7 Impacts of Strata Management Act 2013 and Strata Title Act 2013 on Property Owners

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Scenario: 
You bought a serviced apartment in the city after using your life savings – it was not your first choice. Your first choice being a double storey link house but you could not afford it – just like many others – because a landed costed nothing less than a million in strategic locations. So you resorted to a high rise which costed much lesser. 

As soon as you took over vacant possession of the property, you discovered that you have neighbours from hell – there is leakage on your bathroom ceiling, but the neighbour upstairs refuse to allow any inspection to be done. There are supposed to be 3 residents’ lifts servicing a total of 600 units of apartments and approximately 1800 residents here, however the lifts always break down. That is bad, considering during peak hours you have to wait for 10 minutes or more when you are trying to rush to work. Worse, these slow speed lifts have very bad air ventilation – so when it is packed, it is stuffy and you sweat and there goes your make up and expensive perfume. You walked pass the lobby and saw a long list of defaulters on the notice board – some owners have not pay any maintenance fees for several years!  

On a Sunday, you thought its finally time when you could indulge yourself using common facilities like the pool and sauna, or perhaps even the squash courts. When you finally arrived at the facilities area, you discovered that the pool is dirty – it looks like it has not been serviced for ages. The sauna is out of order. The squash courts have uneven floorings making it not fit for any exercise.

How do you, the property owner, deal with all these problems? What are the laws governing these issues and beyond? 

Overview: 
Land is scarce and as urbanisation continues, more and more people resides in strata properties. In order to maintain and manage a building properly, rules and regulations have been put in placed over time. Having said that, Malaysian strata law had long been criticized as inadequate compared to other developed countries. For a very long time we relied on the National Land Code 1965 (“NLC”) and part of the Housing Development (Control and Licensing) Act 1966 (“HDA”). However, The NLC was silent on most issues highlighted above. Hence the Strata Title Acts 1985 (STA 1985) was enacted subsequently and being amended several times thereafter. The Building and Common Property (Maintenance and Management) Act 2007 (BCPA) was being introduced later on, attempting to cover loopholes found in the STA 1985. Though commendable, the STA 1985 and BCPA has instead caused further confusion over management and maintenance of building. 

As a result, the Strata Titles Act 2013 (“STA 2013) and Strata Management Act 2013 (“SMA”) was enacted and finally came into force on 1 June 2015 in all states of Peninsula Malaysia and the Federal Territories (save for Penang, where SMA 2013 came into effect on 12 June 2015). The BCPA 2007 has since been repealed and replaced by the SMA 2013. The implementation of SMA 2013 is supplemented by the Strata Management (Maintenance & Management) Regulations 2015 and the Strata Management (Strata Management Tribunal) Regulations 2015. Together these acts and regulations provide a more comprehensive and clearer legal framework on procedures and policies in the maintenance and management of strata title properties. 

This article attempts to explain briefly several important factors which will affect property owners as a result of the implementation of the above mentioned new strata acts and regulations. Among others, the more significant ones include but not limit to: 
(1) Recovery of Debt: 
Owners beware! One of the most common issues faced in maintaining and managing a building is to recover debt owed by stubborn owners who refuse to pay up maintenance fee and sinking fund. 

Under the new law, all proprietors must pay service charges and contribution to sinking fund to JMB or MC. Failure to pay is an offence punishable by a fine not more than RM5,000 or imprisonment not more than 3 years or both. JMB or MC has to serve at least one written notice to the owner, demanding for payment within 14 days from the notice. Interest at the rate of 10% per annum calculated on a daily basis is charged on amount owed. 

If the stubborn owner refused to pay despite being served the written notice, the JMB or MC may then take legal action against such owner in Court or bring them to the Strata Management Tribunal (established under this new act), and attached movable properties found in the parcel for sale to recover any debt owed by the proprietor. If the unit is tenanted, then in order to avoid his movable items to be put up on sale, the tenant may pay the amount owing and can deduct the amount from the rent due. 

(2) Establishment of the Strata Management Tribunal:
Court proceedings is time consuming and expensive. As a result, the Strata Management Tribunal is established in order to resolve disputes and claims without having to go to court. The tribunal can hear claims related to strata titled properties up to a limit of RM250,000. No representation by lawyer are allowed in this tribunal, unless if the matter involved complex legal issues and one party will suffer severe financial hardship if not legally presented. 

The tribunal has to make a decision within 60 days from first hearing date. Decision made by the tribunal is final and binding and deemed to be Order of Court. Thus failure to comply with the tribunal’s decision is a criminal offence punishable by fine up to RM250,000 and/or up to three years’ imprisonment. Parties involved can appeal to High Court only on grounds of serious irregularity.

(3) Management Committee Members: Restriction on holding office:
Under the old laws, there was no restriction on management committee members holding office for consecutive terms. 

This is changed by the new laws whereby no committee member shall hold office for more than three consecutive terms. Office bearers such as chairman, treasurer and secretary can only hold office for a maximum of two consecutive terms. 

In the event of any wrongdoings on these committee members, they are liable for fine up to RM250,000 or imprisonment up to three years or both. It is not a mitigating factor even though they served on a voluntary basis. 

(4) Prescribed By-laws:
Before the implementation of these new strata acts and regulations, owners of stratified properties are made to sign a Deed of Mutual Covenant (“DMC) upon execution of a formal Sales and Purchase Agreement with developer. These DMC served as “house rules” of strata living. Content of the DMC may vary from developer to developer. Hence there was no uniformity and standard procedure to be followed or implemented. 

This issue is solved by The Strata Management (Maintenance and Management) Regulations 2015 which laid down a pre-set of by-laws, covering the function and powers of the JMB and MC, general duties of owners etc. These by-laws may not be amended by any managing body. The managing body may add more additional by laws thereafter. However, any additional by-laws or amendment made which is inconsistent with these by-laws are however deemed void and invalid.  

(5) Subdivision and Issuance of Strata Title: 
Under the STA 1985, application to subdivide a building can be made only after the building is completed i.e. within 6 months from the date of certificate of completion and compliance (“CCC”) or within 6 months from the date of the sale (in the event the sale is made after the issuance of the CCC). 

The STA 2013 now provide for application to subdivide a building at super structure stage. Two certificates are involved here: The “Super Structure Stage Certificate” and the certificate of proposed strata plan. The application for subdivision shall be made in 2 stages i.e. (i) to apply for a certificate of proposed strata plan; and (ii) to apply for subdivision within a period of 1 month from the date of issuance of the certificate of proposed strata plan. 

In short, the duration of the work process of issuance of the strata titles will be shortened and owners of the strata units will be able to receive their strata titles sooner.

(6) Compulsory subscription of damage insurance policy:
It is compulsory for the managing body to make subscription of damage insurance policy. The liability of the insurer can be limited to an amount specified in the damage insurance policy.  Such amount shall however be at least equivalent to the reinstatement value of the building indicated by the last valuation obtained for the building. A reinstatement valuation of the building shall be obtained from a registered valuer at least once every 5 years. 

(7) Presumption to be made in respect of any alleged defect in a parcel situated immediately above another parcel: 
It is presumed that a defect is within a parcel situated immediately above another parcel if there is “any evidence of dampness, moisture or water penetration on the ceiling and/or the furnishing materials attached to the ceiling that forms part of the interior of a parcel” immediately below the parcel. 

Whoever fails to give access to the affected unit shall be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding three years or both. 

Conclusion: 
These new laws provide much needed redresses to Malaysian strata laws. Strata living is already a way of life. It is important for fellow Malaysians to understand that a well-managed building will not only serve you a better community living lifestyle, it helps to maintain and perhaps increase the value of your property in the long run. Enforcement of these new laws, as well as a change in the owners’ mentality are two of few deciding factors in ensuring a peaceful strata living community.