STRATA MANAGEMENT ORDINANCE 2019

Kuching HQ
11 hours ago
12 min read

(1) INTRODUCTION

It is evident that there has been an increase in the housing developments of strata titled properties by various housing developers throughout Sarawak in these few years. Strata titled properties consist of buildings or land intended to be subdivided into parcels and subdivided building or land [including condominiums, apartments or townhouses with share facilities, landed properties in a shared development, “small office, home office” (SOHO), “small office, versatile office” (SOVO), “small office, flexible office” (SOFO) and mixed strata development].

The Strata Management Ordinance, 2019 (“SMO”) which came into force on 1 March 2022 provides for the management and maintenance of all the strata titled properties and also for any other matters connected therewith. The three (3) key bodies which play important roles in the management and maintenance of all the strata titled properties at different stages and timelines are laid down below: -

Source: Paper 2 SMO 2019 Seminar Briefing on Management Bodies by Ministry of Public Health, Housing and Local Government Sarawak

In this Legal Bulletin, we will highlight on the Developer’s (during Developer’s Management Period) and JMB’s (during JMB Management Period) duties and powers together with the management of maintenance charges and sinking fund as outlined in Part IV: Strata Management Before Existence of Management Corporation of the SMO.

Application of Part IV: Strata Management Before Existence of Management Corporation

Allocated share units

Where the sale of a parcel by a developer was made before the commencement of SMO and no share units have been assigned to each parcel, the share units for each parcel shall be assigned by the proprietor in accordance with Strata (Subsidiary Title) Ordinance, 2019. The share units for each parcel assigned by the proprietor shall be deemed to be the allocated share units assigned to each parcel until such time as the certified strata plan has been filed by the Superintendent pursuant to the Strata (Subsidiary Title) Ordinance, 2019.

(2) Duties of developer and jmb

The Developer’s (during Developer’s Management Period) OR JMB’s (during JMB Management Period) duties and powers in managing any building or land intended to be subdivided into parcels (“the said parcel”) and the common property are as summarised below: -

(a) To determine, impose and collect the maintenance charges and contribution to the sinking fund

(b) To effect insurance in accordance with SMO

(d) To prepare and maintain a register of all parcel owners

(e) To ensure that the maintenance account and sinking fund accounts are audited

(f) To enforce by-laws

(g) To comply with the direction of the Commissioner of Buildings (COB).

(h) To do such other things necessary for the management and maintenance of the said parcel

For further reference, the relevant provisions for Developer’s duties and powers (during Developer’s Management Period) are specified in the First Schedule of the SMO whereas the JMB’s duties and powers (during JMB Management Period) are specified in Third Schedule of the SMO.

(3) Developer’s Management Period

3.1 What is the Developer’s Management Period (“DMP”)

The period commencing from the date of issuance of the occupation permit of the building on the development until 1 month after the establishment of the Joint Management Body or such other time as may be extended by the COB.

3.2 What happens during the DMP?

The Developer shall: -

perform its duties and exercise its powers as provided in the First Schedule of SMO;
ensure that a separate and distinct area is set aside out of the common property of the development for the sole purpose of an administration office for the carrying out of duties of the Developer under SMO;
shall not be entitled to be paid any remuneration for carrying out the management and maintenance of the said parcel and the common property; and
shall be allowed to enter into any contract for the purposes of management and maintenance of the said parcel and the common property provided that such contract shall not extend beyond the Developer’s management period.

(Any Developer who fails to comply with the hereinabove stated shall be guilty of an offence and shall be punished with a fine not exceeding RM250,000.00 or imprisonment for a term not exceeding 3 years or to both)

(4) Joint Management Body (“JMB”)

4.1 What is a JMB?

JMB (comprising of the Developer and purchasers) shall be a body corporate having perpetual succession and a common seal who can sue or be sued.

4.2 How and when JMB is established?

Section 16(1) of SMO: Upon the Developer’s convening of the first annual general meeting (First AGM) of that JMB: -

(a) if occupation permit of a building on the development was issued before the commencement of SMO, not later than 12 months from the commencement of SMO; or

(b) if occupation permit of a building on the development is issued after the commencement of SMO, not later than 12 months from the date of first delivery of vacant possession of a parcel to a purchaser.

It shall be the Developer’s duty to convene the First AGM of the JMB within the period specified in Section 16(1) of the SMO in accordance to the Second Schedule of SMO (further provided for in item 4.4 below), failing which, the Developer shall be guilty of an offence and shall be punished with a fine not exceeding RM250,000.00 or imprisonment for a term not exceeding 3 years or to both and, in the case of a continuing offence, to a further fine not exceeding RM1,000.00 for every day or part thereof during which the offence continues after conviction.

If the Developer fails to convene the First AGM within the period as specified in Section 16(1) of SMO, COB may appoint any person to convene the First AGM of JMB within such time as may be specified by COB and the Developer shall bear all the expenses incurred therein.

Within 30 days from the date of the First AGM, JMB shall inform and register the name of JMB with COB, who may upon the JMB’s application, issue a certificate certifying that JMB has been duly established under SMO on the day when the First AGM was convened.

JMB shall elect a joint management committee to perform the JMB’s duties and conduct the JMB’s business on its behalf, and may for that purpose exercise any of the powers of JMB.

The constitution of the JMB and joint management committee shall include the Developer.

If the Management Corporation comes into existence before the First AGM of the JMB:

(a) the First AGM shall not be required to be convened;

(b) no JMB shall be established; and

4.3 When is JMB dissolved?

JMB shall dissolve 3 months from the date of the first annual general meeting of the Management Corporation for the development. Management Corporation consisting of all the subsidiary proprietors is established upon the opening of a book of the subsidiary register after strata titles are issued.

4.4 First Annual General Meeting of JMB (Second Schedule of SMO)

(a) The Developer shall: -

Give notice of First AGM to all purchasers NOT less than 21 days before the said First AGM
Display the said notice at a conspicuous part of the development
Prepare and place before the First AGM for approval an annual budget that sufficiently sets out the expected and estimated expenditure required to manage and maintain the said parcel and the common property for a period of 12 months starting on the first day of the month following the date of the First AGM

(b) The agenda for the First AGM of JMB includes:

Determination of the number and election of members of joint management committee
Approval of the annual budget prepared by the Developer
Determination of the amount of maintenance charge and contribution to the sinking fund and the late payment interest thereof to be paid by a parcel owner
Consideration of the audited accounts
Confirmation of the taking over by JMB of insurances effected by the Developer under SMO
Making of by-laws
Consideration of any other matter connected with the management and maintenance of the common property.

Appoint a new date for the election of the joint management committee; or
Appoint a property manager or managing agent to manage and maintain the said parcel and the common property

if within half an hour after the time appointed for First AGM,

no purchaser entitled to vote turns up in the meeting; or
less than 3 purchasers who are eligible for election accept a nomination to be elected as the members of joint management committee; and
the Developer or the person appointed by COB to convene the meeting has within 7 days of the date of the meeting inform COB of the above fact.

(5) maintenance charges and sinking fund

5.1 What are Maintenance Charges?

The sum of money paid into the maintenance account which shall be used by the Developer (during Developer’s Management Period) OR JMB (during JMB Management Period) solely for the purpose of meeting the actual or expected expenditure general or regular expenditure in respect of: -

(a) maintaining the common property in good condition on a day-to-day basis;

(b) paying for the expenses incurred in providing cleaning services for the common property, security services and amenities for the occupiers of the building;

(d) complying with any notice or order given or made by the local authority in respect of periodical inspection of any building in the development in the manner as specified in the Buildings Ordinance, 1994 [Cap. 8];

(e) minor painting work on the premises of the common property;

(f) carrying out inspection of all electrical wiring systems of the common property and replacing or repairing any faulty wiring system, if any;

(g) carrying out inspection, maintenance and repair of the main water tanks;

(h) paying rent and rates, if any;

(i) paying any fee incurred for the auditing of the accounts;

(j) paying all maintenance charges reasonably incurred for the administration of the accounts required to be maintained under SMO as may be determined by COB;

(k) paying the remuneration or fees for the property manager or managing agent appointed under Part VI of SMO;

(l) paying all the allowances and other expenses of the members of JMB and joint management committee according to such rates as may be approved by COB;

(m) paying any expenses, costs or expenditure in relation to the procurement of services, including the engagement of consultants, legal fees or costs and other fees and costs, properly incurred or accepted in the performance of its functions and the exercise of its powers under SMO; or

(n) meeting other expenses of a general or regular nature relating to the management and maintenance and management of the buildings or lands intended for subdivision into parcels and the common property.

5.2 How are maintenance charges calculated during the Developer Management Period and JMB Management Period?

The amount of the maintenance charge payable shall be determined by the Developer (during Development Management Period) OR JMB (during JMB Management Period) in proportion to the allocated share units of each parcel or the proposed quantum of provisional share units for each provisional block and any amount so determined, shall be fair and reasonable in meeting the expected and estimated expenditure to properly manage and maintain the said parcel and the common property.

5.3 What is Sinking Fund?

The sum of money paid into the sinking fund account which shall be used solely for the purpose of meeting the actual or expected general or regular expenditure necessary in respect of: -

(a)the painting or repainting of any part of the common property;

(b)the acquisition of any movable property for use in relation to the common property; or

(c)the renewal or replacement of any fixture or fitting comprised in any common property.

5.4 How is sinking fund calculated during the Developer Management Period and JMB Management Period?

5.5 Who needs to pay maintenance charges and sinking fund?

Developer Management Period

Sold Units to Purchaser

The purchaser shall pay the maintenance charge and contribution to the sinking fund within 14 days of receiving a notice from the Developer, failing which, the Developer may recover the sum in the manner set out in Section 32 of SMO and the purchaser shall pay interest at the rate of 10% per annum on daily basis.

Unsold units

The Developer shall pay the maintenance charges and contribution to the sinking fund within 14 days from the date of the first payment notice issued to any purchaser, failing which, the Developer shall pay interest at the rate of 10% per annum on daily basis;

Any Developer who fails to comply with Section 11(2), (6) or (8) shall be guilty of an offence and shall be punished with a fine not exceeding RM20,000.00 or imprisonment for a term not exceeding 3 years or to both and, in the case of a continuing offence, to a further fine not exceeding RM5,000.00 for every day or part thereof during which the offence continues after conviction.

JMB Management Period

The parcel owner shall pay the maintenance charge and contribution to the sinking fund to JMB within 14 days of receiving a notice from the JMB, failing which, JMB may recover the sum in the manner set out in Section 32 of SMO and the parcel owner shall pay interest not exceeding 10% per annum to JMB.

The Developer shall pay the maintenance charges and contribution to the sinking fund to JMB for unsold units.

5.6 Maintenance Account and Sinking Fund Account

(a) Developer’s Management Period

(i) No maintenance charge or contribution to the sinking fund shall be collected from any purchaser unless a maintenance account and a sinking fund account have been opened in respect of the development and the occupation permit of a building on the development has been issued.

(ii) The Developer shall open a maintenance account and a sinking fund account in respect of each development with a bank or financial institution (both shall be operated and maintained until the expiry of the Developer’s Management Period) within 14 days from the date of the issuance of the occupation permit of the development.

(iii) All monies therein shall: -

not form part of the property of the Developer; and
be held in trust for the purchasers.

(iv) Any Developer of a development which has been completed on or before the commencement of SMO and has, immediately before that date, been collecting monies from the purchasers for the management and maintenance of the said parcel and the common property, may continue to do so until the Joint Management Body is established, provided that all monies collected shall be dealt with by the Developer in accordance with SMO.

(v) The Developer shall cause to be prepared records of accounts, appoint an approved company auditor to audit the maintenance account and the sinking fund account annually, file with COB a certified true copy of the audited accounts together with the auditor’s report within 14 days of the accounts being audited; and permit COB or any person authorized by COB in writing to act on its behalf, full and free access to the accounts and records of accounts and to make copies or extracts of such accounts and records of accounts.

(vi) Before the Developer’s Management Period expires, the Developer shall: -

transfer all balances of monies in the maintenance account and the sinking fund account, after payment of all the expenditures which have been properly charged to the accounts, to the Joint Management Body (if any balance is not transferred, it shall vest in the Joint Management Body on the date of the expiry of the Developer’s Management Period);
hand over to the JMB: -

(a) the administration office set up by the Developer under Section 8(3)(a) of SMO;

(b) the audited accounts of the maintenance account and the sinking fund account or, if such accounts have not been audited, the unaudited accounts;

(d) all records relating to and necessary for the management and maintenance of the building or land intended to be subdivided into parcels and the common property of the development; and

(e) all invoices, receipts and payment vouchers in respect of the maintenance account and sinking fund account.

(b) JMB Management Period

(i) JMB shall open, maintain, control and administer a maintenance account and a sinking fund account with a bank or financial institution.

(ii) Maintenance account shall be administered and controlled by JMB and shall consist of: -

all balances of monies in the maintenance account transferred by the Developer to JMB;
all or any part of the maintenance charge imposed by or payable to JMB under SMO;
all monies derived from lease, rent or use of property lawfully charged by JMB;
all other monies and property which may in any manner become payable or vested in JMB; and
all other monies lawfully received by JMB including interest, donation and trust.

(iii) JMB shall prepare records of accounts, appoint an approved company auditor to audit the maintenance account and the sinking fund account annually, file with COB a certified true copy of the audited accounts together with the auditor’s report within 14 days of the accounts being audited; and permit COB or any person authorized by COB in writing to act on its behalf, full and free access to the accounts and records of accounts and to make copies or extracts of such accounts and records of accounts.

(iv) JMB shall, not more than 1 month from the date of the first annual general meeting of the Management Corporation (i.e. upon the dissolution of JMB): -

transfer all balances of monies in the maintenance account and in the sinking fund account, after payment of all expenditures which have been properly charged to the accounts, to the management corporation (if not, the money shall vest in the management corporation);
hand over to the management corporation-

(a) any by-laws;

(b) the audited accounts of the maintenance account and the sinking fund account or, if such accounts have not been audited, the unaudited accounts;

(d) all the documents delivered by the Developer to the JMB under Section 14(3) of SMO;

(e) all records relating to the subdivision of the building or land into parcels and common property; and

(f) all records relating to and necessary for the management and maintenance of the building or land intended to be subdivided into parcels and common property.