Service Charge in a Strata Development : How far can the management go to collect?

How far can a management of a strata development go to collect the service charges and for that matter any charges that are allowed to be levied on the owner? We have heard stories about refusal to allow entry to the strata development compound, shutting off of water supply and even to the extent of changing locks of the property? Are all these allowed to be done in Malaysia by management of strata development for the sake of collecting these charges? Here is an excerpt from my coming book '40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia'. It is still a rough draft and unedited, so comments especially if you find any mistake is welcome :

The service charges and the sinking fund which are allowed under the property laws to be collected by the management of a strata development are also liabilities are imposed on and must be observed by the purchasers of strata properties. These liabilities on purchasers which will then become owners are all stated in Schedule H of the Housing Development (Control and Licensing) Regulations 1989 under clause 18 with regard to the payment of service charges. Under clause 18(1), the purchaser shall be liable for and shall pay the service charges for the maintenance, management of the common property and for the services provided by the housing developer prior to the establishment of a joint management body under the Building and Common Property (Maintenance and Management) Act 2007. Under clause 18(2) the service charge payable shall be paid within fourteen days when the purchaser received from the housing developer a written notice requesting for payment to be made. If the service charge is not paid by the purchaser at the expiration of the fourteen days, interest on the service charge shall commence immediately thereafter and be payable by the purchaser. The interest is to be calculated from day to day at the rate of not more than ten percent per annum. In these clauses, it can be seen that until a joint management body is formed for that particular strata development, a purchaser of a strata property will be liable to pay the housing developer the service charge and an interest of up to 10% interest can be imposed for non-payments.

When a joint management body is formed within one year of vacant possession for the strata development, the owners in the strata properties are liable to pay service charges to the joint management body under Section 23 of the Building and Common Property (Maintenance and Management) Act 2007 and it includes the interest at a rate of not more than 10% within fourteen days from the service of a written notice requesting the payment of the service charge. The written notice must also include a statement of charges which contain a detail of what the charges are for. When the management corporation takes over the management upon issuance of individual strata property, under Section 45(3)(c) of the Strata Titles Act 1985, the management corporation is allowed to determine interest to be charged on any late contribution by any owner of the strata property not more than 10% per annum. In lieu of these provisions, it can be seen that any late payment of service charge to either the housing developer or the joint management body or the management corporation, an interest of not more than ten percent can be levied to the original amount. However, when the service charges come under the purview of the joint management body and the management corporation, as the case may be, there are avenues for these two institutions to recover any debt owe to them.

There are three options which can overlap each other when the management of strata property decided to do more than just send notice to the owners and demand for payment of any arrears. If the owners of the strata property still don’t pay their service charges or sinking funds upon demand, there are general recovery provisions for the managements of strata development to take. For the joint management body, under Section 32 of the Building and Common Property (Maintenance and Management) Act 2007, after 28 days, upon sending two notices demanding the payment of any arrears of any charges, the joint management body can start to institute proceedings in court to recover the service charges. Under Section 33 of the same Act, if the owner of the strata property fails to pay the charges for more than six months, the Commissioner of Buildings, upon request of the housing developer or the joint management body, can issue a fourteen-day written notice on the owner or owners to pay the arrears.

The Commissioner of Buildings, upon the request of the housing developer or the joint management body, can issue a warrant of attachment authorising attachment on any movable property within the strata property or anywhere within the local authority area. The warrant is to be executed by an officer within the Commissioner of Buildings’ office. The officer is allowed to use forcible entry into the unit, take an inventory, effect the attachment and sold the movable property in a public auction, unless the arrears and collection charges are paid within seven days of the attachment exercise. A collection charge can be added to the amount recovered by the Commissioner of Buildings and the amount recovered shall be deposited into the Building Maintenance Fund with the balance returned to the owner. Other than civil proceedings by the housing developer or the joint management body, which is to be endorsed by the Commissioner of Buildings, the failure or refusal to pay maintenance and management charges are also an offence which if convicted can result in the owner being fined with not more than Ringgit Malaysia Five Thousand and further fine of Ringgit Malaysia Fifty for each day the offence continues.

In Section 52, Section 53, Section 53A, Section 54 and Section 55A of the Strata Titles Act 1985, management corporation, the management entity which takes over the management of a particular strata development upon issuance of individual strata titles to owners, are given nearly the same provisions in law as those given to the joint management body under the Building and Common Property (Maintenance and Management) Act 2007. Section 52 basically lays out the foundation for the owners to give guarantee that each proprietor is liable to pay the portion of their charges according to the share of his unit in the strata development and the management corporation can recover the said sum through the court of law. Section 53 states the term for written notice for owners to pay shall be fourteen days and if remain unpaid another written notice of fourteen days shall be issued before a summons is filed in court.

Section 53A is nearly the exact copy of the Section 33 of the Building and Common Property (Maintenance and Management) Act 2007 which allows the recovery of the debt by the owner through attachment of movable property. However, the authority which can issue the warrant of attachment is the Land Administrator upon a sworn application of any member of the management corporation. The person allowed to execute the warrants can be a member of the management corporation or employed by the management corporation or through the assistance of the Commissioner of Buildings’ office. The whole process of executing the warrants of attachment is outlined in Section 53A including if the house is tenanted and the tenant’s movable property is attached. Section 54 is on the issue of service of documents and Section 55A is on the failure to contribute being an offence which can be fined with Ringgit Malaysia Five Thousand with each continuing day an additional Ringgit Malaysia Fifty daily is imposed.

A comprehensive mechanism has been spelt out in both the Building and Common Property (Maintenance and Management) Act 2007 and Strata Titles Act 1985 when it comes to the liability of proprietors, owners and even in some case, tenants of strata property in paying all the charges imposed on them in a strata property. Before there was the Building and Common Property (Maintenance and Management) Act 2007, one of the serious issue brought up by housing developers managing strata development is the failure and the refusal of owners to pay their dues. There were cases where the housing developers resorting to cutting off the water to the specific unit which refused to pay their maintenance charges. With the provisions under law and the recovery cost being allowed to be added, either for the joint management body or management corporation, such practice shall not be a point of contention anymore.