FOR years, stratified property owners have cried foul over the lack of protection from the processing of strata titles that seemingly take years to claims that Management Corporations (MC) were abusing maintenance and sinking funds. 

The disputes are usually between buyers and the developer or the MC formed by the developer, mainly because developers have to play a custodial role until 33% of the properties have been issued strata titles. 

The Federal Government amended the Strata Title Act 1985 four times (1990, 1996, 2001 and 2007) and came up with the Building and Common Property (Maintenance and Management) Act 2007. 

Commissioner: Alinah currently serves as CoB.

The new Act seeks to protect buyers of the property before the strata title is issued and complements the Strata Title Act. 

The new Act also introduces a new role called the Commissioner of Buildings (CoB), a person empowered to mediate or appoint a mediator for disputes between buyers and developer. 

The Selangor CoB is currently Selangor Housing and Property Board executive director Datin Paduka Alinah Ahmad. 

Joint Management Body 

A major complaint of buyers is the lack of transparency on how the sinking fund is used or how the MC came up with the maintenance fees. 

The new Act seeks to mend this by making it a requirement for developers to form a Joint Management Body (JMB). 

The JMB would have the same powers as the MC and would take over the running of the property pending the application of the strata title. 

This new body offers owners a direct say in how things are carried out at the property, including the re-calculation of maintenance fees based on the formulation provided in the Housing Development Act 1966, Fifth Schedule, Clause 18 - Common Facilities and Services (this is re-affirmed by the Selangor CoB guidelines on the formation of the JMB). 

Another plus point for buyers is that the MC must submit a fully audited account statement within six months of vacant possession, or by Oct 11 for older properties, to the CoB in order to form the JMB. 

With the account statement, any issue involving transparency in expenditure becomes moot, and all developers are required to form the JMB within 12 months from the vacant possession delivery date, or by April 11, 2008 for an older property. 

Failure to form a JMB means a fine of RM10,000 to RM100,000 or a jail period of one year. 

Loopholes 

With a deadline looming and few takers to form a JMB, it would seem that a backlog is inevitable as the process of scrutinising audited accounts is a major task. 

Should the CoB find the accounts unsatisfactory, it can direct its own professional auditors to do an audit of its own - another lengthy process. 

Would such delays count as non-compliance even if the JMB is not formed by April 11, 2008? 

There is already a precedent where developers would not be fined for not completing a specified task within a deadline because of technical issues. 

A developer must apply for strata titles within a period of six to nine months or be fined RM5,000 and an additional RM1,000 for each day the strata title is not applied for. 

A hefty fine, but the process has requirements like the need to settle all fees due and with some developments having a long list of disputes, the applications remain backlogged. 

To date, there are no known instances of a developer being fined for late strata title application. 

Liquidation 

Another worry facing owners is when a developer goes bust and is forced into liquidation before strata titles are issued to them. 

The condominium would still be listed as a property belonging to the developer and any asset is fair game to be placed under receivership to another company trying to recover debts owed to it. 

During a seminar on JMB organised by the Selangor state government, Alinah said any company that assumes the role of receiver would step into the shoes of the ailing developer and automatically allow the board to mediate the issue for buyers. 

Mediation powers or no, the fact remains that the liquidation of company assets comes under the purview of the Companies (Control and Licensing) Act 1965. 

Service Apartments 

By definition, service apartments are residential properties that are rented out and with services similar to those offered by a hotel. 

Regardless of what is said in advertisement brochures, service apartments are built on commercial and not residential land. 

Developers use the term service apartments to build such property on commercial land as a loophole to bypass the requirements stated in the Housing Development Act. 

Because of this technicality, the project is treated as a business entity and buyers are not afforded any sort of consumer protection listed in the Housing Development Act, the Strata Title Act or the Building and Common Property Act. 

Problems involving service apartments usually revolve around parking lots.  

While buyers may argue about misleading advertisements, the ultimate decision will be made based on the sales and purchase agreement, which many buyers sign without fully reading the contents.  

Acid Test 

No law is perfect and loopholes can always be found and exploited, but Condominium, Apartments and High-rise Committee pro-tem assistant chairman Khong Chee Seng said there is a good reason for developers to come forward and comply with the new Act. 

“The government has acknowledged that there are many problems with condominiums when they came up with the new law,” said Khong. 

“If a developer does not want to work with the government and the people to iron out all the issues and problems regardless of the defect in the law, then consumers would lose confidence in future projects of the particular developer and high-rise properties entirely.” 

Khong said conglomerate developers should take the lead and set up their own committees to work with government departments and the people. 

“This is the acid test for the industry,” said Khong.  

“They either become part of the solution or become the problem.”