Contributed by property valuer Mary Lau

In my previous article on this subject, I wrote that different rates of charges have been allowed during the joint management body (JMB) period in a mixed development project and the potential abuse that can cause.

The decision of the High Court in the Menara Rajawali case allowing differential rates for different categories has put individual owners at risk of dominant groups taking advantage. A drop of the ballot by their representatives could overpower other voters at the AGM. This leaves owners in a bit of a conundrum if questionable rates are imposed. Although the facts of the case are reasonable, I do find it a little unsettling that other complaints were deemed unnecessary considerations. Since different rates are allowed, it would have helped if the ruling also included that proposed rates be approved by authorities first before they are put up for voting at the AGM to ensure fairness.

Apart from being a burden to owner-occupiers and investors, high rates would discourage potential buyers from taking up the premises. This could lead to poorer demand and market prices. Words of good intent will reach others if the JMB is controlled by en-bloc purchasers and the perils that poses.

Under the Strata Titles Act 1985 (Amendment 2013) Sec 17A, 2-tier management is allowed after the management corporation (MC) is formed. The MC can have Subsidiary MC (SMC) to manage the limited common property (LCP) which is allocated for the exclusive use and benefit of different category parcel owners. The LCP would be managed and maintained by the SMC the same way common property to all is managed by the main MC (SMA, Sec 64). The Act does not state why this set up is not spelled out for the JMB period.

This procedure requires a number of stringent steps to be fulfilled and approval from the MC is required to get the ball rolling. A comprehensive resolution needs to be submitted 30 days from the date of the EGM to give notice to owners. Voting by poll taken over 60 days has to yield at least two-thirds of the aggregate total number of shares. This is not easy to achieve if many owners have not paid for the transfer of their strata titles. If the majority in the MC does not cooperate, that is another hurdle. Nevertheless, having this avenue is better than none.

I understand that the National House Buyers Association has submitted numerous issues and made recommendations for amendments to Strata Management Act 2013 and Strata Management Regulations – among which is the formation of Sub-JMB.

Why the need for Sub JMB?

If there exists an unfavourable situation under single-tier management, the delay of the strata titles would prolong it. If there is a sub-JMB, the interests of different category parcel owners will be protected under their respective elected subcommittees. There would be better trust among themselves since all accounts, incomes, and expenses will be in their full control.

Currently, common areas exclusive to these owners are managed by the JMB. There have been disputes between JMB members, property managers, and owners, reflective of a mixed development project where I have an office unit. Our JMB is controlled by a few corporations and not all towers have representation in the JMB. Affected owners are unhappy with the differential rates passed at the AGM. These rates were worked out by the management. We question the higher rates imposed on certain categories under individual owners. Furthermore, issues pertinent to towers under affected owners have not been given sufficient attention. The brewing frustrations do not bode well for this place.

One question has surfaced: For owners who are paying higher charges, should they not be given more voting power at the AGM? Some have argued that this should be the case. This would be an issue if rates imposed are not justifiable.

A Sub JMB would eliminate these problems. They can focus on managing the LCP and set their own rates. With full authority and their own property manager, there would be no interference from the main MC and others. They will have their own Annual General Meetings and elections of committee members (SMA Sec 63).

Common properties that all category owners can use (whether they do or not) will come under the main JMB. This way, there will be no splitting of hairs that certain categories should pay lower charges to the MC if they use less of some of the common properties that are common to all.

In the case of insurance, where the LCP cannot be neatly separated from the premises under the MC, the cost will come under the main MC and then apportioned to Sub-MC (SMA, Sec 95).

One Mont’Kiara, a stratified mix development comprising a shopping mall, offices, and apartments will be first in Malaysia to have an SMC. Approval from the Land and Mines office has been obtained and the two-tier management will commence this year.

Authorities to intervene

In the absence of a Sub-JMB, the JMB should get approval from the relevant authorities on the rates before they are proposed at the AGM. This needs to be a prerequisite in any case that the Sub JMC or Sub MC cannot be achieved. With the tedious process, many mix developments may never have them.

Without the two-tier management, it would make a difference to have a mandatory requirement that at least two representatives from each category be in the JMB or MC.

Individual owners can seek help for the COB to be at the AGM to ensure that they are properly conducted and with no coercion from dominant groups. If rates have been passed, owners can request for authorities to help bring all parties together to focus on effecting mutually beneficial rates. This requires effort and cooperation from the JMB and all owners.

If and when the Act will be amended, JMB should for the time being be allowed to adopt the two-tier system to benefit owners instead of satisfying procedures.

About the contributor

Mary Lau graduated from the University of Reading, England, with a BSc Land Management (Valuation Specialisation) in 1991. In 2002, she was appointed High Court Assessor in Sarawak for compulsory acquisition and compensation cases and sat on the bench with the judge. She began her training with CH Williams and later held senior positions in valuation firms such as Henry Butcher, City Valuers and was a Director at Hasmi and Associates in 1999. She began her own setups in real estate investment and other ventures by 2007. She is a licenced valuer with the Board of Valuers in Malaysia.

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Read Part 1 of Maintenance charges for stratified mixed development projects here 

Read more about Sinking Funds here 

Read more about Surplus Funds here 

Read more about house rules in strata-title properties here