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Opinion: Apartment owners

trapped in a limbo

Sunday, 04 May 2008 12:35pm

New Sunday Times(Used by permission)

by Lee Siew Lian

Pitfalls await unwary apartment owners now that they are starting to manage their own common properties,

writes LEE SIEW LIAN

APARTMENT owners are trapped in the middle of a roiling dispute over who should control the lucrative business

of property management.

With an estimated RM600 million in annual fees at stake, the long-standing battle has left owners in a bind over

who to appoint to help run and maintain their communal properties once they take over from developers.

While the two groups of property players slug it out, state governments are dithering over who to appoint as

building commissioners, the officials who should be best placed to decide on the issue.

This leaves the country's 1.2 million apartment owners with little guidance over what to do and few safety nets to

catch them if they make a mistake.

Because regulation of this industry is inadequate and dotted with loopholes, apartment owners are now exposed

to major risks, including financial disaster.

"It's a daunting and confusing task," says Veronica Gan, president of the Bangsar Heights Residents Association,

which will soon form their own management corporation.

"What we need are some guidelines on the best practices to adopt or how to negotiate. The only material we have

is from the House Buyers Association, but it's not really enough."

"There are many pitfalls during this transition period," says Chang Kim Loong, honorary secretary-general of the

national HBA, "But no one's looking out for the consumers."

Thousands of joint management bodies (JMBs) were supposed to have been set up this year, giving owners of flats,

apartments and condominiums a say, together with developers, in how subdivided properties are run.


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JMBs are interim bodies for the years before strata titles are issued and owners' management corporations (MCs)

set up to take over from developers.

One of their biggest responsibilities will be to appoint someone to manage their common property, from the

grounds and lifts to corridor lighting and swimming pools.

Almost overnight, a huge and lucrative industry has opened up.

"If unit owners paid an average of RM50 in monthly maintenance charges, it would mean RM50 million a month,

RM600 million a year," says Kumar Tharmalingam, secretary-general of the International Real Estate Federation

(Fiabci), in Asia Pacific.

The Board of Valuers, a statutory regulator, says owners should appoint only property managers that it has

registered. But a lobby group, the VAEA Joint Action Group, insists that there is no such restriction.

The VAEA refers to the Valuers, Appraisers and Estate Agents Act 1981, the statute that governs the board.

The Joint Action Group has players from different industries as members, ranging from the Real Estate and Housing

Developers Association (Rehda) to apartment management corporations and the Associated Chinese Chamber of

Commerce and Industry (ACCCIM). Fiabci Malaysia, which Tharmalingam used to head, is also part of the group.

The group reads the law differently and asserts that by definition under two other Acts, the owner bodies and

corporations escape the effects of the Valuers Act.

They claim the two Acts -- the Strata Titles Act 1985 and the Building and Common Property (Maintenance and

Management) Act 2007 -- allow owners' committees to appoint what they call managing agents.

"Anyone with the right experience and ability can be a managing agent. JMBs and MCs can appoint any one they

see fit to manage their properties," says Datuk Teo Chiang Kok, See Hoy Chan director.

Their problem with the Valuers Act is that it effectively allows only registered valuers to become property

managers. They say this makes the property management industry a monopoly for just a few hundred registered

valuers.


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"But it is the free market that should decide," Teo says.

Board of Valuers president Datuk Abdullah Thalith Md Thani says anyone involved in managing and maintaining

property should be properly regulated and well-qualified.

"I want to open up registration to anyone who is interested. It's a misunderstanding."

He says he had proposed to amend the Valuers Act, but intense resistance from developers and other property

players forced him to drop the matter. Thalith is president by virtue of his post of director-general of the Valuation

Department under the Ministry of Finance.

Thalith agrees with most industry players that the Act's provisions for regulating property managers are

inadequate, and enforcement patchy.

But he worries that those who appoint the so-called managing agents could be courting financial disaster arising

from mistakes, negligence and dishonesty. Those registered under the Act would be required to obtain

professional indemnity insurance, he points out.

The HBA, a voluntary organisation which represents home owners, agrees owners are exposed even if these

unregistered managing agents had adequate indemnity insurance.

Chang, who is honorary secretary, argues that the insurer could repudiate liability and refuse to pay up since the

managing agent is not a legitimate property manager registered with the Board of Valuers.

Indeed, the same could happen to owner bodies themselves, the JMBs and MCs, he says.

"The relevant statutory provisions do include prosecutions and the right to sue, but this is hardly any protection at

all to owners. There are too few preventive measures." The HBA favours tighter regulation and compulsory

licensing of property managers. "Lives and properties are entrusted to their care, control and management,"

Chang says.

He also urges the board to grant amnesty to competent but unregistered property managers, to encourage them

to register.

"It's similar to the drive that was extended to unlicensed real estate agents some years ago."


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Fiabci's Tharmalingam agrees, saying the board has, by inaction, allowed unlicensed property managers to flourish

for 20 years: "They now have the right to exist."

A valuer by profession, he goes even further to say the JMBs and MCs should also be registered. Registering these

owner bodies would offer a safety net to individual unit owners, he explains: "Those who serve in the (executive)

committees have a responsibility for the (financial) performance of the JMBs and MCs. If the board is prepared to

regulate property managers, then it should take responsibility for the JMBs and MCs too."

The problem is the laws governing stratified properties have been drafted and amended piecemeal, leaving

loopholes that expose apartment owners, Tharmalingam claims.

"It's a solvable problem, but cooler heads must prevail."

http://www.malaysianbar.org.my/general_opinions/comments/opinion_apartment_owners_trapped_in_a_limbo.

html

Management of high-rise apartments: Power back in

hands of owners

Monday, 06 August 2007 07:49am

New Straits Times(Used by permission)

by K. Harinderan and Sri Kuehnlenz

KUALA LUMPUR: At least once a month, the lifts stop working at the high-rise apartment block where Liew See Lan

lives.

"There is little we can do as the developer is the only one with the power over the management company," she

said.


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Soon, though, the housewife and other owners of Bukit Pandan Two condominiums will be able to have a big say in

how the property is run.

Sometime this month, the residents association she leads will meet to form a collective body that will take over

running of the property.

All she needs is between eight and 12 owners, and up to two representatives from the developer, to form what is

called the joint management body (JMB).

This JMB will maintain the common property, decide how much to charge for maintenance and collect the charges.

It also can sue and be sued.

More importantly, it will be able to seize the units of owners who dont pay their maintenance fees, to be

auctioned off to settle what is owed.

This major change in the laws regulating high-rise residential buildings came in April, with the the Building and

Common Property (Maintenance and Management) Act 2007.

These provisions will affect about 500,000 strata-titled units across the country and their two million occupants, as

well as millions of ringgit in sinking funds and collected monies.

Until April this year, apartment owners spent years and sometimes decades waiting for developers to convert

master titles into individual strata titles.

In that period, developers controlled the upkeep of the property, often appointing subsidiaries or business

associates to the role of management company.

The law gave little recourse to frustrated owners, many of whom endured poor service from management

companies.

Problems range from dirty common toilets to leaking roofs and poor lighting in stairwells.

Now the JMB will manage the property until the permanent management body is formed after full conversion of

the master title.


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"The relationship between owners and management used to be a no-mans land. This new law will help to regulate

that area," said Chang Kim Loong, secretary-general of the National House Buyers Association.

An estimated 70 per cent of Malaysias stratified residential properties are badly managed, forcing owners and

occupants to put up with deplorable conditions, he said.

Then again, developers and management companies, too, had problems.

Difficulty in collecting maintenance charges was top of the l ist and they are barred from cutting off the water

supply or denying entry as an enforcement measure. Now, owners will share these headaches, too.

With the new law, developers of new properties must form the JMB within a year of giving vacant possession.

And all developers of existing apartment properties must form the JMB before April 12 next year.

So far, three apartment properties have formed and registered their JMBs. Two are in Kuala Lumpur and one in

Petaling Jaya.

One of them is the Sri Murni condominium off Jalan Duta here.

Its developer, IGB Corporation Bhd, held a meeting last month to elect 12 owners to the committee.

http://www.malaysianbar.org.my/legal/general_news/management_of_high_rise_apartments_power_back_in_h

ands_of_owners.html

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