Managing the Management Corporations

Federal Territory PTG - Guidelines on managing Management Corporations

The phenomenal growth of high-rise building development in recent years has posed new challenges in the field of management of subdivided buildings. The law provides for a management corporation (MC) for the proper upkeep and well-being of the subdivided buildings in which all proprietors have a common interest. It is therefore vital that all parties, developers and parcel owners alike, should have a clear understanding of their respective rights and responsibilities pertaining to management corporation....

The Federal Territory of Kuala Lumpur Lands & Mines Department has published a useful book providing guidelines on managing Management Corporations.

The guidelines serves to explain the role and functions of the Management Corporations as provided for in the Strata Titles Act 1985 and the Strata Titles (Federal Territory of Kuala Lumpur) Rules 1988 (gazetted vide P.U. (A)164/1985).

We reproduce below excerpts from the publication for general information.

Formation of the Management Corporation

The MC is the medium through which the proprietors control and manage the strata scheme pursuant to the Strata Titles Act 1985 and the Rules made thereunder. It automatically comes into being upon the opening of a book of the strata register in respect of a subdivided building. The MC is known by the name appearing in the book of the strata register relating to the subdivided building. It is a body corporate having perpetual succession and a common seal. It is not necessary to register it under the Societies Act 1966 or any other law.

In the case of a subdivided low-cost building, however, the MC does not come into existence automatically with the opening of the strata register. Under section 64 of the Strata Titles Act 1985, the MC comes into existence upon the completion of the transfer of strata title in respect of all the parcels by the original proprietor. On the other hand, the proprietors, other than the original proprietor, having share units totaling more than half of the aggregate share units of all the parcels may apply o the Director of Lands and Mines for an order to establish the management corporation as provided for under section 64A.

This has the effect that the original proprietor shall continue to be responsible for the management and maintenance of the subdivided low-cost building until the MC is formed.

Constitution of Council

The MC is required to elect a council to act on its behalf comprising of between 4 to 14 members.

The Duties, Powers and Responsibilities of the MC

The powers of the MC shall include the following:

To levy contributions from parcel proprietors;
To purchase, hire or otherwise acquire movable property for use as common property;
To borrow moneys required by it in the performance of its duties;
To secure the repayment of moneys borrowed by it and the payment of interest;
To do all things necessary for the performance of its duties;

The duties and responsibilities of the MC shall include the following:

To manage and properly maintain the common property;
To insure and keep insured the subdivided building against fire and other risks;
To pay insurance premiums, quit rent and other rates;
To comply with any notices or orders given by any public authorities to execute any works in respect of the common property;
To take necessary action if the parcel proprietor fails to comply with any orders of the public authorities within a reasonable time;
To prepare and maintain a strata roll for the subdivided building;
To be the custodian of the issue of the document of title of the relevant land;
To purchase additional land, grant or accept an easement
To provide an appropriate receptacle for postal deliveries.

Meetings of the Management Corporation

The Management Corporation goes into operation in two stages, namely the initial stage of management and the stage where the first annual general meeting of the MC has been convened after the initial period. "Initial period" is defined as the period commencing on the day on which the MC is formed and ending on the day on which there 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 a t least one-third of the aggregate share units.

Upon the formation of the MC, the original proprietor is duty bound to manage the subdivided building during the initial period. The original proprietor is required to convene the First Annual General Meeting of the MC within one month after the expiration of the initial period. Failure to comply with this requirement will render the original proprietor liable to prosecution and on conviction to a fine not exceeding RM1,000/=.

The Meeting shall decide on the following:
- Insurance matters;
- amount of contribution towards the management fund;
- number of council members and election of council should there be more than 3 parcel owners; and
- whether to amend, add or repeal any by-laws being in force prior to the meeting.
All management corporations must use the prescribed forms under Strata Titles Act 1985 (Strata Titles Federal Territory of Kuala Lumpur Rules 1988) in relation to the Annual General Meeting.

The elected council of the management corporation is required to file certified true copies of the following documents together with information on the management corporation with the Wilayah Persekutuan Kuala Lumpur Land Administrator within 28 days from the date of the Annual General Meeting;-
- audited accounts as tabled at the AGM;
- resolutions passed by the AGM; and
- minutes of the AGM.
The above documents must be submitted in Bahasa Malaysia. Upon receipt of the minutes of the first AGM, a 'PERAKUAN PERBADANAN PENGURUSAN' will be issued by the WPKL, Land Administrator under section 39 of the Strata Titles Act 1985.

Subsequent annual general meetings must be held within 15 months of the previously held meeting to receive accounts, elect council members and deal with other pertinent matters.. Extraordinary General Meetings may also be held as follows:-
- upon a requisition in writing made by the proprietors who are together entitled to at least one-quarter of the aggregate share units;
- upon receipt of a written directive from PTG for the transaction of such business as the PTG may direct;
- on such other occasion as it thinks fit; and
- if the PTG is satisfied that the council has not been properly constituted, he may authorize in writing any proprietor to convene an extraordinary general meeting for such purposes as may be approved by the PTG.
Financial Management

The Management Corporation shall establish a management fund to control, manage and administer common properties, pay taxes, rates and insurance premiums and also to undertake other obligations on behalf of the Management Corporation. It is also allowed to undertake investment activities, as may be approved by a general meeting. For the purpose of maintaining the management fund accounts, the Management Corporation, may, at a general meeting:-
- decide form time to time the amount of contribution to be levied on parcel owners according to their respective parcel share unit/temporary block ratios;
- decide on the interest payable by the parcel owners in respect of late payment of contributions. Interest payable, however must not exceed 10% per annum.
The management corporation shall maintain a special account in which shall be paid such portion of the contribution to the management fund for the purposes of meeting the costs of the following matters:-
- painting of any part of the building or structure;
- acquisition of any movable property for use in relation with the common property;
- replacement of fixtures and fittings comprised in any common property; and
- any other expenditure to meet a liability for maintenance or for settling any defaults in payment by a proprietor.
All management corporation are advised to keep proper accounting system for issuing/maintaining official receipts, cash vouchers, ledger and cash book.

By-Laws

The by-laws under the Third Schedule of Strata Titles Act, 1985 are applicable to all subdivided buildings.

Management corporations may, however, make additional by-laws and amend such by-laws through special resolution provided that such by-laws are not in contradiction with the Third Schedule of the Strata Titles Act, 1985. A copy of the above additional by-laws for the time being in force must be complied with by all parcel owners as well as the management corporation. Records of all such by-laws must be properly kept by Management Corporation for inspection.

Warrant of Attachment

The PTG may grant a warrant of attachment to a management corporation to enable it to recover money due to it by a parcel owner who has failed to make payment despite being issued with written notice. This warrant is issued in Form 7A in accordance to Section 53A of Strata Titles Act, 1985.

Quit Rent

It is the legal obligation of the management corporation to pay annual rent on the land on which the building is erected as provided under section 43(1)(j) of the Strata Titles Act, 1985.

Failure of Management Corporation

If a proprietor or any of other person or body having registered interest in a parcel finds that that management corporation has not functioned satisfactorily, he may file such complaint to the State Authority to appoint a person or a body to exercise the powers and to discharge the duties and functions of the management corporation. If the State Authority is satisfied with the complaint, it may make such appointment under Section 50 of Strata Titles Act. All expenses incurred by the person or body appointed shall be charged on the management fund of the management corporation.

Management Corporation of Low Cost Properties

Management corporation for low-cost properties is not automatically formed upon opening of strata register, but only after all parcels have been transferred to buyers. As such, the original proprietor will still be responsible for the management of the properties until all parcels are transferred. Original proprietor, or parcel owners with share unit of more than half of total share unit of all parcels may apply to the PTG for an order to form a management corporation.

Upon formation of the management corporation, the original proprietor is obliged to convene the first annual general meeting of the corporation within one month of its formation. The meeting shall decide on whether the Management Corporation will manage the properties or to apply to the State Authority to appoint a person or a body to take over the management of the properties.

Note: A copy of the Guidelines is given to all Management Corporations operating in Wilayah Persekutuan Kuala Lumpur by the PTG