 43 parcels (1/4 X 22100 (26000-3900)). This quota excludes parcels registered under the original proprietor.
As you can see, it only takes around one quarter (1/4) of the total parcels to end the initial period to form the owners’ MC. There are some purchasers, who argued that, since they have paid in full for the purchase and have been contributing towards the common fund, they should be allowed to attend the general meetings.
Unfortunately, the law requires that only registered parcel proprietors be allowed to attend these meetings and have a say in how their strata development is run. Some meeting organizers may allow non-registered owners to attend the meetings but without voting or speaking abilities.
STA S.4. – Interpretation.
“proprietor” refers to a parcel proprietor, that is to say, a person or body for the time being registered as the proprietor of a parcel, as well as to the proprietor of a provisional block, that is to say, a person or body for the time being registered as the proprietor of a provisional block unless expressly provided otherwise;
How important is the First Annual General Meeting?
The Strata Titles Act, 1985 (Act) provides that it is the duty of the original proprietor/developer to convene the First Annual General Meeting within a month of achieving the quota of transferred strata titles.
STA S.4. Interpretation.
“initial period”, in relation to a management corporation, means the period commencing on the day on which the management corporation is formed and ending on the day on which there are proprietors, excluding the proprietor of the lot who is registered as the proprietor of a parcel or parcels or a provisional block or blocks the sum of whose share units is at least one-quarter of the aggregate share units;
If the original proprietor fails to do so, he shall be guilty of an offence and liable on conviction to a fine not exceeding twenty-five thousand ringgit (RM25,000) and to a further fine not exceeding two thousand ringgit (RM2,000) for each day the offence continues to be committed. The developer is therefore bound by law to convene a meeting whether or not the owners are ready to takeover management and maintenance of the strata development so long as the pre-requisite requirements have been achieved..
The agenda for the First Annual General Meeting is spelled out in the Act as well. The agenda for the first annual general meeting shall include the following matters:
to decide whether to confirm, vary or extend insurances effected by the management corporation;
to decide whether to confirm or vary any amounts determined as contributions to the management fund;
to determine the portion of contribution to the management fund to be paid into the special account to be maintained under section 46;
to determine the number of members of the council and to elect the council where there are more than three proprietors; and
to decide whether to amend, add to or repeal the bylaws in force immediately before the holding of the meeting.
These are serious matters which will affect the unit owners and every effort should be taken by the unit owners to attend this meeting. In this meeting, the number of council members will be determined and can only be changed at the next general meeting. These are your fellow owners who would be representing you for the next year or so. Efforts should be made to get to know them.
The first meeting would also decide on whether or not the contributions to the management fund should be varied. Varying, normally would mean an increase as the council members would have to take into consideration, fees or salaries to pay to a management company or for staff employed, replacements or repair works to the common property now that the building has aged or due to neglect, etc.
It is at this meeting where special resolutions are passed to add or amend the By-Law of the strata development. By-laws are for regulating the control, management, administration, use and enjoyment of the strata development. The Act provides a model By-Law, however this is insufficient for most strata developments which have been operating under other governing documents like the Deed of Mutual Covenants, House Rules etc. The MC may by special resolution make additional by-laws, or make amendments to such additional by-laws, not inconsistent with the by-laws set out in the Third Schedule.
All of the governing documents are tools for the Corporation to run smoothly and for the owners to live peacefully within the community. However, it is also not practical for the strata development to create a working By-Law in one day. The By-Law has to be carefully developed / adopted from other documents. In reality, strata property buyers have to prepare in advance before the first annual general meeting is called.
The National House Buyers Association (HBA) has disseminated information and guided / provided general advice to several strata development owners to prepare for transition from developer MC to owners’ MC. Interested parties can approach HBA by appointment on the days the Association’s Advice Centre is opened to the public. Check out http://www.hba.org.my for more information or write to firstname.lastname@example.org for prior appointments which are normally held on Saturdays when our volunteers are available to do public service.
Business at General Meetings
For meetings other than the first annual general meeting, the agenda is normally set out in the by-laws. If not, the Council will normally follow a fairly standard agenda which includes:
call the meeting to order
elect or appoint a chairperson
proof of notice of meeting
call the roll and establish the quorum
amend and adopt the agenda
read and dispose of minutes of the previous meeting
financial report (annual audited financial statements, budget, appointment of auditors)
new business (often includes owners’ questions and comments)
election of Council members
The Act and the Corporation` By-laws will determine a parcel proprietor`s voting rights. First, if title to the unit is mortgaged, the end-financier may want to attend the meeting and vote, the owner cannot vote. This rarely happens but the Act requires that the end-financier be informed of this meeting and borrower should get permission to be appointed as proxy to attend the meeting. Second, if a registered proprietor owes money to the Corporation before the meeting, neither the owner nor any mortgagee on that unit can vote. Owners need to understand that they must be current with their contributions and other financial obligations to the Corporation to enable them to vote. They must pay any outstanding amounts the day before the meeting.
Preparation for parcel owners
Just as the Council prepares, so must owners prepare for the AGM. Consider the following steps:
watch out for notices on upcoming meeting (usually sent out well before the actual notice of the meeting).
think about any items you may want to discuss at the AGM. Write the items in a letter and send it to the Board.
read the by-laws, meeting notice, agenda and any information sent with the meeting notice. Prepare your comments and questions. Get ready to discuss motion and vote on motions.
think about ways you can contribute to the strata development by volunteering.
pay your service charges and any other money owed to the Corporation by the day before the meeting.
arrange to attend the meeting or complete, sign and give your proxy to someone on your behalf. If you choose a proxy, inform that person of your questions or comments to pass on.
if you choose to attend the meeting, plan to arrive half (1/2) an hour early for registration and take all your documents with you (by-laws, meeting notice, documents sent with the meeting notice, budget, financial statements, etc.)
The success of a strata MC can only come from active participation from its members. Whether one participates in the meetings or volunteers to be a council member, strata owners should know that major decisions are made at these meetings and should strive to attend each and every meeting called. The spirit of caring for others in the community can only improve one’s life and not make it worse.
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At RM120,000 the 1-bedroom serviced apartment in the heart of Kuala Lumpur seems like a dream investment for Lee. Her office is close by and although the unit is only a modest 400 sq ft, Lee, an executive, is not put off – she is single and does not need a lot of space. And should she decide not to stay in the unit, she could always go for the leaseback option offered by the developer.
Lee is among the increasing number of property investors who buy serviced apartments, as attested by developers of several serviced apartments who tell City & Country that many of their buyers are owner-occupiers. One developer says that about 70 per cent of his buyers are owner-occupiers. Given the growing demand, it is little wonder then that developers with commercial land are watching this segment of the market like hawks.
Unlike apartments and condominiums, serviced apartments are built on land with commercial status. Since the commercial subsector of the property market is not very exciting these days, building serviced apartments instead of shop offices and the like would seem like a good bet.
There are serviced apartments and there are serviced apartments. Since Kuala Lumpur’s maiden serviced apartment development – the 240-unit Micasa Hotel Apartments along Jalan Tun Razak was completed in 1988 – there are now some 8,642 units scattered both within the city centre and in the suburbs. The Residential Property Stock Report (3Q 2002) by the National Property Information Centre indicates that during the period under review, 986 units were under construction while work on another 120 units started. In addition to that, the authorities approved the building of yet another 208 units.
While serviced apartments started off catering to the business traveller and the expatriate, they are also now popular with tourists. Thus developers’ targeting of investors who are open to leaseback schemes tied to the sale.
DTZ Debenham Tie Leung executive director Brian Koh says besides housekeeping, a serviced apartment should also provide room service, business centre service, concierge, self-service laundrette, cafe, nursery, security and repair services.
Of late however, a new breed of serviced apartments has entered the scene. Simply identified by the market as “serviced residences”, this property type is also targeted at owner-occupiers. Unlike most serviced apartments which are often found within the city centre, these serviced residences are mushrooming in the suburbs like Sri Hartamas, Mont’Kiara, Petaling Jaya and Shah Alam.
While these properties may appear to be an attractive option for prospective homeowners – like Lee – there are underlying differences between owning a serviced apartment and an apartment and it pays to be in the know.
Serviced apartments, for example, carry certain “hidden costs” like higher utility charges. Their development is also not governed by the Housing Development Act.
Side stepping the Housing Development Act?
Zerin Properties CEO Previndran Singhe suspects that developers are selling residential-based properties as serviced apartments as a way around the strict rules and guidelines of the Housing Development Act (HDA).
But Malaysia Land Properties Sdn Bhd (Mayland) general manager Eva Hui disagrees, arguing that “developers have to look at the location factor and that although the land may have a commercial title, it does not mean that they have to build an office building”. (Mayland, a member of the Hong Kong-based Far East Consortium Group, has several serviced apartment projects in the Klang Valley and Johor Baru.)
“We use location to decide on the product�K [and] when we buy land we look at location which is why we focus on areas like Sri Hartamas or the city centre,” Hui says. Apart from serviced apartments, the company is also developing landed and strata housing and shop units.
Previndran stays unconvinced. He maintains that developers go for serviced apartments to avoid the HDA. “The developers [of serviced apartments] do not have to get a Housing Developers Licence, apply for the Advertising Permit and Housing Developers Account before launching and collecting deposits and payments. In the HDA, there is a compulsory adoption of the standard sale and purchase (S&P) agreement under schedule G and H. There is no scope for any negotiations on the terms and conditions. Also in the HDA no bookings can be collected, only the 10 per cent deposit�K the timing for the completion is also strictly governed,” he argues.
Developers of serviced apartments contacted by City & Country, meanwhile, say although they are not bound by HDA regulations, they do adopt some of the rules. The developer of a serviced apartment in Shah Alam says in their case, the S&P is modelled as far as possible after the HDA. He, requesting anonymity, concedes that they do not follow it strictly. “Before the amendment to the act [HDA], buyers of projects that were abandoned were not given a refund for money paid, but we included that [clause] in our S&P agreement,” he continues.
As far as Previndran is concerned, prospective buyers should pay attention to the S&P agreement and its terms. His advice: Ensure that the S&P is equitable for both parties�K there is no such thing as a standard S&P agreement. Details like the completion time, available recourse if the development is delayed, duration of the defects liability period and the setting up of the management corporation must be taken note of.
Prospective investors of serviced apartments should take note that they are technically commercial properties and the water and electricity charges are therefore levied accordingly.
While this has put off some prospective buyers, a developer in Shah Alam says it has discussed with Tenaga Nasional Bhd for the electricity charges of its current development to be based on a residential property. “We have received indication that the rates will be similar to residential property,” he says.
Property consultants point out that besides the higher utility bills, owners of serviced apartments are also slapped with higher assessment charges and quit rent. According to Previndran, quit rent in Kuala Lumpur is calculated at 65 sen psm for residential land and RM4 psm for commercial land. The assessment charges for residential and commercial property, meanwhile, are calculated at 6.0 and 12 per cent of the annual value, respectively. (This means owners of condominiums in the pricey Bangsar or Mont’Kiara area will probably pay higher assessment fees than those of serviced apartments in, for instance, Shah Alam.)
DTZ’s Koh says car parks may not be sold as part of the accessory parcel in serviced apartments, so parking charges may be levied. Most developers charge housekeeping and laundry service on a pay-per-use basis.
In any strata housing development, property management – involving the maintenance of common property and ensuring a growth of the capital value of the property – is key.
In the case of Mayland’s serviced apartments, Hui assures buyers that they have nothing to worry about as both the management and maintenance are undertaken by Dorsett Hotel International – a chain owned by the Far East Consortium Group.
Besides managing the Dorsett Regency Hotel on Jalan Imbi, Kuala Lumpur, Dorsett Hotel International is behind the management of all of Far East Consortium Group’s serviced apartments worldwide.
Managing a serviced apartment development and providing the full range of housekeeping services is not an easy task, Hui stresses, adding that a developer with no experience may find it difficult to provide good service.
Similar to a strata housing development, the owners have to set up a management corporation upon issuance of the strata title. “If at the end of the day they decide that they do not want Dorsett [Hotel International] they can ask other property managers to manage the property�K but whether the latter can provide the services is another matter,” she adds.
In January this year, Housing and Local Government Minister Datuk Seri Ong Ka Ting said although serviced apartments were not governed by the Housing Development Act, the ministry would help mediate between buyers, developers and local authorities if any problems arise.
In the meantime, DTZ’s Koh says an avenue for buyers to seek recourse would be via the courts, as is the case for any commercial property.
Filed under: Building & Common Property Act, Management Corporation | 6 Comments
This blog is meant for sharing informations, highlighting relevant issues and promote interaction of all other JMB in Malaysia
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Tags: Act 663, jmb, jmc, mc, strata title
Welcome to Joint Management Body.
The Building & Common Property (Maintenance & Management) Act 2007 (Act 663) was enacted by the Malaysian government recently for the proper maintenance and management of buildings and the common property, after delivery of vacant possession of the premises to the purchasers but before the Management Corporation is formed. This new law came into force on April 12, 2007. It applies to Peninsular Malaysia and the Federal Territory of Labuan.
The JMB must be formed after 12 months delivery of vacant possession.
One of the most impotant duties of JMB is Insurance.
The powers and duties of the JMB are enumerated by Section 8 of the Act which stated
8. (1)(c) to insure and keep insured the building to the replacement value of the building against fire and such other risks as may be determined by the Body;
8. (1)(d) to apply insurance moneys received by the Body in respect of damage to the building for the rebuilding and reinstatement of that building;
8. (3) The Body shall be deemed—
(a) for the purposes of effecting any insurance under paragraph (1)(c), to have an insurable interest in the building equal to its replacement value or any value as determined by the Body; and
(b) for the purposes of effecting any insurance under paragraph (1)(d), to have an insurable interest in the subject matter of the insurance.
The Joint Management Body must insured the following insurance:
1. Fire & All perils Insurance (Min perils Subsidence & Landslip, RSMD & BOW)
Building – For all the units that is individually own including all the common property.
In this case when the purchaser have a Loan with the Bank, the purchaser need not buy an additional insurance and can use the individual “Certificate of Insurance” issued from the Master policy.
Reinstatement Value (valuation report by an accredited quantity surveyor at least once in 5 years)
Removal of Debris
Architect & surveyor Fee
Rent Clause 2. Public Liability Insurance
Legal liability to pay compensation for accidental bodily injury or accidental damage to the property to the Vistors for using the common property of the Building.
Under Section 4 Establishment of a Joint Management Body
(2) The Body established by subsection (1) shall be a body corporate having perpetual succession and a common seal.
(3) The Body may sue and be sued in its name.
(4) The Body shall comprise the developer and the purchasers.
As the JMB is a body corporate the volunteered committee members can now be sued by the purchasers for Breach of Duty. An E&O or a PL policy to protected the personal liability of the individual committee.
3. Error & Ommission or Professional Liability Insurance
The Insurer will pay on behalf of any Insured all Damages resulting from any Claim for any Breach of Duty of the Insured.
N/B The policy should be placed immediately after the formation of the JMB.
Strata Title Risks Solution:
- Fire Insurance
- Fire Consequential Loss
- All Risk Insurance
- Crime Insurance ( Burglary & Money)
- Plate Glass Insurance
- Machinery Breakdown Insurance
- Public Liability Insurance
- Property Terrorism
- Professional Indemnity for Joint Management Body ( JMB) or Management Corporation (MC)
For more information visit us at http://sites.google.com/site/chrisacompany/ under Strata Title Insurance
Filed under: Insurance | 130 Comments
Tags: Act 663, jmb, jmc, mc, strata title