Sewa : Isu dan Konflik Tuan Rumah dengan Penyewa

Pada hari Rabu, 20.5.2015, saya telah muncul di dalam program TV Al-Hijrah, Assalamualaikum di dalam segmen hartanah berbicara tentang Penyewa vs. Tuan Rumah.

Saya ada membuat blogpost tentang kemunculan saya itu di sini (eja segmen pun salah!).

Program Assalamualaikum TV Al-Hijrah ini berlangsung setiap hari di antara pukul 8.30 pagi sehingga 10.30 pagi. Ini maklumat tentang program Assalamualaikum yang diambil daripada website TV Al-Hijrah. Jika hendak playback rancangan-rancangan daripada TV Al-Hijrah boleh ke Al-Hijrah Media. Oleh kerana mereka tidak menaikmuatkan semua program mereka, saya ingin mengulas apa yang telah saya bincangkan pada hari itu. Iaitu tentang isu menyewa rumah.

Hos pada hari itu adalah Shahrul dan Sofi

Saya telah diutarakan soalan tentang masalah-masalah yang dihadapi oleh tuan rumah dengan penyewa. Ini berlaku terutamanya jika tiada perjanjian bertulis antara tuan rumah dengan penyewa.

Di Malaysia, kecuali di Bahagian 15, Kanun Tanah Negara 1965, tiada undang-undang spesifik berkenaan sewaan. Bahagian 15 itu secara am menggariskan tentang sewaan sebarang hartanah melebihi tiga tahun akan menjadikan sewaan itu pajakan dan perlu didaftarkan di pejabat tanah menggunakan Borang 15A di dalam Kanun Tanah Negara tersebut.

Kebanyakan sewaan yang dilakukan di kalangan orang awam adalah yang tidak melebihi tiga tahun dan jatuh di bawah sewaan.

Studio TV Al-Hijrah

Selain daripada perlunya perjanjian penyewaan untuk menolong tuan rumah mengutip sewa, ia juga diperlukan oleh tuan rumah untuk menekankan kepada penyewa perkara-perkara berikut :

1) Bila dan bagaimana bayaran sewaan perlu dilakukan. Sebagai tuan rumah, saya mendapati cara terbaik untuk memastikan penyewa membayar sewa adalah dengan penyewa memberi cheque post dated selama setahun. Ini akan memastikan sewa masuk tepat pada waktunya;

2) Memastikan keadaan rumah akan dipulangkan dalam keadaan baik. Saya cadangkan agar gambar keadaan rumah sebelum diserahkan kepada penyewa dimasukkan ke dalam Perjanjian Penyewaan dan ia menjadi panduan untuk penyewa memulangkan dalam keadaan yang sama;

3) Terma tentang apa-apa pengubahsuaian di dalam rumah dinyatakan dengan jelas termasuk meminta kebenaran daripada pihak berkuasa tempatan, membayar deposit kepada pihak berkuasa tempatan dan membayar denda, jika ada;

4) Satu senarai barangan samada perabut atau fittings yang diserahkan kepada penyewa dilampirkan dalam Perjanjian Penyewaaan tersebut;

5) Deposit rumah yang penuh dibayar pada masa Perjanjian Penyewaan dan penyerahan kunci dibuat. Ramai yang mengabaikan ini dan menyesal apabila penyewa membuat hal. Deposit biasanya adalah 2 bulan jumlah sewa dan 1 bulan sewa untuk sebarang kegagalan membayar bil utiliti;

6) Satu cara yang baik untuk memastikan tuan rumah tidak dibebankan dengan bil utiliti tidak berbayar adalah dengan mendaftar nama penyewa untuk utiliti tetapi syarikat utiliti biasanya membenarkan ini hanya untuk hartanah komersil;

7) Tuan rumah dan penyewa juga kena jelas tentang perkara paling penting iaitu kenaikan harga sewaan (tempoh masa dan jumlah);

Sebelum segmen saya, tetamu mereka termasuk Fynn Jamal bercakap tentang bayi terbuang

Saya juga pernah ditemuramah oleh BFM Radio mengenai penyewaan hartanah komersil. Temuramah ini boleh didengar di podcast di bawah :

Negotiating Commercial Leases

TV Al-Hijrah - Temuramah Sekmen Hartanah 20.5.2015

Saya akan muncul di segmen Assalamualaikum TV Al-Hijrah pada Rabu, 20.5.2015 di dalam segmen hartanah untuk berkongsi ilmu tentang masalah dan penyelesaian isu-isu yang timbul apabila menyewakan rumah kepada penyewa.

Berikut adalah soalan-soalan yang ditimbulkan oleh penerbit untuk saya terangkan dalam segmen hartanah tersebut (saya salin secara verbatim) :

FOKUS/SIPNOSIS:

Kekecewaan adalah perkataan yang paling tepat untuk digambarkan kepada pemilik rumah yang memberi sewa kepada penyewa yang suka hati mengubah suai rumah dan tidak menjelaskan bayaran sewa tepat pada masanya. Inilah lumrah yang terpaksa dihadapi pemilik rumah yang menyewakan rumah mereka kepada orang lain. Perjanjian awal di antara pemilik dan penyewa sudah  tentu pelbagai kata-kata manis diberikan.

SOALAN :

1. Sebagai penyewa, apa yang perlu anda lakukan apabila menyewa rumah?

2. Apakah yang dibolehkan dan tidak dibolehkan sebagai penyewa untuk melakukan pengubahsuaian rumah?

3. Mengikut Perjanjian sewa rumah, apakah tindakan tuan rumah sekiranya mereka gagal patuhi?

4. Penyewa sukahati ubah meter.

5. Selain itu, sewa bulanan dilambatkan namun masih mampu untuk mengubahsuai rumah tersebut.

6. Kata-kata akhir pesanan kepada penyewa dan tuan rumah.

Saya akan jawap soalan-soalan yang ditanya dalam rancangan Assalamualaikum esok pagi. Rancangan ini berlangsung di antara pukul 8.30 pagi sehingga 10.30 pagi setiap Isnin sehingga Ahad secara live daripada Pusat Penyiaran Digital TV Al-Hijrah di Kompleks Pusat Islam, Kuala Lumpur.

Why does it take so long for lawyers to complete a property transaction?

This question is not only asked by the purchaser of a property transaction but is also asked by the seller who sells the property to get money out of it. Most seller and purchaser expect a property transaction to be completed within a month or two. That is not the case as there are various factors to be taken into consideration and various parties involved other than the seller and the purchaser.

A lawyer is involved in a property transaction as a facilitator. A lawyer manages the various parties involved in the property transaction which include :

1)      the seller;

2)      the purchaser;

3)      the lawyer representing the seller (if the lawyer is acting for the purchaser) and vice versa;

4)      the housing developer (which an be the seller or involved in the transaction as the property is not issued with an individual title yet);

5)      the land office (where the property is registered as proof of ownership);

6)      the state authority (which is actually represented by the land office but is involved if the property is a property which requires a consent to transfer or consent to charge -  usually leasehold property);

7)      local authority (to pay for any assessment notice arrears);

8)      bank or banks (depending whether the purchaser purchase the property by taking a housing loan and if the seller still owes the bank any money which need to be paid first)

The duration of a property transaction from the time that the Sale & Purchase Agreement is signed to the time that the purchaser can say that he is the new owner of the property fluctuates according to the type of property being transacted. The easiest type of property to transfer will be a piece of land but this type of property also has pitfalls which can drag the transaction into many months. If the property is a house, the package that it comes in will be the key to the process. A house can be built on a piece of land and sell as a terrace house, a bungalow or a semi-D. A house can also be an apartment, a condominium and a penthouse. Agreements governing the sale of the house built on land and the one sold as a strata property are different.

When you buy from a property developer, the sale of a house on land will use the agreement provided for in Schedule G under the Housing Development (Control and Licensing) Act 1966 which is the sale of building and land. The time frame provided for the property to be completely built and delivered to the purchaser is two years. Within the two years, the housing developers at their own pace must built the structure of the house, get all the infrastructures within the housing development ready, deal with authorities and finally deliver the key to the house buyer. The sale of strata property will use the agreement provided for in Schedule H of the Housing Development (Control and Licensing) Act 1966 which is the sale of building or land which will be subdivided into parcel. As for strata property, the timeframe is increased to three years as there are a lot more complications in building a property with many units within it.

As housing developers has their own capability in building their housing project, you cannot actually say they are not delivering because you do not see any construction is taking place at the place where your new house is supposed to be. As much as housing developers are said to have a reputation as businessmen who don’t deliver what they have promised, they can set the schedule of building the houses according to their own time frame. If they are serious businessmen, they will want more purchasers to purchase their housing project and keep them in business.  Only when there are no progress in the housing development for more than one year should you worry about the fate of your house, if you buy the property from a housing developer.

However, if you are buying a property from another individual, the timeframe for the completion of the transaction can fluctuate between three months to more than a year (even more), depending on the type of property that you are buying and how you intend to finance your purchase. If the property that you are buying is not charged to any financial institution and the property does not require to be approved by the state authority to be transferred, whether the property has been issued a title or not, the time for it to be transferred can be a short time of two or three months. This is a very rare occurrence in this day and age as most property is purchased by the vendor in the first instance using a financial institution.

If the property is charged to a financial institution, the time for the transfer will be determined by the efficiency of bank which has put a charge on the property before it is sold. The bank will only release the property from its control once it has receives the full amount of payment due from the purchaser’s financier. Just imagine the intricacies that are involve as your lawyers have to communicate with your financier, with the vendor’s lawyer, with the vendor’s bank and in certain matters, the vendor himself, in trying to get the property unencumbered. Once payment are made, the lawyer who handles the finance side of your purchase will have to secure the interest of the financial institution that you have chosen to finance your property transaction. That will take another duration which will depend on the efficiency of your lawyer and to some extent, your financier.

One of the timeframe which usually delay the completion of a property transaction is when consent to transfer need to be acquired from the State Authority. ‘Application for Consent to Transfer’ as it is called usually takes between 3 months or more especially if the transfer is from a bumiputra seller to a non-bumiputra purchaser. Surprisingly, once consent to transfer is obtained, a consent to charge will only requires a maximum of 2 weeks to be obtained from the same department.

If the property is still not issued with an individual title, the housing developer which had built the property needs to be involved in the equation. Although Section 22D of the Housing Development (Control and Licensing) Act 1966 has specifically stated a housing developer should not withhold confirmation of any arrears and can only charge RM50-00 for issuing an undertaking to the lawyer(s) handling the transaction, things get complicated if there are arrears, if Joint Management Body decided to be tough and if the property is under receivership, to quote a few ‘complications’. Add between two weeks to three months for your lawyer to resolve this.

Another delay will usually happen when the property needs to be redeemed from the seller’s financier. As the seller’s financier is in the process of losing a customer, the department that handles the issuance of redemption statement and handling the redemption itself usually takes time to do as such. Another factor is the security documents are usually kept by a storage company and takes some reasonable time to be located. Add in another one or two month to the equation.

These are just some examples which can crop up when a property transaction is being conducted by your lawyer. A good advice for novice or even seasoned seller or purchaser of property to follow closely your lawyer who conducts your property transaction and help them facilitate the transaction wherever you could.

This article was first published in Property Insight magazine, April 2015 edition

Why a housing bubble will always happen again and again. All over the world

If you read the news around the world, there are people keep saying a housing bubble is imminent in their county. Although it has just happened, like in the United States when the last housing bubbles brought down a few investment banks which had been hit by the sub-prime scandals, people who are smart enough say a housing bubble is in the making there. China is another country people is expecting to have its property bubble burst anytime soon. Why does this keep happening again and again?

It is due to the nature of housing. People keep on buying houses to live in it and to try to make a lot of money out of it by selling it at a higher margin. The question is, why don't people learn that they will drag down the economy due to their greed to make a profit? Why do they keep on doing the same thing again and again? Aren't the governments around the world doing anything about it?

Here's the thing about housing. There are genuine buyers who want to have a roof above their head and there are those who think houses as an investment. They are mixed together without any borders separating them in the same space. When you see a long line queuing up at a property launch, you cannot determine who are the genuine buyer and who are the speculators. The speculators who buy and want to make money out of the property want the same treatment the genuine house buyers are getting. It will make the profit higher as the housing developers will throw in so many things into the sale. Including cheaper housing loans.

Governments around the world have been trying to control speculative buying of property by imposing tax on the profit anyone makes when a property is sold. In Malaysia it is known as Real Property Gain Tax. The current tax regime impose tax on property sold within 5 years of the property being bought. The tax imposed is a withholding tax where the seller will have to pay the Internal Revenue Department and only get it back once it is checked out there was no profit made on the property transaction. The withholding tax for Malaysian property sellers is 2%.

Does this current withholding tax stop or reduce the property transactions or sales of houses? Does it stop the speculative buying of houses? No. It does not.

Here's why.

Any good property speculator will know you only have to factor in the cost of the Real Property Gain Tax into the margin that you will make from the sale of the property. This Real Property Gain Tax is not the only thing the property speculator has to contend with. The Malaysian government has imposed in 2010 a maximum margin of 70% on any third housing loan taken by any one buyer. That is already a deterrent factor there. Still people buys houses speculatively and try to make huge profits out of it.

Banks are also culprits in the making of housing bubbles. Why? Because they make so much money out of giving out housing loans to people who want to buy houses, whether they need it or not. A speculators adage has always been "If you can use other people money, do not use your own money." This has also been the adage that fueled a few of economic crisis in the world.

Another factor why housing bubble will visit the world every few years in this modern era is due to the property gurus that keep teaching people to buy and sell property to make a profit out of it. While these property gurus go running and laughing to the bank thanking the gullible students for paying them an arm and a leg trying to learn how to make money from property speculation, new property speculators are born and play the property speculation game all over again

So, as the sun keeps on shining and people keeps on needing a house, a housing bubble will keeps on visiting each property hot spot.

Again and again...

*Originally wrote this as a LinkedIn post : https://www.linkedin.com/today/post/article/20140617041553-25491383-why-a-housing-bubble-will-always-happens-again-and-again-all-over-the-world?trk=prof-post

Media appearances past few months

It has been a few weeks of non-stop media appearances for me. Some are in articles in news portals, two radio guest appearance and author appearances at one book fair.

For posterity sake, here are those media appearances :

My two articles in The Malaysian Insider :

One is on the issue of Gated and Guarded Community in Malaysia published on 2nd April 2013 :

Whither neighbourliness?

Another is about Affordable Housing in Malaysia published on 19th May 2013 :

Affordable housing : Political Rhetoric or Serious Solution?

Then I answered a question in News Straits Times pullout Real Estate and Decor about discharge of a strata property :

Q & A on 5th April 2013

And my article was published by News Straits Times : Real Estate and Decor about Gated and Guarded Properties in Malaysia on 3rd May 2013 :

One day inside a gated and guarded development

In April and May, I had two radio interviews by BFM Radio both in The Property Show. Here are the podcasts from the show. Here is my interviewer, Azura Rahman, from the show :

First interview was about my new book :

40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

My second interview was about Malay Reserved lands in Malaysia :

Understanding Malay reserve land

Finally during the recent Kuala Lumpur International Book Fair at PWTC which happened between 26th April and 4th of May 2013, my new book was launched and I made two author appearances at my publisher's booth :

That was it. I just realised I had a busy April and May 2013. It was good to be busy.

You can still get my book here, at True Wealth Sdn Bhd's Book Planet website :

40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

Credit Reporting Agencies in Malaysia : What is CENTRAL CREDIT REFERENCE INFORMATION SYSTEM (CCRIS) and CREDIT TIP OFF SERVICE (CTOS)?

This is an excerpt from my next book. The book's working title is 40 Questions You Should Ask Your Lawyer Before Taking A Housing Loan in Malaysia, another book under Ask The Lawyer series. I am targeting for it to come out next year, 2014. Do get my new book 40 More Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia here. Any questions, comments and inquiries are welcomed.

CCRIS and CTOS are credit reporting agency, a newly-governed industry in Malaysia. People applying for housing loans in Malaysia will have their financial information checked by the financial institutions they are applying the housing loan to. Here is excerpts for one of the question in my book under the title above :

Central Credit Reference Information System (CCRIS) is an online credit checking system operated by Bank Negara Malaysia with all Malaysian’s resident’s credit information in the system. As long as that person has an identification card and credit history, he can check his credit history in CCRIS. CCRIS is managed by the Credit Bureau of the Bank Negara Malaysia since 1982 and formed under the Central Bank of Malaysia Act 1958. The Credit Bureau collects the credit information of any borrower from all financial institutions in Malaysia and then issue a credit report when it is requested by any of the financial institutions governed by Bank Negara Malaysia. Central Credit Reference Information System is a computerised database and there is nearly more than nine millions borrowers’ credit information currently being stored by Central Credit Reference Information System. All the information about the function of Credit Bureau and Central Credit Reference Information System, can be found in the Bank Negara website on Credit Bureau : http://creditbureau.bnm.gov.my.

The financial institutions are required to report the name, identification number, address and credit facility details such as type of credit facilities, credit limit, outstanding balance, conduct of account and any legal action status. A borrower can check your Central Credit Reference Information System report at Bank Negara or Bank Negara’s various branches in Malaysia. A borrower cannot ask a representative to check his own Central Credit Reference Information System report. Under the various banking laws including Banking and Financial Institutions Act 1989, Islamic Banking Act 1983 and Central Bank of Malaysia Act 1958, confidentiality is imperative in dealing with Central Credit Reference Information System report. It can only be released with a financial institution authorised by an applicant for a housing loan or any other loans to get the Central Credit Reference Information System report from the credit bureau. Upon getting the Central Credit Reference Information System report, the financial institution and its officer can only use it to process the loan and not use it for anything else such as marketing its products

Financial institutions giving housing loans or any other loans to borrowers in Malaysia need up-to-date information about the applicants of the loans. Central Credit Reference Information System is where these financial institutions go in order to get the credit history of the borrower. The Credit Bureau sourced the information from all licensed commercial banks, Islamic banks, investment banks and several other financial institutions. In order to ensure the borrower’s data is up-to-date, verifications are done against the data at the National Registration Department and Companies Commission of Malaysia. Here are the list of information listed in the Central Credit Reference Information System report :-

1.       Outstanding credit including housing loan, hire purchase, credit card, overdraft and personal loan;

2.       Special attention account under close supervision by any financial institution; and

3.       Application for credit

All these three types of information will be for anything under the applicant’s own name, joint name with another person, sole proprietorship, a partnership or a professional body.

Any account fully settled or application rejected, deleted or cancelled are not included in the report. Credit repayment behaviors are listed at the end of the report for outstanding credit report or special attention credit report with 1, 2 or 3 or more stated according to the month in a year for the last twelve months. These can affect certain loan application, including housing loan. Any financial institution processing an application from an applicant of a housing loan will give special attention to any account with late or missed monthly installment payments, high debt servicing ratio between the borrower’s take home income and the debt the borrower already have, high utilisation of approved credit such as credit card, too many loan applications and any loan under litigation or special attention account. Unless it can be disputed, it is good for a borrower to clear some of the debts before applying for a housing loan.

Any borrower can dispute your credit report in Central Credit Reference Information System by first going to the bank which has entered the wrong information and then at any of the Bank Negara branch. Any financial institution supplying the inaccurate report must rectify any inaccurate or incomplete information immediately by sending it to the Credit Bureau. The financial institution is obligated to reflect the latest credit position of the borrower. A data review by the Credit Bureau can be done if the borrower is not satisfied with financial institution. The borrower can get and filled the Request for Data Review form to do a data review. It can be downloaded from the Credit Bureau website and then submitted to any Bank Negara Malaysia’s branches.

Credit Tip Off Service (CTOS) is a different form of credit report used by some financial institutions in Malaysia. Credit Tip Off Service is not related to Bank Negara Malaysia or any government agency and it is not endorsed by any of them. Credit Tip Off Service is run by CTOS Data Systems Sdn Bhd, a private company, better known as CTOS Sdn Bhd. The website for CTOS Sdn Bhd is http://www.ctos.com.my/ with its office in Megan Avenue 1, Jalan Tun Razak, Kuala Lumpur. CTOS Sdn Bhd collects data made public in news, court filings of legal proceedings allowed to be made public by the court, Companies Commission of Malaysia, information provided by the borrower and any of the borrower’s creditors, people or companies the borrowers registered with such as clubs, memberships and even include utilities companies. CTOS Sdn Bhd also collects a person’s directorship in companies either listed or not and all his sole proprietorship or partnership holdings. CTOS Sdn Bhd is registered under Credit Reporting Agencies Act 2010 and governed by the Securities Commission of Malaysia. Any refusal by CTOS Sdn Bhd to update its record can now be reported.

A few people claimed Credit Tip Off Service is an illegal gathering of information by a private company and is a blacklist. There a few evidence of this as CTOS Sdn Bhd is a company gathering information made public relating to credits and liabilities. CTOS is a lead information system with clients that need to check a particular person or company’s background, especially financials, in their normal course of business such as bankers, legal firm, insurance company and credit card companies. CTOS Sdn Bhd does not update their database or delete a settlement on any of the borrower’s case automatically unless the borrower or the person being checked informs CTOS Sdn Bhd of such matter. CTOS Sdn Bhd also claims it is not a blacklist report. Having a credit report under CTOS Sdn Bhd does not mean an applicant of a housing loan will not get approved. Applicants may receive a rejection from the bank the borrower is applying for a housing loan with the word ‘CTOS issue’ and the best course it to get in touch with CTOS Sdn Bhd to know what is the issue if the bank is unwilling to divulge the information. Getting credit especially a housing loan from a financial institution is still about the borrower proving himself to be credit worthy. Any data from CTOS Sdn Bhd is a public record and a borrower can get this record at his disposal too. A settled court case or a bankruptcy already being settled will have proofs and the borrower can update the financial institution the borrower is applying the housing loan with the proof.

The difference between Central Credit Reference Information System report and Credit Tip Off Service report is the weight given to each report. Most financial institutions give more weight by rejecting a housing loan application when they found the applicant has a ‘CTOS issue’. Central Credit Reference Information System is run by Credit Bureau under Bank Negara Malaysia, with banking laws to back the collection of information. Credit Tip Off Service is not imposed on financial institution as it is not run by any government agency but is supervised by Securities Commision. Other than these two agencies, there are several other credit reporting agencies such as Financial Information Service Sdn Bhd (FIS) and SME Credit Bureau Sdn Bhd. The unscrupulous use of a borrower’s or an individual’s information, especially financial information by any agency under Credit Reporting Act 2010 shall be reported to Securities Commission. With the coming of the Personal Data Protection Act 2010, the usage of personal data on individuals by financial institutions are now under another layer of scrutiny including disallowing the financial institutions’ credit department to divulge an applicant’s or a borrower’s data to its marketing department unless expressly allowed by person.

Real Property Gain Tax in 2013

This is an update from my blog post in 2011 about the Real Property Gain Tax (RPGT) in Malaysia for the current year 2012. You can go to the blog post here. That blog post explains about how does the Real Property Gain Tax in Malaysia works.

It was announced in Budget 2013 that the change for Real Property Gain Tax in Malaysia for 2013 is the addition of 5% to the current 10% RPGT for the sale of property which was bought 2 years from the date of the Sale & Purchase Agreement and the addition of 5% to the current 5% RPGT for the sale of property which was bought between 2 years and 5 years from the date of the Sale & Purchase Agreement. On the 6th year, there will be no Real Property Gain Tax levied on the sale.

As such, here is the rate which will be in force from 1st January 2013 :

Sale of property between 0 to 2 years of purchase : 15% RPGT

Sale of property between 2 to 5 years of purchase : 10% RPGT

Sale of property after 5 years of purchase : 0% RPGT

As I had advised in the blog post about RPGT in 2011, adjust your property investment accordingly.

Strata Titles Board, the law exist but the office isn't?

Another chapter from the sequel of my second book. Still in its rough draft. Comments are welcomed or questions even

The Strata Titles Board, as the name suggested, is an office established to deal with disputes under the Strata Titles Act 1985. The Strata Titles Board can only settle disputes in strata development which is already has been issued with individual strata titles and has a functioning Management Corporation. The Strata Titles Board can hear and makes decision on any disputes which is brought to it by the owner of a strata property or the management corporation of a strata development or any person or body having interest in the strata property, which is usually the financier for the strata property or strata development. The disputes which the Strata Titles Board can hear are listed in the Strata Titles Act. Every state in Semenanjung Malaysia has its own Strata Titles Board and consists of less than twenty members with a President and more than one Deputy President. The appointed of members in the Strata Titles Board is made by the Minister of Housing and Local Governments with the recommendation of the relevant State Authority. The member of the Strata Titles Board is appointed for two years and is eligible for reappointment. The appointment can be declined, resigned from and revoked. Although the provisions in Part IXA of Strata Titles Act 1985 has been in existence since the amendment of the Strata Titles Act in 2007, no state in Semenanjung Malaysia has set up its own the Strata Titles Board yet although the need for it has increased.

What is the importance of the Strata Titles Board in the whole scheme of things when it comes to strata development? The Strata Titles Board is a good place to settle problems arising from anything that an owner, Management Corporation and any person or body which has interest in a strata property in any strata development. There are so many provisions in the Strata Titles Act in order to allow it to work faster and better than any dispute resolution process. The Strata Title Board can even hear issues which are not provided for under Part IXA of the Strata Titles Act 1985, and any matter brought in front of the Strata Titles Board even survive the death of any member of the Strata Titles Board. The member of the Strata Titles Board who resigns or retires during a hearing must finish hearing any dispute that was brought before the Strata Titles Board when he was a member. Members of Strata Titles Board are protected when doing anything done in good faith during hearings and can be paid allowances. The Strata Titles Board is given six months to settle any dispute brought before it except if otherwise decided the matter is complex. The proceedings of the Strata Titles Board are open to public and all its members are considered as public servants when serving the Strata Titles Board.

Matters that can be settled by Strata Titles Board which are listed in the Strata Titles Act 1985 are spelt out from Section 67H until Section 67O of the Strata Titles Act 1985. A Strata Titles Board can revoke any amendment of additional by-laws which are made by the Management Corporation. This is if it is found that the owners feels that the additional by-law which is added, revoked or amended interferes with the enjoyment of strata properties or common property within the strata development. The Strata Titles Board can order the Management Corporation to pay compensation to the owners adversely affected by the additional by-law. Additional by-law which is found to be made outside the power of the Management Corporation can be found invalid by the Strata Titles Board. If the Management Corporation in collecting the service charges under Section 45 of the Strata Titles Act 1985 - Management Fund, charged an unreasonable interest rate, the Board may order the no interest rate is paid or order a different interest rate to be paid. The Strata Titles Board can make an order regarding any disputes on costs of repairs for any rectification or repair of defect of any strata property or common property either on the Management Corporation or the owners, depending on which party is liable to it. The Strata Titles Board can ask the Management Corporation which has refused unreasonably to consent to any proposal by owner to alter the common property within the strata development.

The Strata Titles Board is also allowed to hear applications with regards to general meetings of the Management Corporation. The Strata Titles Board is empowered to invalidate or refuse to invalidate any resolution or election in any meeting of the Management Corporation which is done without complying with the provisions of the Strata Titles Act 1985. If a meeting of the Management Corporation is called and resolutions are made while an owner is improperly denied to vote or was not given proper notice of the agenda of the meeting, if an application is made, the Strata Titles Board can nullify the resolution. When making decisions about insurance, the Strata Titles Board can ask the Management Corporation to vary the amount the buildings in the strata development is insured if it is found that the amount of contribution under Section 43(1) of the Strata Titles Act 1985 is not reasonable. The Strata Titles Board can order the Management Corporation to make or pursue an insurance claim if there is any damage to the buildings in the strata development, if the Management Corporation unreasonably to do so. The Strata Titles Board can order the Managing Corporation or the managing agent or any member of its council to supply any information or document unreasonably withheld to any owner. 

In discharging its duties, the Strata Titles Board acts very much like a tribunal or court. It has certain powers which allow it to issue order as to cost. The Strata Titles Board can order the cost to be paid either the applicant or the Management Corporation or any person whom an order has been made against. The Strata Titles Board even has the power for costs to be paid by any party who has made a frivolous application. Another power endowed on the Strata Titles Board is to order any party relevant to the strata development to do or refrain from doing a specified act in relation to the unit or common property within the strata development. A lawyer can appear on behalf of the interested party either the applicant or the Management Corporation in front of the Strata Titles Board. A member of the council can appear on behalf of the Management Corporation. The Strata Titles Board also has the power to summoned witnesses to give evidence and produce documents. Penalty can be imposed on the party who does not follow the order by the Strata Titles Board. Any order by the Strata Titles Board can be appealed to the High Court on point of law. With the powers and provisions in the Strata Titles Act, it can be seen that the Strata Titles Board has a very wide power and can settle a lot of the disputes in relation to strata properties which are already issued with individual strata titles. It is high time that the government seriously consider the setting up of Strata Titles Board in all the states in Semenanjung Malaysia in order to have a place for owners and management of strata properties to have a platform to settle their disputes.

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. 

What is meant by 'Service Charge' in a strata development?

Service charge is the main point of contention between the owner and the management in a strata development as it does not exist in landed property when one owns a property. It is an additional burden to strata development property owner as it has to be paid monthly. Under clause 18 of Schedule H of the Housing Development (Control and Licensing) Regulations 1989, the payment for maintaining the common facilities or common property provided by the housing developer is known as  ‘service charge’. Payment of service charge is paid to the housing developer before the joint management body for the property is established. The portion of the service charge to be paid by the purchaser is determined by a licensed land surveyor, appointed by the housing developer, who assigns the amount payable each month by the owner according to the allocated share units within the strata development. It means that the purchaser of a strata development pays according to the space that the purchaser owns within the strata development. The more space that the purchaser owns, the more service charge that the purchaser has to pay. An owner of a penthouse or a duplex pays more than a standard unit. In order for the purchaser to take vacant possession of the property that was bought, a four-month service charge has to be paid in advance and then the purchaser pays the service charge monthly in advance.

A Building Maintenance Account is established and maintained by the housing developer where all the collected service charge are deposited. The housing developer will then hand over the account to the Joint Management Body when it is formed and the account will finally be managed by the management corporation upon issuance of individual strata titles. Under the Fifth Schedule of the Sale & Purchase Agreement of Schedule H of the Housing Development (Control and Licensing) Regulations 1989, a sample of service charge statement is set out outlining the itemised billing and payment that the purchaser has to make every month. The Fifth Schedule is known as ‘Form of Service Charge Statement’ and has the descriptions, estimated monthly expenses and estimated annual expenses for the service charges. The listed descriptions for the service charge include the electricity supply, electrical system maintenance, firefighting system maintenance, lift or escalator system maintenance, security maintenance system, water supply, swimming pool maintenance and a few other common properties which need maintenance and upkeep. The list also includes management fee, management office expenses, staff expenses and bank charges for the management of the strata property. The list is not exhaustive as other services can be added on.

Under Section 16 and 17 of the Building and Common Property (Maintenance and Management) Act 2007, when the housing developer transfers the management of the strata property to the joint management body, the housing developer also has to transfer the Building Maintenance Account to the joint management body. The Building Management Account is to be opened before vacant possession is delivered. The housing developer has to deposit all the service charges received from the purchasers and to pay the service charges for the unsold parcels too. The housing developer will need to make sure that the Building Maintenance Account is maintained, audited by professional auditor, file a certified statement of accounts with the Commissioner of Buildings and  permit the Commissioner of Buildings' office to have access to the Building Maintenance Account. A housing developer who fails to do as such can be liable to pay between RM10,000-00 and RM100,000-00 with fine not exceeding RM1,000-00 for each day the offence continues if convicted. When the Building Maintenance Account is transferred by the housing developer within one month of the establishment of the joint management body, the account will be under control of the joint management body called ‘the Building Maintenance Fund’. Even if the housing developer is unfortunate enough to go into composition or arrangement with its creditors or goes into liquidation, the money in the Building Maintenance Account will not form part of the property of the housing developer and be under receivership. The money in the Building Maintenance Account will still have to be transferred to the joint management body by the administrator of the liquidation process. The Building Maintenance Fund will always be under the control of the joint management body. The monies in the Building Maintenance Fund shall include maintenance charges for the building, any money from the sale, disposal, lease or hire of any property, mortgages, charges or debentures which is done by the joint management body, moneys and property payable to the joint management body due to the joint management body’s functions and powers; and any money lawfully received by the joint management body be it interest, donation and trust. 

When the strata development is issued with individual titles, accessory parcels and common property, according to the Strata Tiles Act 1985,  the management of the strata development will pass to the the management corporation. Management corporation is born through the first annual meeting called by the housing developer. Part of the duties and powers of the management corporation are to take over from the joint management body, and then manage, maintain, audit and send report to the Commissioner of Buildings, the management fund. Under Section 45 of the Strata Titles Act 1985, the management fund is where all service charges are paid into when strata titles are issued to a strata development and management corporation manages the common property.  Service charges in the management fund are allowed to be used for nearly the same usage whether it is under the housing developer, joint management body or the management corporation. Management corporation is given additional usage of service charges under Section 45(2) of the Strata Titles Act 1985 in which management corporation is allowed to invest the money in the management fund with approval at general meetings. Service charges can also be raised through the annual general meetings accordingly through votes. 

In my next post, I'll try to tackle the issue of liability to pay the service charge, how far the management can do to collect it and what's the liability of the management to give good service.