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22/03/08 NST-PROP

As the country enters a new era of democracy, all of us are beginning to realise the importance of information so we can be aware of our rights and obligations.

This is especially true for apartment owners concerned about the management and maintenance of their projects, which is now governed by the Building & Common Property (Maintenance and Management) Act 2007 (BCP Act).

With the passage of this piece of legislation through Parliament in December 2006 and its introduction to the property landscape on April 12 last year, a framework for the establishment of a Joint Management Body (JMB) and the appointment of a Commissioner of Buildings (CoB) to administer the Strata Titles Act 1985 are now in existence, as are rules relating to the rights and obligations of owners.

Here, we sift through the legal jargon and complex issues of the BCP Act to point out some areas of interest:

What are allocated share units?

Many of us are used to seeing the contribution owners have to make towards a project’s common fund based on rates such as “20 sen per square foot per month”. But what determines “per square foot”?

The BCP Act says this is based on “share units” that are “assigned to each parcel (owner) by a developer’s licensed land surveyor”.

In Sections 8(1)(a) and 23(2), the BCP Act elaborates that contributions for maintenance and management charges must be collected in proportion to this “allocated share units”.

The term can be found in an individual strata title and, since Dec 1, 2002, in Schedule 5 of the standard sale and purchase agreements governing stratified properties (Schedule H of the Housing Development (Control and Licensing) Regulations, 1989).

What is common property?

Section 2 of the BCP Act defines common property as “so much of the development area … such as the structural elements of the building … the exterior of all common parts of the building … facilities and installations and any part of the land used or capable of being used or enjoyed in common by all the occupiers of the building”.

These include stairs and fire escapes, entrances and exits, corridors and lobbies, lifts, refuse chutes and bins, drains and sewers, water tanks and pipes, wires, cables and ducts, playing fields and recreational areas, driveways, open spaces, car-parks and parking areas as well as walls and fences.

Of interest is the inclusion of car-parks, as it seems to imply that once the developer has added up all the lots that need to be provided (consisting of bays allocated to unit owners as accessory parcels plus those required for visitor parking) any extra parking lots would become “common property”.

Developer contribution for unsold units

Under Section 12 of the BCP Act, the JMB or the developer must maintain a register of purchasers and keep track of the number of unsold units in the project, while in Section 17(b), the developer is required to contribute to the charges attracted by the unsold units as if they have been sold.

This puts an end to the problem owners had in the past, when it was not known whether the developer actually paid its share or even when an available unit was sold.

“Hidden” information, disclosed

In Section 13 of the BCP Act, it is stipulated that both purchasers and intending purchasers have the right to know previously “classified” information such as:

• The time and manner that maintenance charges are due;

• The extent, if any, in which these charges have been paid;

• The credit balance of the Building Maintenance Fund and the amount committed or reserved for expenses already incurred;

• Any repairs intended to be carried out and their estimated expenditure; and

• The amount paid and to be paid by the developer in respect of the unsold units.

With the section, purchasers are now able to check the financial health of the project they intend to buy into, so that they can make informed decisions.

Formation of House Rules In the BCP Act, the document governing the proper maintenance and management of a project, is called the “House Rules” whereas in the Strata Title Act, it is known as “bylaws”.

When the JMB undertakes its job of crafting the House Rules, it must do so carefully, making sure it leaves no stone unturned as its lifespan is for the long term.

It must not overlook duties and enforcement, nor the addition of the mechanics governing the subdivision of buildings or land, which can be found in Schedule 3 of the Strata Titles Act.

Once drafted to satisfaction, the House Rules must be lodged with the CoB within 14 days of the JMB passing the resolution to this effect. Thereafter, it would probably be adopted as “by-laws” when the stratified project’s Management Corporation (MCorp) is formed.

Lifespan of the JMB

Three months after the MCorp has held its first general meeting, the JMB will be deemed dissolved. However, the people owning stratified units who were on the JMB can also serve in the MCorp if they are elected to the council.

To ensure smooth transfer of duties, the JMB must provide to the new set-up within a month of the first general meeting:

1) The house rules;

2) The audited accounts of the Building Maintenance Fund (if not audited, the JMB has three months to do so);

3) A list of all assets and liabilities; and

4) Records related to and necessary for the maintenance of the project and its common property.

If these documents are not provided, Section 15(3) of the BCP Act states that every JMB member would be committing an offence that upon conviction, would attract a fine of not more than RM10,000 and a further penalty not exceeding RM1,000 for every day the offence continues after conviction.

Setting up of a Building Maintenance Account (BMA)

For a stratified project that has not been delivered with Vacant Possession (VP) by April 12, 2007, Section 16 of the BCP Act says its developer must open the BMA before VP is issued.

For a project already given VP but without an MCorp, its developer can continue to collect the maintenance and management charges (as it had previously done), but it has to submit to the CoB the audited accounts of all monies received, in compliance with Section 21 of the BCP Act. The developer can then continue looking after the income received until the JMB has been formed.

Under either circumstance, though, the developer is obliged to:

1) Deposit all proceeds into the BMA within two working days of receiving the monies;

2) Pay all charges relating to the unsold units;

3) Cause the BMA to be properly kept;

4) Appoint a professional to annually audit the BMA; and

5) File the statement of accounts and auditor’s reports with the CoB within 14 days of the audit. (This is to give the CoB full access to the BMA and allow it to hear any disputes arising from the accounts.)

Setting up of the Building Management Fund and Sinking Fund

After the JMB is established, any surplus money in the BMA must be transferred to the Building Management Fund for its administration.

The JMB is also responsible for opening a separate Sinking Fund, which it can use to pay for the upkeep of the stratified project’s common areas. This includes painting or repainting, acquisition of movable property and the renewal or replacement of any fixture or fitting.

Appointment of a managing agent

The CoB can appoint a managing agent for a stratified project if the owners do not attend the first meeting or if there are no volunteers to be office bearers for the JMB.

Rectifying defects in common property

When the developer delivers VP to the owners, it must also deposit with the CoB a sum as prescribed by the State Authority that is sufficient to pay for any rectification work in any part of the common areas.

Upon expiry of the standard Defect Liability Period (DLP), the unutilised portion of the deposit will be refunded to the developer.

This means the JMB should conduct a joint inspection of the common areas with the developer as soon as VP has been given so that any defects can be rectified before the deposit is claimed back.

Duties of owners

With the BCP Act, the responsibilities of individual parcel owners are also brought into clearer focus, especially with regard to payment of maintenance and management charges.

Should they fail to pay within 14 days of the due date, the BCP Act states they would be facing a late payment penalty not exceeding 10 per cent per annum.

Continued default without any reasonable excuse would attract a fine upon conviction of not more than RM5,000 and a further penalty not exceeding RM50 for every day the offence continues after conviction.

Owners of stratified units should thus realise their three-fold obligations: First, as individual parcel owners; second, as co-owners of the common areas and land in the stratified project; and third, as members of a body entrusted to manage and maintain the project.

Only such thinking will create a harmonious community.

Good maintenance, efficient management and desirable homes are the result of a diligent and conscientious JMB (or MCorp) team, supportive and understanding owners … and a steady flow of income into the common fund.

Without these ingredients, the outcome would be disastrous.

With the advent of the BCP Act, owners needn’t wait for strata titles to be issued before forming a body to take charge of their projects. They can now be at the helm of their destinies from a much earlier stage.


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