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'Property management lacks proper financial planning'
14/04/2004 NST By Sadna Saifuddin

Malaysian's property management industry is too profit-oriented and lacks proper financial planning, according to a study by Universiti Sains Malaysia.

Lecturers Dr Nor Malina Malek and Dr Tiun Ling Ta showed in the study that some developers and property managers are taking advantage of loopholes in the law.

The loopholes in the Strata Title Act 1985 and the Housing Developers (Control and Licensing) Act 1966 have resulted in countless unethical conducts by developers and property managers, they said.

"The seriousness of these problems is reflected in the growing number of complaints against errant developers or property managers " Nor Malina and Tiun said in a jointly prepared research paper for the International Real, Estate Research Symposium 2004 in Kuala Lumpur yesterday.

The weakness of the property management system in the country begins as early as at the planning and design stage, where the role of building management will be taken into consideration only after the construction is completed and the certificate of fitness is issued.

They said it has also become a trend in Malaysia for the property developers to emphasise on the aesthetic aspects of a building so as to promote Wes, but neglect the local climate as well as social and spiritual needs of residents.

For example, according to a survey done for the study, in Penang, which has the highest number of high-rise residential complexes, 52 per cent of the complexes do not have facilities
for social activities.

The needs of the unfortunate and the elderly, especially in-terms of accessibility around the complexes, are often neglected during the designing and planning stage of buildings even though it is stated in the Uniform Building By-Laws 1984.

Although guidelines indicate that unit owners are to be informed of the portion, of the management fee the y should pay and how the money collected is managed, the lack of transparency has denied "residents of these rights.

"Due to the problems of management transparency, most of the high-rise owners are not aware of how the money collected is utilised," they added.

In Penang, only 32.6 per cent of the 133 high-rise residential complexes surveyed displayed their monthly accounts to unit owners, while 55.8 per cent never provided any information.

The similar problem is also faced in relation to the "sinking fund", which is collected during the hand-over of vacant possessions, where rampant misuse of the fund amounted to more than millions of ringgit.

The researchers also found out that only 44.2 per cent of the Residents Association representatives said that their property managers disclosed the account for the sinking fund.

In Hong Kong, proper guidelines on budget and account management are provided in the Building Management Ordinance (BMO).

The BMO requires the management corporations to prepare an annual budget based on the amount to be paid by individual owners, in addition to maintaining a contingency fund to provide for deficiencies in a general fund.

The management corporations must also maintain proper records that should be audited by established accountants, and the summary of the income and expenditure has to be displayed in a prominent place in the building.

These measures, the study stated, are seldom practised in Malaysia, leading to sticky situations especially before the establishment of management corporations.

It said measures must also be taken to prevent corruption cases in property management.

Previous studies have shown that there is a high tendency of corruption practices committed in building management, particularly pertaining to contracts, procurement of services and goods and financial management.
 

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