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It's a crime not to pay


THE Strata Management Act 2013 (Act 757) that came into force in June last year unifies all previous laws governing the management and maintenance of common properties in stratified – condos and high-rise – buildings, explains Wong Kok Soo.

Wong is an adviser to the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector of Malaysia and consultant to the National House Buyers Association.

He explains that service or maintenance fees, known as “charges”, must now be kept in a “maintenance account” for the general maintenance, management and administration of the common property and building. Contributions to a separate “sinking fund” account are used only for capital expenditure, he explains.

He highlights the Act’s new measures to address the perennial problem of collecting these monies:

> Failure to pay within 14 days from date of service of billing incurs interest not exceeding 10% a year on daily rest until payment is made.

> Any restriction or action against a defaulter shall include his family or any chargee, assignee, successor-in-title, lessee, tenant or occupier of his unit.

> A defaulters’ list showing the amounts owed can be displayed on notice boards.

> A managing body can deactivate the defaulter’s electro­magnetic access device without prior notice. The defaulter can be asked to sign a register upon every entry/exit. A fee not exceeding RM50 can be charged for reactivation of the device upon settlement of arrears.

> Use of common facilities/services, including car park bays, can be suspended.

> A managing body can demand payment of arrears by issuing the prescribed regulation Form 11 (used by developers and joint management bodies) or Form 20 (used by management corporations).

> A defaulter who fails to comply with such a notice of demand commits a criminal offence, and upon conviction, without reasonable excuse, can be fined up to RM5,000 or jailed for not more than three years, or both.

> The defaulter can be further fined up to RM50 for every day the offence continues after conviction.

> If the debt due is not settled within the stated 14-day period in the notice of demand, the managing body can file a claim in the Strata Management Tribunal to recover the sum. Failure to comply with an award made by the tribunal is a criminal offence and, upon conviction, the defaulter can be fined up to RM250,000 or jailed for not more than three years, or both. The defaulter can also be further fined up to RM5,000 for every day the offence continues after conviction.

Chang Kim Loong, for one, lauds the provisions under the Act.

Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA). said only in Malaysia are people rewarded for paying late.
Chang Kim Loong

As the National House Buyers Association (HBA) honorary secretary-general points out, proper maintenance and efficient management depends on a steady flow of payments to the common fund, so repeated failure to make those payments can wreck the whole strata development scheme.

However, he feels that there is room for improvement. The HBA, he adds, has proposed some 20 amendments to the Act and its ­regulations to “plug the loopholes” and address inconsistencies.

“We’ve seen the practical application of the Act’s laws. There are teething problems so we’ve made our recommendations to the Urban Wellbeing, Housing and Local Government Ministry,” he says, though he declines to elaborate on those recommendations.

But no matter how sound the law, it won’t solve anything unless strictly enforced, he stresses.

Real Estate and Housing Developers’ Association president Datuk Seri F.D. Iskandar agrees.

“Regardless of the provisions provided in the law, problems will persist without proper monitoring and enforcement,” he says.

He does feel, though, that the penalties imposed under the Act will go a long way towards encouraging unit owners to pay their fees.

“The penalties will nudge many to settle their dues and address the ‘why should I pay’ attitude,” he says.

He adds that the provisions in the new Act have given much needed recourse to developers, joint management bodies and ­management corporations, as they will be able to file claims with the Strata Management Tribunal.

“With further provisions to recover sums owed, including the option to auction off defaulters’ movable property, it is likely that the long-standing non-payment issue will be reduced.”

Wong actually thinks the provisions don’t go far enough. Instead of just moveable property, he says the law should provide for the seizure and public auction of the ­actual unit belonging to a defaulter if arrears reach a set limit.

Such a measure will have a strong deterrent effect. Singapore does this and high-rises there are free from the problem of fee defaulters, he says.

While Building Managers Association of Malaysia (BMAM) deputy president Tan Sri Teo Chiang Kok agrees – “There must be an effective process of recovery. Once the property is auctioned off, the balance can go back to the owner,” he says – the HBA’s Chang does not, saying that giving the tribunal powers of public auction would be “too drastic”.

Managing director of Yap Burgess Rawson International managing director Wong Kok Soo.
Wong Kok Soo

Doing so, he feels, would be unfair and cause too much hardship, as there would be legal and technical complications that a layperson wouldn’t be able to undertake.

“Ordering an auction is a complex and serious matter that should only be dealt with by a full-fledged court. If a defaulter only owes RM25,000 and his unit is worth RM500,000, a tribunal would be ill-equipped to deal with related issues like bank collateral vis-à-vis indebtedness and price of sale,” he points out.

The point of the quasi-legal form of redress offered by the tribunal is to offer easy, cheap and speedy justice while sparing the parties involved from having to go to court, he says.

“Although it doesn’t have the power to order that the stratified property belonging to defaulters be auctioned off, such a remedy is still possible through the normal legal process.

“The tribunal’s award can be enforced by applying to the High Court for foreclosure of the property to recover all arrears,” Chang points out.

Sometimes, taking matters into court can help, says senior lawyer Roger Tan.

Although the Act defines defaulting on fees payment as a crime, Tan notes that, to date, nobody has ever been charged in court for this offence.

“Management bodies can pressure their residents to pay by ­deactivating their access devices and so on. But this may create more tension.

“So perhaps the most effective way to curb defaulters is to prosecute them,” he suggests.

After all, it is unfair on the law-abiding residents who regularly pay the charges when defaulters are not punished, he points out.

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More professionalism needed in managing high-rises

Why some people don't comply

Property , defaulters , maintenance fees , charges

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