 Laws governing the maintenance of sub-divided buildings lack bite in recovering the sums due from defaulting owners New Sunday Times
by Roger Tan
THERE are about three million Malaysians living in sub-divided buildings today.
These buildings can range from low-cost apartments to the most luxurious
condominium units.
One common but serious problem faced by those who manage such
buildings is the difficulty in collecting maintenance charges or contributions
from parcel owners.
It is, therefore, not uncommon to hear that there are:
- management corporations (MCs) which have run into deficits involving millions
of ringgit because parcel owners refuse to pay contributions for years.
- buildings, especially low and medium-cost apartments, that have become
enclaves for drug addicts, migrant workers and illegal immigrants because there
are no funds to engage security services. As a result, the owners will not live
there and residents living in the surrounding areas face a social problem.
- developers who could not find anyone interested in serving
in the first MC and thereafter, or joint management body (JMB) as there is no
surplus in the accounts due to a high default rate for non-payment among parcel
owners.
Generally, there are two sets of laws which govern the maintenance and
management of sub-divided buildings and their common property.
The Strata Titles Act 1985 (Act 318) applies to those buildings where an MC has
already been established after the issuance of individual strata titles. After
April 12, 2007, the Building and Common Property (Maintenance and Management)
Act 2007 (Act 663) applied to those buildings without an MC by setting up a JMB.
Prior to 2004, MCs had resorted to a rather effective way to compel payment of
the contributions -- by disconnecting water supply to units of defaulting
owners.
But all this stopped after the case of John Denis De Silva v. Crescent Court
Management Corporation 2006. In this case, the late De Silva, a retired
diplomat, obtained an injunction to restrain the defendant from preventing the
entry of his car as well as disconnecting the water supply for not having paid
his monthly contributions.
The court held that such unilateral acts were ultra vires sections 53 and
53A of Act 318, which set out the procedures to be followed in recovering the
contributions due.
Section 53 provides that if the owner fails to settle the sum due within a
period of four weeks after having been served with two notices -- each requiring
him to pay within two weeks after service of the notice -- then the MC may sue
for the recovery of the said sum in court or, in addition or as an alternative,
resort to section 53A.
The section empowers the MC to apply to the Land Administrator for a warrant to
attach the movable properties of the owner found in the unit or elsewhere in the
state. The properties can then be sold by public auction if the owner still
fails to settle the contributions.
One other provision not mentioned by the court in the John Denis case is
section 55A, which provides that any owner who has failed to pay the
contributions in the manner set out in section 53 commits an offence and shall
be liable on conviction to a fine not exceeding RM5,000 and to a further fine
not exceeding RM50 for every day during which the contributions remain unpaid
after conviction. (In Act 663, the identical provision is section 34.) It
appears that to date no one has been prosecuted under this section.
However, in practice, the above methods are hardly effective in recovering the
sums due from defaulting owners, especially the contumacious ones, as it takes
years to obtain and enforce a judgment. The attachment mode is also ineffective
because either the movable properties belong to the tenants or the premises have
been stripped bare, and it is also difficult to ascertain their other properties
situated elsewhere.
For prosecution under section 55A to take place, the written consent of the
Public Prosecutor is required under section 80A. Even if there is prosecution
under section 55A, big-time defaulters, like corporations, may still delay in
settling the contributions as the daily fine of RM50 may not be a deterrent to
them.
Some may then ask what if the right to disconnect water supply is contained in
the deed of mutual covenants or house rules or by-laws?
In my opinion, the deed may not even be valid if it is signed simultaneously
with the statutory sale and purchase agreement for housing accommodation without
the prior approval of the Controller of Housing under Regulation 11 of the
Housing Development (Control and Licensing) Regulations 1989.
Secondly, the covenants contained therein can only be considered as house rules
in addition to those contained in the Third Schedule of Act 318 if they have
first been passed in a general meeting by special resolution under section 44.
Even if the deed is valid or the right to disconnect is contained in the house
rules, such power will still be nullified by the John Denis decision.
However, if the owner does not have any proprietary interest in the parking lot
allocated by the MC, then additional by-laws may be passed by special resolution
to deny the defaulting owner the allocated parking lot or the use of facilities
such as the swimming pool or gymnasium.
But this does not prevent the owner from complaining to the Strata Titles Board
under section 67H of Act 318 to have such by-laws revoked, and the MC may even
be required to pay compensation to him if he is adversely affected by the
by-laws.
While the above also applies to stratafied commercial properties, I am of the
view that Act 318 and Act 663 ought to be amended to allow the MC or JMB to
create a legal charge on the parcel unit belonging to a defaulting owner if the
sum due is not settled after the four-week period stated in section 53. This
charge should rank in priority over any prior charge created by the owner's
financiers.
If the owner or his financier does not settle the sum due including any interest
and legal costs within a specified period after publication of the notice of
sale, then the MC or JMB can sell the unit by way of public auction if the sale
has also been approved by special resolution in a general meeting.
This recovery method, widely used in many countries, has proven to be effective
and our authorities should seriously consider introducing it here in the
interests of all law-abiding parcel owners and the general public.
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