Maintenance of a building (Part II)
08/06/2007 The Sun LAW & REALTY By Andrew Wong Fook Hin


...before management corporation is formed – Part 2

IN Part 1 (last week), we examined provisions in the Building & Common Property (Maintenance & Management) Act, 2007 (“the Act”) relating to the Commissioner of Buildings, the Joint Management Body (JMB) and the Joint Management Committee (JMC).

Register of purchasers

The developer or the JMB, as the case may be, is required to maintain a register containing the following particulars for all parcels in the development area:

• allocated share unit of each parcel;

• floor area;

• name and address of every purchaser;

• name and address of solicitor for the purchaser; and

• number of parcels unsold. Rights of purchasers

A purchaser or a prospective purchaser may apply to the JMB for a certificate, certifying:

• amount of charges payable;

• time and payment of charges;

• extent to which charges have been paid;

• amount recoverable by JMB in respect of the parcel;

• the sum standing in the credit of the BMF and the sum committed or reserved for expenses already incurred;

• nature of repairs and estimated expenditure which is likely to be incurred by a purchaser; and

• amount paid or to be paid by the developer for unsold units.

House rules

The JMB is required to keep a record of house rules in force and to furnish to a purchaser a copy of such rules or make the rules available for inspection to any person who has a proper interest. A copy of the rules and amendments thereto must be lodged with the Commissioner.

Dissolution of the JMB

One month after the first meeting of the Management Corporation (MC), the JMB shall hand over to the MC, the house rules, audited or unaudited accounts of the BMF, assets and liabilities, and all records connected with the maintenance of the building and common property. The JMB itself shall be deemed to be dissolved three months from the date of the first meeting of the MC.

If the JMB fails to hand over the above, every member of the JMB (meaning the developer and all purchasers) commits an offence punishable with a fine of not more than RM10,000, and a further fine of not more than RM1,000 for every day during which the offence is continued, unless the member proves that the offence was committed without his knowledge, consent or connivance and that he had taken all reasonable precautions and had exercised due diligence to prevent the commission of the offence.

Building Maintenance Account (BMA) and Building Management Fund (BMF)

What is the difference between BMA and BMF?

The BMA is an account operated Maintenance of a building by the developer before the JMB is formed. When the JMB is formed, surplus moneys in the BMA shall be transferred to the BMF which shall be maintained, administered and controlled by the JMB.

When must BMA be opened?

If the development is completed after April 12, 2007, the developer must open a BMA in the name of the development area, before delivery of vacant possession to the purchasers. Each development area shall have a separate BMA. The developer shall deposit into the BMA, all charges received from purchasers, and all charges for unsold units. The charges for unsold units is of the same amount as that payable by the purchasers had the parcels been sold. No person may collect any charges from any purchaser for maintenance or management, unless the BMA has been opened and vacant possession has been delivered to the purchasers.

Development completed before April 12, 2007

If the development was completed on or before April 12, and the developer has immediately before that day been collecting charges for maintenance from purchasers, the developer may continue to do so until the JMB is formed. It would appear that after April 12, the developer must open the BMA immediately and deposit all maintenance charges collected from the purchasers and all charges for unsold units, into the BMA.

Moneys in BMA do not belong to the developer

Moneys in the BMA shall not be deemed to form part of the property of the developer in the event of insolvency and some sort of a statutory trust has been created over such moneys. The developer is required to keep proper accounts of the BMA and to appoint a professional auditor to audit the BMA annually. A copy of the audited accounts and auditor’s report must be filed with the Commissioner within 14 days after audit. The Commissioner has full and free access to all records relating to the BMA.

In addition, any developer of a development which has been completed but for which the MC has not been formed, shall not later than six months from April 12, submit to the Commissioner, an account audited by an auditor, of all moneys collected and expended for the purposes of maintenance and management, and sinking fund (if any) prior to April 12. Failure to do so will render the developer liable to a fine.

The BMF

The BMF shall consist of maintenance charges imposed by or payable to the JMB and all other moneys received by the JMB and such moneys shall be used for purposes of repairing and maintaining the common property.

The JMB shall also maintain a sinking fund into which shall be paid such portion of the contributions as determined by the JMB, for the purposes of painting and repainting, acquisition of property, renewal or replacement of fixtures and fittings and other expenditure.

Payment of maintenance charges

Every purchaser is liable to pay maintenance charges in proportion to the allocated share units and payment must be made within 14 days of receiving a written notice supported by a statement of charges, issued by the developer or the JMB, as the case may be. If payment is not made within the 14 days, the JMB may impose interest for late payment provided the rate shall not exceed 10% per annum.

Recovery

Where charges become recoverable by the JMB, the JMB may institute legal proceedings in court to recover the amount due, after having given to the defaulting purchaser the requisite notices. Further, if the amount of charges payable is in arrears for six months, the JMB may request the Commissioner to issue a warrant of attachment to attach any moveable property belonging to the purchaser, found in the parcel or elsewhere within the local authority area. The officer from the Commissioner’s office who is executing a warrant may effect forcible entry.

If arrears and collection charges are not paid within seven days of attachment, property attached may be sold by public auction, and the amount recovered from the auction (after deduction of collection charges) shall be deposited into BMA. Any surplus shall be paid to the person who at the time of attachment was in possession of the property.

All provisions relating to payment and recovery refer only to payment by the purchasers and there are no provisions for recovery from a developer who fails to pay charges for unsold units. A warrant of attachment may not be issued against a developer who is in arrears, as only a purchaser’s movable property can be attached.

Any person who, without reasonable excuse, fails or refuses to pay maintenance and management charges shall be liable to a fine not exceeding RM5,000 and a further fine not exceeding RM50 for every day during which the offence is continued after conviction. What may constitute a reasonable excuse not to pay, remains to be seen.

Apart from the above statutory offence, if the developer fails to pay maintenance charges for unsold units, he is liable for an additional offence under section 17(7), and may be liable to pay a fine of not less than RM10,000 but not more than RM100,000 and a further fine not exceeding RM1,000 for every day during which the offence is continued.

The managing agent

The Commissioner has the power to appoint a managing agent to maintain and manage the building or land intended for subdivision and the common property, in the event that all the members present at the first meeting of the JMB refuse to be members of the JMC, or if the Commissioner is satisfied that the developer or the JMB is not maintaining or managing the building satisfactorily.

The managing agent shall have control of all moneys in the BMA or BMF and all moneys received by him shall be paid into the BMA or BMF. He shall perform all the duties and exercise the powers as if he was acting as the developer or the JMB, including giving notice to the purchasers to pay maintenance charges and instituting proceedings to recover outstanding charges. The remuneration or fees of the managing agent shall be charged to the BMA or BMF, as the case may be.

A person shall not be appointed as a managing agent if he has a professional or pecuniary interest in the property and he shall be regarded as having a professional or pecuniary interest, if he has been responsible for the design and construction, or he or his nominees, officers or employees has any material interest in the property, or he is a partner or is in the employment of a person who has a material interest, or he or his family holds any interest in the building or land.

A managing agent is required to lodge a bond with the Commissioner, to make good any loss caused by him as a result of his failure to account for moneys received or held by him. If he fails to pay moneys into BMA or BMF or if he fails to submit requisite statements to the Commissioner, he may be liable to a fine not exceeding RM100,000 or imprisonment for term not exceeding two years or to both.

Developer to pay deposit to rectify defects on common property

It is noted that the appointment of a managing agent does not relieve the developer of his obligation to carry out repairs to the common property or make good defects in the common property, during defects the liability period and the developer still has the responsibility to carry out repairs and varied and additional works to ensure that development is constructed in accordance with plans and specifications approved by the competent authority.

The Act now requires the developer to deposit (cash or bank guarantee) with the Commissioner such sum as shall be prescribed, for purpose of carrying out works to rectify any defects in the common property after its completion. This deposit shall be paid upon handing over of vacant possession to the purchasers. Any unexpended deposit shall be refunded to developer on expiry of the defect liability period for the development. If the developer fails to comply, he can be punished with a fine of not more than RM5,000 and a further fine of not more than RM50 for every day during which offence is continued.

Power of entry

The Act empowers the Commissioner to authorise any person to enter any building or land for purpose of carrying out inspection or investigation to determine whether any offence has been committed, and books, accounts or documents may be seized on such entry.

Entry is also permitted for the purpose of executing any works required by the local authority. However, if a building or premises is occupied, no entry shall be permitted unless the occupier or a representative is present during the entry. No private dwelling shall be entered upon except with consent of the purchaser or after giving 24 hours’ notice to the occupier.

In the case of any urgent repairs or works the Commissioner may, at all reasonable times enter any building. The act provides penal sanctions for anyone who assaults, obstruct hinders or delay entry authorised by the Commissioner.

Other contracts and deeds no longer apply

The provisions of any written law, contracts and deeds relating to maintenance and management of buildings and the common property, in so far as they are contrary to the provisions of the Act, shall cease to have effect and the provisions of the Act shall have effect notwithstanding anything to the contrary contained in any agreement or contract entered into after the commencement of the Act. Further, no agreement or contract entered into after commencement shall operate to annul, vary or exclude any of the provisions of the Act.

The writer is the Deputy Chairman of the Conveyancing Practice Committee, Bar Council, Malaysia www.malaysianbar.org.my

Note: This column is brought to you by the Malaysian Bar Council for your information only. It does not constitute legal advice. You should therefore seek professional legal advice for your specific needs. Neither the Malaysian Bar nor the Sun Media Corporation Sdn Bhd shall be liable to any reader who suffers losses as a result of relying on this column.