TO: MEMBERS OF PARLIAMENT

 MEMORANDUM from House Buyers Association in respect of the proposed amendments to Strata Titles Act, 1985.

3rd April, 2001

Re: Amendments to Strata Titles Act, 1985

We refer to the above matter.

House Buyers Association ("HBA") applauds the quick, reaction and timely initiatives on the exigencies of the matter to propose amendments to the Act.

While the amendments are considered expedient and vital, as a stop gap measure to curb undesirable trend practiced by Housing Developers in the building industry, it is the Association's considered opinion that in the long run it would be preferable if a thorough review would be carried out on the existing Act or to replace it with one that would suit the present day prevailing conditions. This contention was prompted largely on the basis that the existing Act which was passed in 1985, might be construed to have surpassed its effectiveness over such a long period of time and in the chase taken by developers to build houses to cater for the market. The Malaysian strata titles legislation owes its origin to the Conveyancing (Strata Titles) Act (Cap. 277, 1970) which itself was modeled on the New South Wales Legislation. The old Act and other such legislation in New South Wales has since been repealed and is now reformed into "Strata Scheme Management Act, 1996". Perhaps, we, too, must consolidate our ideas and we should reform the entire stratified properties. HBA is of the opinion that we will not be well served by the proposed amendment. It would be best to start a new Enactment.

Nevertheless, our committee have made a study on the proposed amendments and noted that they were intended to streamline the existing Act as well as to serve as deterrents to developers who had deliberately flouted the law by taking advantage of unprotected house buyers. It was on these premises, that HBA would like to contribute by making some comments on the proposed amendments, for whatever they are worth as representing the views of thousands of house buyers who have always been on the loosing end in their dealings with the developers in the hope that their earnestness for a more protective Act would be met with due consideration.

1. Section 4

Proposal to amend the definition of "proprietor" in the Act. This amendment seeks to include the Developer as a party to the Act in instances where the proprietor and developer of the building are different parties and in such instances the word original proprietor would include the developer of the project as well.

2. Proposed amendments to Section 8(5)

We are unable to comprehend the rationale for capping the minimum fine in the second limb of the statement. The perception is that penalties should be increased with time instead of being reduced. In order to create a heavier impact and to be sufficient deterrence, the penalty to be imposed ought to be of a certain magnitude that could effectively deter offenders from committing the act.

Housing developers are not petty traders and an amount of RM100,000 is justified as a standard penalty for those developers who deliberately violate it. For further delay committed by offenders, a minimum fine of RM1,000.00 per day should be further imposed to make them realize the consequences and that it was not worth while to ignore the Law.

Perhaps, provisions should be allowed for all relevant authorities, like the Department of Survey, Land Office, State authorities etc. to automatically freeze all other applications for housing development of the same developer pending the compliance of this provision.

3. Section 8

This section is also vague on the period to submit application. Perhaps this clause should be re-structured to give it certainty. The provision of this section implies that parcels/units within building are sold only upon completion. Bearing in mind that units are sold prior to the completion of the building and that some of the conditions in Section 10 can only be complied with on completed units, it is proposed that the 6 months period be calculated upon commencement of work on building site in accordance with the 1st Schedule of the Payment of Schedule G or H.

Further proposals:

• to delete Sub-section (6) and replace it with a provision which is similar to sub-section (3) of section 7.

• that a qualified/provisional strata title be issued pending the final measurement of the built of area of the parcel and other compliance of Section 10. Thereafter, upon the final submission of all plans, a final document of strata title be issued.

• to make it mandatory for proprietor/developer to maintain a register in its office which is accessible to the public. In this register, all relevant forms, correspondences to and from the relevant authorities for the application of subdivision will be kept and open for inspection by the interested parties. In this way, all purchasers will be kept informed of the development of applications and on whether developer/proprietor has complied with this section. On discovery of any breaches of this section, the purchaser can notify the Director and appropriate action can then be taken against the developer. Propose form of penalty is for a purchaser or any party having an interest in the property to petition to the Director to direct all financiers/purchasers to stop payment under the Schedules G or H to the Developer until the breach has been rectified. Developer will not be allowed to charge interest on late payment upon this direction by the Director.

4. Section 15

To add a further priviso to make it the responsibility of the proprietor/developer to remove all caveats lodged against the master title within a period of six (6) months, upon the notification from the Registrar that lot is so subject to the caveats entered on the master title, at the proprietor/developer's own cost and expense.

5. Section 39

This amendment may impose further encumbrances on the part of the management corporation (hereinafter "MC"). A provision to provide for a letter from the MC after the first AGM to the Registrar, notifying the Registrar of the MC's establishment should be sufficient.

6. Section 41

To add further amendments to reflect:

• a duty of trust imposed on the proprietor/developer for the purchasers on the management fees received prior to the setting up of the MC;

• a duty on the developer to keep proper books of accounts in respect of all sums of money received and expended, specifying the matters in relation to which the receipts and expenditure took place;

• to present and hand over the audited accounts, the balance of the management fees (if any) paid by the proprietors to the developer, prior to the setting up of the MC during the first AGM;

• to increase the fine to RM5000.00.

7. Proposed to redefine Section 46(d)

Presently, maintenance services of most stratified properties and high-rise apartments are provided by the housing developers themselves or by their appointed subsidiary companies who lack the competence of qualified property managers resulting in mundane maintenance work and unsatisfactory services.

Huge sums of money collected as maintenance fees and the sinking fund accounts are under their control. There is a need for these accounts to be properly managed and made transparent to unit owners and expenditure statements, which is not being currently practiced, although the onus of doing it rest with the Management Companies.

To put in check the blatant disregard of their obligations, there should be proper guidelines in the Act, that requires section 46(d) of the Strata Titles Act to be redefined.

To eliminate problems relating to non-application of strata title, HBA proposes that all necessary payments whether surveyor fees, premiums, processing fees for sub-division, application for strata title etc. should be effected to a proposed Strata Title Board prior (meaning pre-paid) to any building plans being approved. This is not impossible as the Chief Minister of Malacca YB Dato Wira Mohd. Ali Rustam has adopted and implemented the concept.

8. Section 50

Propose  to add in:

• a sub-section (4) to set a time limit to the appointment of the managing agent. A period of two (2) years or until the next election of council to take over the MC;

• a sub-section (5) for the removal or replacement of the managing agent upon the application of a proprietor or any other person or body having a registered interest which content is similar to subsection (1);

• a sub-section (6) to provide for the provisions of section 55 to apply in the event the managing agent breaches the provisions of this Part VII.

The concept in the proposed Section 50 is good except that the identity of the managing agent has to be identified. What are the managing agent's responsibilities? What if the managing agent is unable to perform their responsibilities? Capacity to be liable or negligence? How is the managing agent to work with the MC? Must the books be handed over or must the managing agent take out an insurance policy?

9. Section 55A

We recommend that the monies received from "fines" should be paid to the MC's coffer and for failure to pay the fines, it should be made out to be a statutory criminal offence.

10. New PART IXA

Section 67 M

There may be disputes on duplicity of insurance. It is suggested that there should be a uniform insurance.

Section 67 N & 67 Q

We propose that the Strata Title Board should be able to take applications for hearing on disputes on anything related to Common Properties.

Section 67 O

This is pursuing of someone's action as oppose to the common law "maintenance of an action".

11. Other sections not mentioned in the Amendment

Section 9 (1) (i)

To increase the period of leasehold land to seventy (70) years as to shorten the application process on the part of the relevant authority.

Section 10

All those conditions that require exact measurement/technical specifications that can only be complied on completed parcels and buildings have to be amended to provide for approximate estimation in accordance with the building plans and specifications. We recommend an additional sub-section to provide for subsequent submission of actual built-up area of unit or such other technical specifications immediately upon the completion of buildings. Architects and quantity surveyors should be consulted on this area.

Section 14A

To increase the fine to RM10,000 and to a further fine of RM1,000 for each day of the offence.

Section 54

To include the mode of service of documents to all proprietors of parcels for notices of meetings, etc.

Section 55

To include the managing agent as a party to be liable.

Other proposals

• to set up a single strata title department to expedite the handling of this area of the law as too many authorities are involved. There should also be a time frame for the approving officer to complete the process of strata to reflect efficiency.

• to formalize a standardized Deed of Mutual Covenants as Schedule 4 for all developers and purchasers to adopt to ensure better protection for purchasers and to ensure that there are no uncertainty of house rules.

• all "fines" which are to be collected should be the rights of entitlement of the MC concern.

12. Problems faced by house buyers of stratified properties

Under the Act, a management corporation could only assume its responsibilities and functions of managing the properties of the subdivided units, if the building has been registered with separate titles. The period between the submission of application by the developers and the issuance of titles normally take a long time during which the management of the building are left in the hands of the developers or their appointed subsidiaries who are 'hand in glove' with one another. Usually this category of management do not see eye to eye with the Residents' Association resulting in disputes over several issues regarding the maintenance of the property.

HBA had expected that incidents like this, could have been resolved in the proposed  amendments of the Act which would empower the setting up of an interim joint co-operation consisting of members of the Residents' Association and the management who, pending the registration of  management corporation to provide the management of services to the property.

An amendment to the Act to put off the nagging problems at rest between the feuding parties had been much expected by house buyers.

HBA is of the opinion that these proposed amendments to the Strata Titles Act, 1985, should be best tabled a the same time as the Common Property (Maintenance & Management) Bill which has been drawn up by the Ministry of Housing and Local Government, as both are related and should be debated together with a full understanding and complete analysis of the issues affecting house buyers nationwide.

Our comments aforesaid are supplementary to our stand that no amount of law will be able to eliminate or solve the problems unless they are strictly enforced.

Thank you.

Yours sincerely,

Signed by Datuk Hj. Zainuddin b. Bachik

(Chairman)