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Battle over property management
03/10/2005 The Star

Property Talk: A weekly column by S.C. Cheah 

THE battle line is drawn over the hotly debated property management issue, with the group opposing the proposed amendment to the Valuers, Appraisers and Estate Agents Act, 1981 (Act) having the upper-hand, both in terms of their numbers as well as their control of sizeable interests in the nation's real estate. 

They are a force to be reckoned with and their views have to be taken seriously by the authorities. Both sides have argued their case. 

At least they share a common ground and that is: property management must be properly and effectively managed. There is also no argument as to the amount of fees to be charged either by the valuers according to a set of guidelines under the Act or by other non-registered valuers. 

The bone of contention is: who should manage a property? The opposing group is adamant that owners must be free to choose whom they want to employ to best manage their property. 

Richard Chan

In fact, some major property owners have their own property management companies that are professionally staffed. One of the contentious issues is that if these property management companies are doing a good job, why complicate matters by having other professionals – in the form of valuers or people registered with the Board of Valuers, Appraisers and Estate Agents (Board) – take over the job and add on another layer of fees? 

Although Board member Elvin Fernandez has clarified that owners can manage their own property provided no “fee” is levied, some quarters are unconvinced. 

Legal sources said the valuers had kept on harping, with the misplaced intention of appeasing or misleading property owners, that the Act allows property owners to manage their own buildings. This is far from the truth as the so-called exemption is devoid of meaning, they said. 

They said that although Section 21 2(a) of the Act makes the exemption, Section 21 (3) clearly states that the owner of any land or building shall not include a shareholder in the company, unless such land or building is “wholly owned by the company and such person is the sole shareholder.” 

The sources said the words “sole shareholder” can only apply to a holding company, and this can only be a “corporate/institutional shareholder” which must also hold 100% stake in the subsidiary company that owns the property to qualify as the “sole shareholder”. 

Hence the term “sole shareholder” cannot apply to an individual natural person/shareholder as under the Companies Act 1965 there must be at least two natural persons as shareholders in a company. 

“The effect of this limitation on sole shareholder is that the statements by the registered valuers that property owners can manage their own properties can only happen in very limited situations. This so-called exemption is not a truly practical and meaningful exemption at all!” one source said. 

To illustrate this point, take the two scenarios below: 

·Two shareholders, A and B, control 100% shareholdings of company ABC Sdn Bhd which owns a property. In this situation, neither A nor B can act as property manager. 

·Two shareholders, C and D, control 100% shareholdings of ABC Sdn Bhd that owns Z Sdn Bhd which owns a property. 

ABC can only be allowed to act as property manager for the property owned by Z Sdn Bhd, provided ABC Sdn Bhd owns 100% equity in Z Sdn Bhd. “However, in practical terms, even if ABC Sdn Bhd were allowed to act as property manager, being a corporate entity, ABC Sdn Bhd cannot act as property manager. In reality, ABC Sdn Bhd has to engage a registered valuer to perform the function of property manager,” the source said. 

He said the Board had been interpreting that so long a company was not 100% owned by a single “corporate/institutional shareholder”, the function of the property owner could not be performed by an employed registered valuer. The company must engage an independent valuer firm to do so.  

“This is the extent of the Act in tightly sealing and reserving the property management jobs for registered valuers. So stop the charade!,” he added. 

The Malaysian Association for Shopping and Highrise Complex Management (PPK) president Richard Chan welcomed an amicable solution. 

“Concerted efforts are needed to bring property management to world-class standards. However, for any party to claim total domination or monopoly, we do not think this is the solution. The industry will not allow it,” he said. 

What’s my view? Well, I feel it should be market driven. Let the owners decide for themselves.  

However, for certain properties like real estate investment trusts, there may be a need for regulation to give among other things, foreign investors some confidence. 

One may ask: If property management is deregulated, what about estate agencies? Does it mean that buyers and sellers should be allowed to pick even illegal estate agents? 

Well, many people do not mind engaging illegal estate agents if they are diligent, honest and can close a deal faster and at a much lower commission. “Let owners decide for themselves, but they must be prepared to bear the risks. Some illegal agents are also experts in specific property sectors and are very hardworking,” one reader told me. 

Well, there are the pros and cons when professional bodies are set up to regulate their profession. On the flip side, it can also be seen as a form of protecting one’s turf. 

Meanwhile, there are many strata-titled properties, especially vacant units, that require urgent effective management as they are falling into disrepair and are badly vandalised.  

What are the concerned parties, including police and authorities, doing about it?  

Since developers are managing such properties pending issuance of strata titles, let there be some arrangements where developers also provide reasonable security for the properties. This is another debatable issue that cannot wait any longer. 

 

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