Income+
Upholding your rights as strata property owners
Lim Siew May 
Stratified properties are a form of community living that are subject to different laws, rules and regulations to govern the relationship and obligations of the respective parties
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NEWS of authorities raiding apartments and confiscating belongings of strata property owners who have defaulted on maintenance fees grabbed headlines recently.

This casts a spotlight on the perennial problem in the collection of such fees, which has plagued many strata properties.

While strata properties are commonly used to describe high-rise units like condominiums and apartments, they also extend to a lesser-known category known as ”horizontal strata”, which describes gated and guarded landed developments.

Suffice to say, insufficient funds will lead to the poor upkeep of the shared facilities, common areas and even trigger security concerns. On the other side of the coin, some strata owners are unhappy with the performance of their management corporations, and feel shortchanged that they are required to pay maintenance fees every month.

Ultimately, the vicious chicken-and-egg dilemma will lead to subpar living conditions and a drop in property value, creating a “lose-lose” proposition for property investors, homeowners and tenants. 

Is there a better way to deal with the common dilemmas of strata living? Here, two lawyers weigh in on the controversy in recovering outstanding payment through confiscation of defaulters’ belongings, and solutions to the contentious issues of communal living.

 

Effective in recovering payment

Yong Siew Lee, partner of law firm Yong SL & Partners, explains the typical process to recover outstanding payment from errant strata property owners.

Strata owners should read and review the audited annual reports, attend the AGM and EGM as well as understand the current and future financial situation of their condominiums or apartments, Yong urges

 

She says a developer or any member of the joint management committee of a condominium or apartment may serve a written notice to demand outstanding payment from the strata owner who has been given several oral and/or written reminders.

If it remains unpaid within 14 days from the date of such notice, the Commissioner of Buildings (COB) may enter into the defaulter’s unit with a warrant, and confiscate the defaulter’s removable properties.

Kenny Seng, partner of Seng & Partners, points out the power to forcefully enter a defaulting owner’s property and seize their belongings is nothing new – it already existed in the Strata Title Act 1985. For unknown reasons, however, this power wasn’t exercised often by the COB, presumably due to budget constraints or the lack of necessary enforcement personnel in the respective municipalities, he notes.

While some may see forceful entry as a contentious move in recovering payment, Yong believes confiscating a defaulter’s removable properties serves as a useful tool to collect outstanding maintenance fees, especially when a defaulter has been stubborn.

After all, the developer or the management corporation may be unable to upkeep a condominium or an apartment if the total outstanding maintenance fees are high, she explains.

Aside from confiscating defaulters’ removable properties, the developer or the management corporation may initiate legal actions or file statement of claims against the defaulters with the Strata Management Tribunal (SMT) , she adds.

That said, she believes the developer or the management corporation should give defaulters a few reminders on their outstanding maintenance fees and sinking fund before issuing letters of demand.

Seng concurs with her view on the tougher enforcement. “Previously, the preferred cause of action by the COB was to issue warning letters to the defaulters, which were obviously ineffective. I personally believe the change in stance should be applauded, harsh as it may seem, but without such enforcements, our law would be nothing more than a disregarded piece of paper,” he says.

 

Management body’s role

While unpopular to some residents and property owners, management corporations don’t have the easiest of jobs. In Seng’s view, running a stratified property is akin to running a non-profit organisation – you have no buffer or coffer to rely on, yet you still need to stay afloat financially to continue serving the intended cause.

“In the case of a joint management body [JMB] or management corporation [collectively the management body] of a stratified property, that intended cause would be to maintain the common property and serve the community,” he says.

When some owners refuse to pay maintenance fees and sinking funds, it creates a void or shortfall in the anticipated budget, which will have a domino effect on the subsequent budgets. When compounded, this may cripple the management body and in turn, affect the innocent owners’ peaceful enjoyment of their property and common property, he explains.

To deter and punish such behaviour, this leads Seng to conclude that it is important to accord the management body effective and efficient mechanics.

With the advent of the Strata Management Act 2013 (SMA), enforcement powers were codified, the number of offences increased and punishments became harsher. Given that more stratified properties are grappling with poor maintenance, these developments are all necessary and are a step in the right direction, Seng rationalises. 

“People need to understand that stratified properties are a form of community living that entails different set of responsibilities, and are subject to different laws, rules and regulations to govern the relationship and obligations of the respective parties. These include the developer, joint management body, management corporation, owners and more,” he says.

A change of mindset is thus required to effect sustainable and equitable communal living. “For the community to work and prosper, all parties are required to do their part. For the owners, that would mean paying their monthly maintenance and sinking fund in a timely manner.

“When one fails to do so, then the law will step in to punish such behaviour. This will do justice to the innocent, such as owners who have been paying diligently,” Seng explains.

 

Knowing your rights

Suffice to say, it helps to know your key rights as a strata owners and assert them to your advantage, especially when you have been paying your dues dutifully.

One area that often catches strata owners off guard is their rights during the defect liability period, Yong highlights. “Strata owners may claim for any defect in their properties such as cracks on the wall, watermarks, water leakage, bad paint work and more within the defect liability period of 24 months. This takes place from the date the owners receive delivery of vacant possession and keys to their properties,” she points out.

Above all, strata owners should also play a more proactive role in safeguarding their collective interests. As Yong puts it, strata owners are akin to shareholders of a company, which is why they receive audited annual reports of their condominiums or apartments on a yearly basis.

“They should read and review the audited annual reports, attend the annual general meetings [AGM] and extraordinary general meetings [EGM], as well as understand the current and future financial situation of their condominiums or apartments,” she urges. 

Seng says based on his observation, the right to participate in the management of the property is often, if not, always overlooked

Seng couldn’t agree more. Based on his observation, the right to participate in the management of the property is often, if not, always overlooked. “The biggest feature of a stratified property is the existence of the common property and the management body that manages it. All the maintenance and sinking funds paid go towards the management of this common property.

“Owners should play an active role in the management by attending the AGM/EGM and voting on motions proposed, or even proposing for a motion to be passed, provided they are not disqualified by provisions in the SMA,” he says.

Communal living means co-existing with people of diverse ways of life. With this, disagreements and issues are bound to happen. Seng believes that an AGM/EGM serves as the platform for owners to highlight and discuss problems, as well as to raise each other’s awareness on a particular issue. In turn, a solution may be proposed and adopted.

“Questions can be asked to understand the rationale on certain course of actions taken. Further, playing an active role can serve as a check on the management body and on how the monies collected are spent, ensuring that any problems with such will be nipped in the bud,” Seng explains.

It’s normal to feel that your one vote carries little impact in the grander scheme of things, which ultimately leads to apathy. But Seng offers this food for thought: “People need to understand regardless if it is one voice or one vote, every little one counts and may make a huge difference in the direction of the property management that will affect the owners and community.”

“Participation is thus a key right that, though often overlooked, should be exercised to the advantage of the owners,” he adds.

Withholding payment not the way

IT is not uncommon to hear strata property owners lamenting how their joint management body or management corporation could have done a better job safeguarding the residents’ welfare.

When there’s a perceived room for improvement, even the most law-abiding owners may ponder over such a dilemma – should you continue paying maintenance fees and sinking fund when you have not been getting what you want?

Under the Strata Management Act 2013, not paying or withholding payment is an offence, even if you feel that your management body has fallen short of expectations

The right course of action is to lodge a formal complaint against the developer or the management corporation with the Commissioner of Buildings (COB) Division under the Property Management and Valuation Department.

 

“It may not be advisable to withhold payment of maintenance fees, as you will not be entitled to vote in the annual general meetings [AGM] and/or extraordinary general meetings [EGM] of your condominium or apartment. Alternatively, you may lodge a formal complaint to the Strata Management Tribunal on the performance of the developer or the management corporation,” says Yong Siew Lee, partner of law firm Yong SL & Partners.

Kenny Seng, partner of Seng & Partners, echoes her view. He cautions that under the Strata Management Act 2013 (SMA) regime, not paying or withholding payment is an offence, and doing so will ultimately affect the owners, not the management body.

There are other avenues for you to air your grievances constructively. “If the management body is not performing, owners should either requisite for a motion to replace the members of the management body [usually the management committee members] be included in the agenda of the upcoming AGM or, at any time else, requisite an EGM be convened to move such motion,” he explains.

Should the management body refuse to call for a general meeting, owners can file a claim with the new Strata Management Tribunal, or lodge a complaint with the COB, Seng says.

He cautions that what constitutes a job well done, as opposed to not performing at all or going beyond the defined responsibilities in SMA, is a subjective matter.

“Whether the Strata Management Tribunal or the Commissioner of Buildings decides in favour of the owners is thus, highly dependent on the facts. This should not, of course, put owners off from pursuing what is right,” he says. “In the end, I believe common sense and justice will prevail to preserve what is right.” 

 

When maintenance fees are increased drastically

HAVE you ever been influenced to buy a strata property due to its competitive monthly maintenance fees, only to have a rude awakening later when the fees are increased drastically within a short time frame?

Kenny Seng, partner of Seng & Partners, explains that when the developer takes over the management of the property from the date of vacant possession till the formation of the joint management body (JMB), it will set the maintenance and sinking fund rate payable.

Should owners disagree with the said rates, they may review it before the Commissioner of Buildings (COB). Consequently, the rates may be adjusted to a fair and reasonable sum.

However, there is no guarantee that the rates will stay the same for a prolonged period. Seng points out that after the formation of the JMB and during its first annual general meeting (AGM), it is required to determine the rates again. What this implies is that the JMB may lower, increase or adopt the existing rates, subject to the passing of that motion.

The same process is repeated again upon the formation of the management corporation, adds Seng. “The JMB or management corporation may also, at any other AGM/extraordinary general meeting [EGM], propose to adjust the rates. It is up to the owners forming the quorum whether to approve the same. Such proposals are usually supported by a budget, with justifications which the owners can question and scrutinise,” he explains.

In Seng’s view, raising or lowering rates is highly dependent on the circumstances. “It may be as simple as the JMB genuinely requiring the additional funds to manage the property due to poor collection, or it may be that the developer was subsidising the rates to keep the attractiveness of the unsold units.

“When the JMB took over, it may have noticed from the audited accounts that it had to increase the rates to cover the gap created by the subsidy which may have been stopped by the developer,” he explains.

Should you be unhappy with the newly-increased rates levied on you, you may write in to the COB Division under the Property Management and Valuation Department and request for a review, advises Yong Siew Lee, partner of law firm Yong SL & Partners.

“COB may either re-determine it, or instruct the developer or joint management body [JMB] to appoint a registered property manager to recommend an amount for the maintenance fees. Alternatively, you may lodge a formal complaint to the Strata Management Tribunal on the maintenance fees rate determined by the developer of the management corporation,” she explains.

Meanwhile, Seng believes it would generally be difficult to challenge a properly-passed motion. After all, the motion has been raised and passed through the democratic process at the AGM/EGM. “In any event, the moneies raised through the collection of the maintenance fees and sinking fund will only be used for the property within the defined boundaries of the Strata Management Act 2013,” he points out.

“If, however, an owner wishes to dispute the rates, he or she may raise an agenda during the AGM/EGM to review the rates, and adjust them, subject to the approval of the quorum in place. My opinion is that the Strata Management Tribunal would not be willing to intervene on the rates, so long as they have been properly approved during the AGM/EGM of the property,” Seng concludes.

 



This article first appeared in Focus Malaysia Issue 255.