Strata Titles Act 1985

Overview

It is quite important to ask whether one’s property is a “landed property” or with “strata title”. The issue document of title to a landed property is issued by the relevant authority under the National Land Code, 1965, whilst the issue document of strata title is issued under the Strata Titles Act  1985 (Malaysia) . The 'strata' part of the term refers to apartments being on different levels, or "strata".

Strata title properties are parcels of properties in a building to be subdivided into separate parcels. Examples of properties with strata titles are office suites, parcels in a commercial complex, apartments, flats, condominiums and townhouses. When strata titles for such properties are issued, the master title for the lot of land on which the subdivided building has been erected, continues to exist and will be registered in the name of the developer or, when the book of strata register is opened, in the name of the management corporation. It is pertinent to note that the master title is issued under the National Land Code and not the Strata Titles Act  1985 (Malaysia) .

Strata titles involve the vertical subdivision of land and the building on the land into lots and common property. The lots comprise the units or apartments while the common property comprises the walls floors roof of the building, the land above, below and around the building, as well as common facilities within the building (such as foyers, elevators, stairs, landings, car park, driveways and a range of equipment).

The lots are effectively parcels of "airspace" usually bounded by floors, walls and ceilings as defined on a plan drawn by a surveyor and registered in the local titles office. The common property is everything that is left after the lots are taken out of the original land parcel. Because of this approach the plan does not actually define the common property. Sometimes there are structural features and services located within a lot but which serve other lots. These are usually deemed to be common property even though they are situated within a lot.

There are sufficient provisions in the Strata Titles Act  1985 (Malaysia)  to regulate the period within which a land proprietor (usually also the developer) must apply for the strata titles in a completed development, failing which the land proprietor shall be guilty of an offence and liable on conviction to a fine of not less than RM10,000 but not more than RM100,000 and a further fine of not less than RM100 but not more than RM1,000 for each day the offence continues to be committed.

Previously, the owners of properties with strata titles had their sub-sale transactions or re-financing transactions inordinately delayed as the consent of their respective developers was required before the property owners could proceed with these transactions. However the Housing Development (Control and Licensing) (Amendment) Act 2006 has done away with the requirement of obtaining the developer‘s consent before a sub-sale or refinancing transaction.

Another problem that was not addressed by the Strata Titles Act  1985 (Malaysia)  was the responsibility of parcel owners to pay monthly charges for the maintenance of the common areas and other contributions, to the developer, with the parcel owners having no say in the amount of the monthly charges and the standard of service provided prior to the issuance of the strata title.

Parcel owners could only participate in matters pertaining to the maintenance of the common areas after the strata titles had been issued and the management corporation had been formed from amongst them.

This problem has also been addressed with the enactment of the Building and Common Property (Maintenance and Management) Act 2007. Under this Act a joint management body comprising the developer and the purchasers will be established before the issuance of the strata titles and the joint management body will maintain the common areas and determine the amount of monthly charges, prior to the formation of the management corporation.

Building & Common Property (Maintenance & Management) Act 2007

The Building & Common Property (Maintenance & Management) Act  2007 (Malaysia)  came into force on 12th April 2007. It is an Act to provide for the proper maintenance and management of buildings and common property, and for matters incidental thereto.

Before the Act came into force the maintenance and management of building housing two or more storeys and common property was governed by the Housing Development (Control and Licensing) Act  1966 (Malaysia) (Act 118) and the Strata Titles Act  1985 (Malaysia) (Act 318). Under this legislation, the developer was responsible for the maintenance and management of the common property before the formation of the management corporation ie before the issuance of the strata title.

After the Building & Common Property (Maintenance & Management) Act 2007 came into force the management and maintenance of the common property prior to the formation of the management corporation is no longer under the sole governance of the developer but comprised of the representatives of the developer and the purchasers of the property as well. This was done through the establishment of the joint management body.

The pre-requisites for the establishment of the joint management body

The initial quorum (legal requirement) for establishing the joint management body is 25% of the purchasers having paid their maintenance charges and thereby having the right to vote at the 1st AGM meeting of joint management body.

It should be established upon the convening of the first meeting not later than twelve (12) months from the date of delivery of vacant possession of the parcels to the purchasers. All resolutions at the first meeting of the Body shall be decided by a show of hands. (See sec 6(2) & (4) of the Act).

Developer’s role prior to the establishment of the joint management body

1. (a) To open and maintain building maintenance account; (See sec 16(1) of the Act).
2. (b) To deposit into the building maintenance account:
   1. (i) All charges received from purchasers for the maintenance and management of the common property;
   2. (ii) All charges for the maintenance and management fees for the unsold units.(see sec 17(1) of the Act).
3. (c) To cause proper accounts of the building maintenance account to be kept in respect of all sums of money received from and all payments made out of the building maintenance account; (see sec 17(2)(a) of the Act).
4. (d) To appoint a professional auditor to audit the account annually or one month before the date of actual transfer to joint management body. (see sec 17(2)(b) of the Act).
5. (e) To file with the commissioner of buildings a copy of the statement of accounts certified by the auditors and a copy of the auditor’s report within 14 days of the accounts being audited; (see sec 17(2)9c of the Act). Forward to the commissioner of buildings a copy of statement of accounts certified by the auditor; and (see sec 17(2)(b) of the Act).
6. (f) To insure the building against any loss of the building and against fire and other risks. (see sec 17(4) of the Act).

Building maintenance account

The surplus moneys in the building maintenance account shall be transferred to the joint management body not later than one month from the date of establishment of the joint management body and shall be known as the building maintenance fund.

Composition of the joint management body

The joint management committee shall consist of the developer and not less than 5 and not more than 12 purchasers who shall be elected at the Annual General Meeting of the body. (see sec 11(2) of the Act).

• From among the members of the committee elected under sec 11(2) of the act, there shall be elected a chairman, a secretary and a treasurer. (see sec 11(3) of the Act).
• It is the duty of the joint management body to inform the commissioner of buildings the name of the body within twenty eight days of the first meeting. (see sec 7(1) of the Act).

Purchasers who are present at the first AGM and who have paid maintenance charges in respect of their parcels to the building maintenance account of the developer are entitled to vote. (Note: Joint purchasers shall not be entitled to vote except by way of a jointly appointed proxy). (See sec 6(2 of the Act).

Duties of the joint management body

1. (a) To properly maintain the common property and keep it in a state of good and serviceable repair.
2. (b) To determine and impose charges that is necessary for the repair and proper maintenance of the common property.
3. (c)To insure and keep insured the building to the replacement value of the building against fire and such other risk as may be determined by the body.
4. (d) To apply insurance moneys received by the body in respect of damage to the building for the rebuilding and reinstatement of the building.
5. (e) To comply with any notices or orders given or made by the local authority or any competent public authority. To prepare and maintain a register of all purchasers of the building.
6. (f) To ensure that the building maintenance fund is audited and to provide audited financial statements for the information of the purchasers.
7. (g) To enforce house rules (see sec 8(1)of the Act).

Powers of the joint management body

1. (a) To collect from purchasers maintenance and management charges from the purchasers in proportion to the allocated share units.
2. (b) To authorize expenditure for carrying out the maintenance and management of the common property.
3. (c) To recover monies due from purchasers.
4. [(d) To acquire property for use by purchasers in connection with the common property.
5. (e) To secure the services of a person or agent to undertake the maintenance and management of the common property of the building.
6. (f) To make house rules.
7. (g) To do all things reasonably necessary for the performance of its duties under the Act. (See sec 8(2) of the Act).

The joint management body shall be deemed to be dissolved three months from the date of the first meeting of the management corporation. (See sec 15(1) of the Act). The management corporation has to be formed within 1 month after ¼ of the aggregate share units have been registered as owners of the parcels i.e. after the Strata Title has been issued.

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