Part 1: Joint Management Bodies & Management

Corporations
8 Things To Know About JMBs/MCs
In the course of practising law, I’ve noticed that there’s an increase of disputes involving Joint Management
Bodies (JMBs) and/or Management Corporations (MCs). This is inevitable because of the increase of
stratified developments and also legal awareness among the dwellers within. These issues vary and include
challenging the validity of proxy holders, use of the maintenance account and sinking funds, the efficiency
of managing agents, statutory duties and so on. I’ve also been exposed to many operational issues faced by a
Joint Management Committee (JMC) and MCs because at the time of writing, I’m chairing 3 different
JMBs.

Some of these issues were trivial but some were major enough to secure a conviction for charges under
misappropriation of property.

Many parcel owners have viewed the responsibilities of JMC a menial and easy one. In reality however, it is
the exact opposite especially if the JMC/MC oversees a mixed development which is very common
nowadays. In fact, to take office in JMC, the person must at least be conversant with the law of contract, the
law of meeting, law of defamation, law of tort, Building and Common Property (Maintenance and
Management) Act 2007 (BCP) – which is now repealed, Strata Management Act 2013 (SMA), Strata Titles
Act 1985 (STA).

I’m writing this article post SMA and I will further write a separate article to mark the significant
differences between the BCP and SMA.

In view of the vast areas I have encountered, I wish to share with readers the top 8 most important things one
should know about JMCs/MCs. This is the first of a series and for the 8 items listed, I’ll elaborate them in 8
separate articles with a final concluding article. However, they may not be written in the order set below.

The list above is by no means exhaustive and I must caution all JMC members to know what you are getting
into when you offer to take office.

In fact, I would go one step further to suggest that each JMC member should attend an intensive training
course for the simple reason of avoiding any unnecessary entanglement with the law in future.

Lastly, maintaining a building is not an easy task. In addition to attending to the usual maintenance issues,
JMB must also pay equal attention to the policies of hiring staff and payment of bonus, selecting contractors
and appointing managing agents, setting key performance index, determining the assembly points in case of
a fire, ensuring fire regulations are adhered to and complying with the various newly passed legislation like
the Personal Data Protection Act 2010. If in doubt, always consult a lawyer and get a lawyer to sit in each
JMC meeting ̶ just like how you would appoint an external auditor to audit your accounts.

Getting your house in order at all times will minimize liabilities.

[information provided by Chee Hoe & Associates]
JMBs & MCs Part 2: Developer Duties
Duties Of The Developer
This week, I’ll share with you the statutory duties of the developer, what happens if the developer fails to
perform them and what action can the JMB/MC can take if that happens. We’ll also cover what the JMB
should take note of when the JMB is formed. This topic is important because it determines whether a JMB
will have a good head start.

It is the duty of the developer to open, maintain, transfer the building maintenance account and convene the
first general meeting.

It is interesting that the Strata Management Act (SMA) appears to provide clarity over:

 Developers Management Period – which means the period commencing from the date of delivery of vacant
possession of a parcel to a purchaser by a developer until 1 month after the establishment of the JMC; (Section
7(2))
 Establishment of a JMB – upon convening the first Annual General Meeting (not later than 12 months after
delivery of vacant possession)
 Preliminary Management Period – means the period commencing from the date of delivery of vacant
possession of a parcel to a purchaser by the developer until one month after the first annual general meeting of
the MC
 Establishment of a MC – Upon the opening of a book of the strata register

A JMB is first formed after the first meeting is called by the developer whereas the MC is first formed upon
the opening of a book of the strata register.

The developer has a period of 12 months from the date of delivery of vacant possession of the parcels (a
piece of real estate usually resulting from the division of land) to call a first meeting to establish a
JMB. Whereas for a MC, the developer has a duty to convene the first Annual General Meeting (AGM) of
the management corporation within 1 month after the expiration on when there are proprietors who are
registered as the proprietor of a parcel a sum of whose share units is at least 25% of the aggregate share units.

At the first meeting, it is imperative that you make sure the developer includes the issues below in the meeting’s
agenda:

 To determine the number of members of the JMC;

 To consider the annual budget prepared by the developer;
 To determine the maintenance charges and contribution to the sinking fund;
 To determine the rate of interest payable for late payment of maintenance charges and sinking fund;
 To consider the audited accounts;
 To confirm the taking over by the JMB of insurances effected by the developer;
 To make additional by-laws; and
 To consider any other matter connected with the maintenance and management of other common property
The quorum (minimum number of members) that make the meeting valid at the first meeting must be one
quarter of the purchasers who have paid maintenance charges. If within half an hour, a quorum is not present,
the registered members entitled to vote who are present shall constitute a quorum.

Maintenance Account (MA)

In the course of anticipating the first meeting, the individual purchasers must also know that it is the duty of
the developer to open and maintain a Maintenance Account. The account should be opened for each
development area and be transferred to the JMB after JMB is formed.
Transferring of the funds from the MA is usually a tedious process and it is important that the JMB at this
juncture note the following:
[Information provided by Chee Hoe & Associates]

[Information provided by Chee Hoe & Associates]

All monies collected by the developer in the maintenance account shall only be used for actual or expected
general or regular expenditure of the following matters:

A developer who fails to comply with the above commits an offence and shall be liable to a fine of not less
than RM250,000.00 or to imprisonment for a term of not exceeding 3 years or to both.

During the handover to the JMB, the Developer is also statutory bound to:

 Hand over the administration office set up by the developer;

 The audited accounts of the maintenance account and sinking fund;
 All the assets of the development area;
 All records relating to and necessary for the maintenance and management of the buildings;
 All invoices, receipts and payment vouchers in respect of the maintenance account and sinking fund account
[Information provided by Chee Hoe & Associates]

Section 15(3) of the SMA also made it a duty for the developer to deliver to the JMB:

 All approved plans for buildings or lands intended for subdivision;

 Any document in the developer’s possession that indicates, as far as practicable, the actual location of any
pipe, wire, cable, chute, duct or other facility for the passage or provision of systems or services;
 All contracts entered into by the developer in respect of the maintenance or management
 A copy of the schedule of parcels filed with COB;
 The names and address of such contractors, subcontractors and persons who supplied labour or materials to
the development;
 All warranties, manuals, schematic drawings, operation instructions, service guides, manufacturer’s
documentation and other similar information in respect of the construction, installation, operation,
maintenance, repair and servicing of any common property
 The register of all parcel owners of the buildings;
 The original copy of all insurance policies

Any developer who fails to convene a first Annual General Meeting or to deliver the documents above
commits an offence and shall, on conviction, be liable to a fine not RM250,000.00 or to imprisonment for
a term not exceeding 3 years or to both.

If the developer fails to discharge its responsibility, a proprietor can lodge a complaint at the Strata
Tribunal. There are a lot more issues which I have come across at the handover period which I may not be
able to share them all at this juncture but JMBs are encouraged to seek legal advice for a complete handover.
JMBs & MCs Part 3: JMB Duties & Legal
Liabilities
Taking Office In JMB Exposes Oneself To Potential Legal
Liabilities
The topic although appears intimidating but unfortunately is true. In my practice, I acted for and against
Joint Management Bodies and many times, the matters turn litigatious because there was lack of knowledge
of the statutory duties and applicable laws on the part of the JMC.

It is close to impossible to list down all the potential liabilities in this article but I will attempt to list down
the most important items a JMB must be aware of.

To begin with, let me list down the statutory duties of the JMB which are the most basic duties each JMC
should be aware of. It has no intention whatsoever to discourage you from offering your services to the Joint
Management Body. On the contrary, this article serves to provide you insights into the responsibilities,
possible legal liabilities of the JMB.

In addition to the statutory duties, one must also note that by virtue of the JMB owning the common area,
the JMB will inevitably face with issues of abuse to the common area, façade preservation, unauthorized
renovation, appointment of contractors and many more. These issues although appear to be simplistic but
my experience suggests otherwise as I have come across issues where:

 Common areas were abused and used to generate revenue;

 Façade was converted into a big advertisement boards;
 Roof top was made available for installation of a base transceiver station;
 Renovation undertaken not in accordance to House Rules.

and litigation then followed. At this juncture, both parcel owners and the JMB will be dragged to court to
resolve the issues which at time are not the most pleasant way to seek a closure to the chapter.

This is especially so when both parties are litigating in court, their relationship is still very much
professionally connected when the parcel owners bear the obligation to pay the maintenance charges to the
JMB whilst the JMB continues to manage the entire building.

There are many more areas of law the JMB must also take into cognizance especially when JMB enters into
contracts with several stakeholders including the companies offering services of cleaning, security, lift
maintenance, landscape etc. Each contract is drafted with different set of terms and negotiation for a best
outcome will bring benefit to the community.

Conversely, if a lopsided agreement was signed on behalf of JMB , JMB may then be sued one fine day (if
the breach of the contract caused the JMB to suffer losses) by parcel owners for not protecting their interest
because each parcel owners have an interest to the Maintenance Account and the use of the funds. In fact
this is not uncommon and I have personally did a matter when a JMB was ordered by the court to pay a sum
of RM200,000.00 as fortification of damages to the opposing party for an injunction taken.
[Information provided by Chee Hoe & Associates]
JMBs & MCs Part 4: Appointing A Person Or A
Management Company?
Directly Employing VS Management Company
So after taking over the management rights from the developer. What should the JMB do?

In practice, many times the JMB or MC will continue to retain the services of the management company
appointed by the developer for convenience purposes. However I see a recent trend of JMBs opting to make
a change and conduct competitive bidding to appoint other management companies.

How do you do that and what are the things to take note of when appointing a person or a
managing company?

Can a JMB manage itself by employing personnel or must it appoint a management company?

It is important to appoint a managing agent who is conversant with the law

DIFFERENCES BETWEEN MANAGEMENT COMPANIES & DIRECT EMPLOYMENT

Section 21 of the Strata Management Act and Regulation 21 and 35 of the Strata Management (Maintenance
and Management) Regulations 2015 appears to provide for a JMB or MC to secure the services of any
person or agent to undertake the maintenance and management works. “person” or “agent” are used
interchangeably in the Act but person can simply mean that they are of a natural person.

Out of the 2 MCs I chair, we appoint professional management companies whereas the other smaller project
is run by individuals as employees of the MC. The main differences of hiring direct persons employees as
opposed to having a management company are:

Whether self-managing it by hiring employees or appointing management companies, I believe the criteria are
somewhat similar and they should at least:

CONCLUSION

Can a management company which is not with the Board of Valuers, Appraisers and Estate Agents Malaysia
carry on business? (I note that there are concerns raised as to whether to only allow registered valuer to
practice as a property manager but this article will not at all put forward any argument whether to support or
oppose the proposal). Regulation 21 of the Strata Management (Maintenance and Management) Regulations
2015 allow for non-registered management company to carry on business but these companies are required
to pay a Bond to the JMB or MC equivalent to the remuneration or management fees for a period of 12
months or a sum of RM50,000.00, whichever is higher.

With the bond in place, it is argued that the JMB or MC is now in a better position to safeguards its interest
against managing agents.
[Information provided by Chee Hoe & Associates]
Part 5: The Use of Funds In The Maintenance And
Sinking Fund Account Is Strictly Provided For
Under The Strata Management Act 2013
Using The Maintenance And Sinking Funds
Throughout the years of chairing Joint Management Bodies (JMBs) and Management Corporations (MCs), a
similar question keeps popping up as to whether we can utilise the funds from the Maintenance Account to
carry out certain activities.

These activities include to have a simple appreciation dinner with the JMC/MC members, to install wifi at
the common area, to purchase equipment for the gymnasium, setting up signboards (especially in a mixed
project) etc.

Although these activities share a common objective in bringing benefits to the community, they will
however face a lot of resistance mainly because of the restrictive provisions provided in the Strata
Management Act (SMA). Often than not, before we can spend a single Ringgit from the Maintenance
Account to carry out the activities above, full blown arguments will be made in the meeting essentially
trying to construe the law and guessing what is the intention of the legislators.

To illustrate the complexities, let me firstly give you the law in brief. There are 3 different provisions in the
SMA which provides the use of the maintenance account which are Section 10, 23 and 50 and which
largely bear similar grounds.

(i) maintaining the common property;

(ii) paying for the expenses incurred for cleaning, security and amenities;

(iii) paying any premiums for the insurance;

(iv) complying with any notice or order given;

(v) minor painting work on the common property;

(vi) carrying out inspection of all electrical wiring systems of the common property;

(vii) carrying out inspection, maintenance and repair of the main water tanks;

(viii) paying rent and rates;

(ix) paying any fee incurred for the auditing of the accounts;

(x) paying all charges reasonably incurred for the administration of the accounts;

(xi) paying the remuneration or fees for the managing agent;

(xii) paying for the allowances and other expenses of the members of the joint management body and
members of the joint management committee

(xiii) meeting other expenses of a general or regular nature relating to the maintenance and management of
the building or land intended for subdivision into parcels and the common property; or
(xiii) paying any expenses, costs or expenditure in relation to the procurement of services, including the
engagement of consultants, legal fees or costs and other fees and costs.

Strictly relying on those sections, any monies spent outside the scope will be deemed illegal. So, having the
provisions set out above, what is your take to the activities above?

I think by now, you will still be equally puzzled because it remains unclear to assist you and there is still this
doubt lingering over whether you could spend money from the maintenance account to purchase gym
equipment, or even to install wifi in your neighbourhood.

SO, WHAT DO YOU DO NEXT?

Do you just call it off? Because if you do, chances are that the proprietors will complain that they have paid
so much of the maintenance charges and sinking fund, yet they don’t enjoy basic amenities like internet
connection. On the other hand, if you proceed, you may have to be made liable for the expenses spent which
the proprietors have a right to recover from you.

I equally share the pains of these nagging questions, and when I was approached for advice I usually get my
clients adopt few simple steps below:

If you could not fit into any of the limbs no matter how liberal you try to interpret the SMA, you should put
a stop to it. If you insist, you may be made liable to reinstate monies spent and if your actions have caused
the transactions not explained sufficiently in the accounts being a true and fair balance sheet, income and
expenditure statement and profit and loss statement, you may commit an offence and shall, on conviction, be
liable to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not
exceeding three years or to both.

*THE SINKING FUNDS PROVISION:

As listed below:

The sinking fund account shall be used solely for the purposes of meeting the actual or expected capital
expenditure in respect of the following matters:

(a) the painting or repainting of any part of the common property;

(b) the acquisition of any movable property for use in relation to the common property;

(c) the renewal or replacement of any fixture or fitting comprised in any common property;

(d) the upgrading and refurbishment of the common property; or

(e) any other capital expenditure as the joint management body deems necessary.

Lastly, another creative way is to set aside the funds generated from the common area (non-contribution of
proprietors) although it also shares certain amount of risks. A good example would be licensing fees
collected from the alfresco area or common areas for installation of signboards. These funds can then be
technically used for purposes not covered within the scope of SMA to set up advertisement billboards,
directory signages, touch on screens and even wifi centres for the benefit of proprietors.
Information provided by Chee Hoe & Associates
JMBs And MCs Part 6 : AGM/EGM Statutory
Rights
Exercise Your Statutory Rights Accorded To You In An AGM Or
EGM
Every time a general meeting approaches, I see many Joint Management Bodies (JMBs)/Management
Corporations (MCs) struggle. They are unsure of what documents to prepare, the time and method to
circulate the notice of meeting, and what to include in the agenda.

Issues like that get more serious in self-managed buildings because they simply don’t know the laws that
revolve around the general meeting of a JMB/MC.

Fortunately, the new Strata Management Act 2013 (SMA) gives some sort of guidance with the intention of
assisting strata proprietors when it comes to calling a general meeting, whether it is an annual (AGM) or
extraordinary general meeting (EGM).

WHEN TO CALL AN ANNUAL GENERAL MEETING (AGM)?

For JMBS, the first Annual General Meeting must be within 12 months after the delivery of vacant
possession.

For MCs, the first Annual General Meeting must be held within 1 month after the expiry of the initial period
which is when the proprietors have registered the strata for at least ¼ of the aggregate share units.

After that, Annual General Meetings must be called once every year with not more than an interval of 15
months lapse in-between.

BEFORE AGM

Notice of Meeting

You can seek guidance from Form 5 or 14 of the Strata Management (Maintenance and Management)
Regulations 2015. Note that Form 14 applies to the first AGM of a Management Corporation.

Ensure that you prepare a notice of general meeting at least 14 days before the AGM date.

The notice must have the place, date and time for the meeting, each proposed resolution to be considered at
the meeting, a notification to each proprietor of his voting rights and that he may vote in person or by proxy
at the meeting. In the case of AGMs, the notice should also contain minutes of the last AGM, audited
accounts with the auditor’s report and any other matters be considered.

You must circulate the notice by way of registered post or deliver it by hand to their last known address.

PROXY FORM

A proxy is someone who is appointed to act on the behalf of another person. To appoint a proxy, you must
do so in writing. If the proxy is appointed by a natural person, it must be done by the proprietor making the
appointment or his lawyer. (A natural person is an individual person. In law there are various specific terms
to define individuals and groups such as “legal persons” – which can also be public or private organisations.)

If it is a company appointing a proxy, the proxy form must be under the company seal or signed by an
officer of the company, director or its lawyer.

Proxy Forms must be deposited at the registered address of the JMB/MC not less than 48 hours before the
time of meeting.

AT THE ANNUAL GENERAL MEETING (AGM)

The minutes of meeting must be prepared during the AGM. It is also important to note that a proprietor
cannot vote if he owes the Management Corporation any charges 7 days before the meeting.

AFTER AGM

Fix the first Management Corporation meeting and nominate the office bearers (chairperson, secretary and
treasurer). Within 28 days, ensure that you file with the Commissioner of Buildings, certified true copies of
the audited accounts, resolutions passed, Form 5A (for JMBs) or Form 15 (for MCs), and minutes of the
general meeting. You must also file and display the minutes of meeting as well as issue Form 5A or Form 15
to all proprietors.