PROJECT DEVELOPMENT Building and Common Property

Introduction

Legally, the common property of a strata development is owned by the developer until the handover of such on or after the first annual general meeting stipulated under the Strata Titles Act, 1985 (Act 318). However, the issuance of individual strata titles, leading to the handover of the common property, takes years and resulted in numerous complaints on maintenance and management issues. It is for this reason, that the Building & Common Property (Maintenance and Management) Act, 2007 was passed by Parliament in December, 2006 and in operation from 12th April, 2007.

The main aim of the Building and Common Property (Maintenance and Management) Act, 2007 (Act 633) [‘BCP Act’] is to regulate the maintenance and management of common property in strata developments by providing a framework for the establishment of a Joint Management Body (‘JMB’) and the appointment of a Commissioner of Building (COB) to administer the Act. The BCP Act is designed to complement Parts VI and VII of the Strata Act with regards to rights and obligations of owners and management issues.

Allocated Share units

Sections 8(1)(a) and 23(2) requires that contributions for maintenance and management charges be collected in proportion to the “allocated share units". The “allocated share units" is defined in this Act as “share units to be assigned to each parcel by a developer’s licensed land surveyor".

Malaysians are so used to the practice of contributions for common funds & expenses (maintenance charges, sinking fund, insurance premium, quit rent) according to rates like 20 sen per square foot, that it will take a while for these share units allocation to be a common term. Holders of strata titles would be familiar with the term as the share units are stated in the titles. Purchasers of units in strata development after the 1st December, 2002 would also have indication of the allocated share units in Schedule 5 of their Schedule H – the regulated sale and purchase agreement under the Housing Development (Control and Licensing) Regulations, 1989.

Common Property

Section 2 of the BCP Act gives the definition of “common property" as: 

“in relation to a development area, means so much of the development area as is not comprised in any parcel, such as the structural elements of the building, stairs, stairways, fire escapes, entrances and exits, corridors, lobbies, fixtures and fittings, lifts, refuse chutes, refuse bins, compounds, drains, water tanks, sewers, pipes, wires, cables and ducts that serve more than one parcel, the exterior of all common parts of the building, playing fields and recreational areas, driveways, car parks and parking areas, open spaces, landscape areas, walls and fences, and all other facilities and installations and any part of the land used or capable of being used or enjoyed in common by all the occupiers of the building"

Of interest is the inclusion of car parks and parking areas. Does this mean that once the developer has assigned car parks intended for use with parcels as accessory parcels and comply with the necessary allocation of visitors’ bays, those extra car parks are ‘common property’? From the definition given in this Act, it would appear so.

Contributions from developer on unsold units

Section 12 requires the JMB or the developer to maintain a register of purchasers and unsold units and Section 17(b) requires the developer to contribute equally for the unsold units as if the units have been sold to purchasers. This resolves the problem of owners of the past where there is no transparency on whether developers have contributed their portions or when the units are gradually sold off or if the developer actually intends to hold the units as investment properties.

Information

Section 13 provides purchasers and intending purchasers the right to information such as:

the amount of charges payable by a purchaser

the time and manner of payment of the amount of charges

the extent, if any, to which the charges have been paid

the amount, if any, then recoverable by the JMB in respect of the parcel

the sum standing to the credit of the Building Maintenance Fund and the sum in the account that has been committed or reserved for expenses already incurred by the JMB

the nature of the repairs and estimated expenditure, if any, where the JMB has incurred any expenditure or is about to perform any repairs, work or act in respect of which a liability is likely to be incurred by the purchaser of the parcel under any provision the Act, and

the amount paid and to be paid by the developer for unsold parcels.

This certainly makes it easier for a subsequent purchaser to check on the financial health of the development as a whole and to make informed decisions on their intending purchase.

House Rules

In this Act, the governing document for the proper maintenance and management of the building is called the ‘house rules’ whereas the same is called the “by-laws’ in the Strata Act. This Act does not provide a ‘standard’ house rule as such the JMB has the power to make and amend the house rules provided in Section 8(2)(f). This document must be lodged with the COB within fourteen (14) days of the passing of the resolution of the JMB.

Like any governing documents, the House Rules must be drafted carefully as it is also the duty and in the power of the JMB to enforce the House Rules. The House Rules would probably be adopted as the By-Laws once the Management Corporation is formed as such for long term used, the JMB would be wise to spend time on the drafting this document.

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Building and Common Property

(Maintenance and Management) Act 2007

Act 663

An Act to provide for the proper maintenance and management of buildings and common property, and for matters incidental thereto.

Whereas it is expedient for the purposes only of ensuring uniformity of law and policy with respect to local government to make laws relating to the maintenance and management of buildings and common property within Peninsular Malaysia and the Federal Territory of Labuan:

Now, Therefore, pursuant to Clause (4) of Article 76 of the Federal Constitution, It Is Enacted by the Parliament of Malaysia as follows:

Part 1 – Preliminary

1. Short title, application and commencement

(1) This Act may be cited as the Building and Common Property (Maintenance and Management) Act 2006.

(2) This Act shall apply only to Peninsular Malaysia and the Federal Territory of Labuan.

(3) This Act shall come into operation in each State on such date as may be appointed by the Minister, after consultation with the State Authority, in relation to that State by notification in the Gazette, and the Minister may, after consultation with the State Authority, appoint different dates –

 

(a) for the coming into operation of this Act in different local authority areas or parts of local authority areas; and

(b) for the coming into operation of different provisions of this Act in different local authority areas or parts of local authority areas.

(4) This Act shall come into operation in the Federal Territory of Kuala Lumpur, the Federal Territory of Labuan and the Federal Territory of Putrajaya on a date to be appointed by the Minister responsible for the Federal Territory of Kuala Lumpur, the Federal Territory of Labuan and the Federal Territory of Putrajaya by notification in the Gazette.

(5) Notwithstanding subsection (3), the State Authority may, by notification in the Gazette, extend any of the provisions of this Act to apply to the whole or any part of any area within the State which is not under the local authority area; and may make such modifications, amendments or variations to the provisions of this Act as may be necessary for the purpose of their application to such area.

(6) Notwithstanding subsection (3), the State Authority may, by notification in the Gazette, exempt any part of any local authority area from any or all the provisions of this Act or any regulations made under this Act.

(7) The State Authority may, if in its opinion it would not be contrary to the public interest, and the interest of the purchasers to do so, suspend the operation of this Act or any provision of this Act in any local authority area or any part of any local authority area or any other area for such period as it deems fit.

(8) In this Act, references to the State Authority in relation to the Federal Territory of Kuala Lumpur, the Federal Territory of Labuan and the Federal Territory of Putrajaya shall be construed as references to the Minister responsible for the Federal Territory of Kuala Lumpur, the Federal Territory of Labuan and the Federal Territory of Putrajaya.

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2. Interpretation

In this Act, unless the context otherwise requires –

“accessory parcel" means any parcel shown in a strata plan as an accessory parcel which is used or intended to be used in conjunction with a parcel;

“allocated share units’ means the share units to be assigned to each parcel by a developer’s licensed land surveyor.

 

“Body" means the Joint Management Body established under section 4;

“building" means any object erected on the development area, and includes the common property of the building;

“Building Maintenance Account" means the Building Maintenance Account opened and maintained under section 16;

“Building Maintenance Fund" means the Building Maintenance Fund that the Body is required by section 22 to maintain;

“building or land intended for subdivision into parcels" means –

 

(a) any building or buildings having two or more storeys in a development area and intended to be subdivided into parcels; and any land on the same lot intended to be subdivided into parcels to be held under a separate strata title or for which an application for subdivision has been made under the Strata Titles Act 1985 [Act 318]; or

(b) any development area having two or more buildings intended to be subdivided into land parcels as defined in the Strata Titles Act 1985;

“Central Bank" means the Central Bank of Malaysia established under the Central of Malaysia Act 1958 [Act 519];

“charges" means any money collected by the owner, developer, Body or managing agent from the purchaser for the maintenance and management of a building or land intended for subdivision into parcels and common property;

“common property", in relation to a development area, means so much of the development area as is not comprised in any parcel, such as the structural elements of the building, stairs, stairways, fire escapes, entrances and exits, corridors, lobbies, fixtures and fittings, lifts, refuse chutes, refuse bins, compounds, drains, water tanks, sewers, pipes, wires, cables and ducts that serve more than one parcel, the exterior of all common parts of the building, playing fields and recreational areas, driveways, car parks and parking areas, open spaces, landscape areas, walls and fences, and all other facilities and installations and any part of the land used or capable of being used or enjoyed in common by all the occupiers of the building;

“Commissioner" means the Commissioner of Buildings appointed under section 3;

 

“Committee" means the Joint Management Committee established under section 11;

 

“developer" means any person or body of persons (by whatever name described), who develops any land for the purpose of accommodation including accommodation for commercial and industrial use and includes the executors, administrators and successors in title and permitted assigns of such person or body of persons;

“development area" means any alienated land held as one lot under final title (whether Registry or Land Office title) on which building or land intended for subdivision into parcels is constructed or is in the course of construction;

 

“local authority" includes any person or body of persons appointed under any written law to exercise and perform the powers and duties which are conferred and imposed on a local authority under any written law’

 

“local authority area" means any area in a State that has been declared by the State Authority to be a local authority in accordance with section 3 of the Local Government Act 1976 [Act 171];

 

“management corporation" means the management corporation established under the Strata Titles Act 1985;

“managing agent" means any person appointed by the Commissioner of Buildings under section 25;

“Minister" means the Minister charged with the responsibility for local government;

“occupier" means the person in actual occupation of the building, but, in the case of premises for lodging purposes, does not include a lodger;

“parcel", in relation to –

 

(a) a building intended for subdivision, means one of the individual units comprised in the building which (except in the case of an accessory parcel) is held or to be held under a separate strata title; and

(b) a land intended for subdivision, means one of the individual units of land parcel;

“property" means any land on the development area, and includes any building or part of a building that has been erected or is being erected on the land, and also includes a building or land intended for subdivision into parcels;

“purchaser" means the purchaser of a parcel;

“replacement value" means the value to replace the building in the case of fire or damage;

 

“sinking fund" means a special fund opened and maintained under section 24;

 

“subdivided building" has the meaning assigned to it by the Strata Titles Act 1985.

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Part II – Administration of the Act

3. Appointment of Commissioner of Buildings and other officers

(1) The State Authority may, in respect of a local authority area or any other area, appoint an officer to be known as the Commissioner of Buildings and such officers as may be necessary for the purposes of administering and carrying out the provisions of this Act.

(2) The Commissioner, subject to any general or special direction of the State Authority, shall have charge of the administration of this Act and Parts VI and VII of the Strata Titles Act 1985 and shall perform such other duties as are imposed and may exercise such powers as are conferred upon him by the Strata Titles Act 1985.

(3) Subject to any general or special direction of the Commissioner, the powers conferred and the duties imposed upon the Commissioner by this Act or any regulations made under this Act may be exercised or performed by any other officer appointed under subsection (1).

Part III – Management of Building or Land Intended for Subdivision Into Parcels

4. Establishment of a Joint Management Body

(1) Where a building or land intended for subdivision into parcels has been completed –

 

(a) before the commencement of this Act and vacant possession of the parcels has been delivered by the developer to purchasers but the management corporation has not come into existence, a Joint Management Body shall be established consisting of the developer and the purchasers upon the convening of the first meeting not later than twelve months from the commencement of this Act; and

 

(b) on or after the commencement of this Act, a Joint Management Body shall be established consisting of the developer and the purchasers upon the convening of the first meeting not later than twelve months from the date of delivery of vacant possession of the parcels to the purchasers.

(2) The Body established by subsection (1) shall be a body corporate having perpetual succession and a common seal.

(3) The Body may sue and be sued in its name.

(4) The Body shall comprise the developer and the purchasers.

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5. Duty of developer to convene meeting

(1) It shall be the duty of the developer to convene the first meeting of all purchasers.

(2) The developer shall give a written notice of the first meeting to all purchasers not less than fourteen days before the meeting.

(3) Without prejudice to subsection (1), if the developer fails to convene the first meeting within the specified period, the Commissioner may appoint a person to convene the first meeting of the Body, within such time as may be specified by the Commissioner.

(4) The developer shall, until the establishment of the Body and subject to the provisions of this Act, be responsible for the maintenance and management of the Property.

(5) Any developer who fails to comply with subsection (1) commits an offence and shall on conviction be liable to a fine not exceeding twenty thousand ringgit or to imprisonment for a term not exceeding three months or to both.

6. First meeting of Joint Management Body

(1) The agenda for the first meeting of the Body shall include the following matters:

 

(a) the election of the office bearers of the Committee as provided for in subsection 11(2);

 

(b) to confirm the taking over by the Body of insurances effected by the developer;

 

(c) subject to subsection 23(2), to determine the amount to be paid by the purchasers to the Building Maintenance Fund for the maintenance and management of the common property of the building;

 

(d) the determination of the rate of interest payable by a purchaser in respect of late payment charges; and

 

(e)any matter connected with the maintenance and management of the common property of the building.

(2) The quorum of the first meeting of the Body shall be one-quarter of the purchasers who have paid maintenance charges in respect of their parcels to the Building Maintenance Accounts (“members entitled to vote") of the developer.

(3) If within half an hour after the time appointed for the meeting, a quorum is not present, the members entitled to vote who are present shall constitute a quorum.

(4) All resolutions at the first meeting of the Body shall be decided by a show of hands.

(5) Notwithstanding subsection (4), joint purchasers shall not be entitled to vote except by way of a jointly appointed proxy.

(6) In the event of an equality of votes, the chairman shall have a casting vote.

(7) Where an hour after the time appointed for the meeting, no member entitled to vote turns up or all the members present, for any reason, refuse to be the office bearers of the Committee, the developer shall, within seven days of the date of the meeting, inform the Commissioner of the fact and the Commissioner may –

 

(a) appoint a new date for the first meeting of the Body; or

 

(b)appoint a managing agent under subsection 25(1) to maintain the common property of the building.

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7. Duty of Body to inform Commissioner of name of Body

(1) The Body shall inform and register with the Commissioner the name of the Body within twenty-eight days of the first meeting.

 (2) The Commissioner may, upon an application by the Body, issue a certificate certifying that the Body has been duly constituted under this Act on the day specified in the certificate.

(3) The constitution of the Body under this Act shall not be affected in the event the first meeting is subsequently invalidated, the provision of subsection 6(1) is not complied with or a situation under subsection 6(7) occurs.

8. Duties and powers of Joint Management Body

 (1) The duties of the Body include the following:

 

(a) to properly maintain the common property and keep it in a state of good and serviceable repair;

 

(b) to determine and impose charges that are necessary for the repair and proper maintenance of the common property;

 

(c) to insure and keep insured the building to the replacement value of the building against fire and such other risks as may be determined by the Body;

 

 (d) to apply insurance moneys received by the Body in respect of damage to the building for the rebuilding and reinstatement of that building;

 

(e) to comply with any notices or orders given or made by the local authority or any competent public authority requiring the abatement of any nuisance on the common property, or ordering repairs or other work to be done in respect of the common property or other improvements to the property.

 

(f) to prepare and maintain a register of all purchasers of the building;

 

(g) to ensure that the Building Maintenance Fund is audited and to provide audited financial statements for the information to the purchasers;

 

(h) to enforce house rules for the proper maintenance and management of the building; and

 

(i) to do such things as may be expedient or necessary for the proper maintenance and management of the building.

(2) The powers of the Body shall include the following:

 

(a) to collect from purchasers maintenance and management charges in proportion to the allocated share units of their respective parcels;

 

(b) to authorize expenditure for the carrying out of the maintenance and management of the common property;

 

(c) to recover from any purchaser any sum expended by the Body in respect of that parcel in complying with any such notices or orders as are referred to under paragraph (1)(e);

 

(d) to purchase, hire or otherwise acquire movable or immovable property for use by the purchasers in connection with their enjoyment of the common property;

 

(e) to arrange and secure the services of any person or agent to undertake the maintenance and management of the common property of the building;

 

(f) to make house rules for the proper maintenance and management of the building; and

 

(g) to do all things reasonably necessary for the performance of its duties under this Act.

(3) The Body shall be deemed –

 

(a) for the purposes affecting any insurance under paragraph (1)(c), to have an insurable interest in the building equal to its replacement value or any value as determined by the Body; and

 

(b) for the purposes of effecting any insurance under paragraph (1)(d), to have an insurable interest in the subject matter of the insurance.

(4) Where the Body incurs any expenditure or performs any repair, work or act that it is required or authorized by or under this Part to do or consequent upon the service on the Body of any notice or order by any local authority or under any other written law, and the expenditure or the repairs, work or act were or was rendered necessary by reason of any willful or negligent act or omission on the part of, or breach of any provision of its by-laws by, any purchaser or his tenant, lessess, licensee or invitee, the amount of that expenditure expended by the Body in performing the repairs, work or act shall be recoverable by the Body from that purchaser.

 (5) The generality of this section shall not be prejudiced by any other provision in this Part conferring a power or imposing a duty on the Body.

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9. Annual General Meeting

(1) An annual general meeting of the Body shall be held to consider the Building Maintenance Fund and to transact such other business as may arise.

(2) The annual general meeting shall be held once in each year and not more than fifteen months shall elapse between the date of one annual general meeting and the next.

10. Extraordinary general meeting

(1) A general meeting other than the annual general meeting shall be known as an extraordinary general meeting.

(2) The Body –

 

(a) shall convene an extraordinary general meeting upon a requisition in writing made by the purchasers who are together entitled to at least one-quarter of the total number of parcels registered under section 12;

 

(b) shall convene an extraordinary general meeting upon receiving a direction in writing from the Commissioner for the transaction of such business as the Commissioner may direct; and

 

(c) may convene an extraordinary general meeting on such other occasion as the Body thinks fit.

(3) Where the Commissioner is satisfied that the Body has not been properly constituted, he may authorize in writing any purchaser to convene an extraordinary general meeting for such purposes as may be approved by the Commissioner.

11. Joint Management Committee

(1) The Body shall elect a Joint Management Committee who subject to any restriction imposed or direction given by the Body at a general meeting, may perform the Body’s duties and conduct the Body’s business on its behalf, and may for that purpose exercise any of the Body’s powers.

(2) The Committee shall consist of the developer and not less than five and not more than twelve purchasers, who shall be elected at the annual general meeting of the Body and shall hold office for a period not exceeding three years or until the dissolution of the Body in accordance with section 15, whichever is earlier.

(3) From among the members of the Committee elected under subsection (2), there shall be elected a chairman, a secretary and a treasurer.

(4) The provisions of the First Schedule shall apply to the Committee.

(5) The State Authority may amend the First Schedule by order published in the Gazette.

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12. Register of purchasers

The developer or Body, as the case may be, shall maintain a register in such form as the Commissioner may require, containing the following particulars in respect of all the parcels in the development area:

(a) the allocated share unit to be assigned to each parcel filed with the Commissioner;

(b) the floor area of the parcel referred to in paragraph (a);

(c) the name and address of every purchaser and if the purchaser is not a resident of Malaysia, the address in Malaysia at which notices may be served on the purchaser;

(d) the name and address of the solicitor acting for the purchaser in the sale and purchase of the parcel; and

(e) the number of parcels which are unsold.

13. Right of purchaser

On application by or on behalf of a person who is a purchaser, or by or on behalf of a person who is a prospective purchaser, the Body shall issue to that person a certificate certifying –

(a) the amount of charges payable by a purchaser;

(b) the time and manner of payment of the amount of charges;

(c) the extent, if any, to which the charges have been paid;

(d) the amount, if any, then recoverable by the Body in respect of the parcel;

(e) the sum standing to the credit of the Building Maintenance Fund and the sum in the account that has been committed or reserved for expenses already incurred by the Body;

(f) the nature of the repairs and estimated expenditure, if any, where the Body has incurred any expenditure or is about to perform any repairs, work or act in respect of which a liability is likely to be incurred by the purchaser of the parcel under any provision of this Act; and

(g) the amount paid and to be paid by the developer for unsold parcels.

14. House rules

(1) The Body shall –

 

(a) keep a record of the house-rules in force from time to time;

 

(b) on receipt of an application in writing made by a purchaser or by a person duly authorized to apply on behalf of a purchaser for a copy of the house rules in force, supply to such purchaser or the person duly authorized by him, at a reasonable cost, a copy of the house rules; and

 

(c) on the application of any person who satisfies the Body that he has a proper interest in so applying, make such house rules available for inspection.

(2) A copy of any house rules made by the Body and any amendment of any house rules for the time being in force, certified as a true copy under the seal of the Body, shall be lodged by the Body with the Commissioner within fourteen days of the passing of the resolution by the Body approving the house rules.

15. Dissolution of Joint Management Body

(1) The Body shall be deemed to be dissolved three months from the date of the first meeting of the management corporation for the building.

(2) The Body shall –

 

(a) not later than one month from the date of the first meeting of the management corporation, hand over to the management corporation –

 

 

(i) the house rules;

 

 

(ii) the audited accounts of the Building Maintenance Fund or, if such accounts have not been audited, the unaudited accounts;

 

 

(iii) all the assets and liabilities of the Body; and

 

 

(iv) records related to and necessary for the maintenance of the building and its common property; and

 

(b) if only unaudited accounts have been handed over under subparagraph (a)(ii); not later than three months from the date of the first meeting of the management corporation, hand over to the management corporation the audited accounts of the Body.

(3) If the Body fails to comply with this section, every member of the Body commits an offence and shall on conviction be liable to a fine not exceeding ten thousand ringgit and shall also be liable to a further fine not exceeding one thousand ringgit for every day during which the offence is continued after conviction.

 (4)Where an offence under this section has been committed by the Body, every member of the Body shall be deemed to have also committed that offence unless, having regard to all the circumstances, he proves –

 

(a) that the offence was committed without his knowledge, consent or connivance; and

 

(b) that he had taken all reasonable precautions and had exercised due diligence to prevent the commission of the offence.

Define the area, facilities maintain. This will need explanation on the common area, common facilities use by the residents or tenants.

Provide the breakdown of this figure and enclose the layout plan.

All plan and chart need to have short explanation relating to the proposal.

Do list the table or plan included in the synopsis

The Milestone should show clearly when do you plan to start each task for each of the maintenance work. This should be done align with the type of task or facilities you have in your building.

Gauge the milestone to your shorterm and long term plan.

Do list your references.

SYNOPSIS:

Students are required to carry out findings, research on the synopsis topic based on property maintenance on your previous proposed development in semester 1. The findings should cover the followings

Introduction to property maintenance based on the previous proposed development.

Strategic planning on the functions of the property maintenance organization; organization structure, functions, scope of works.

Setting up the plans on the maintenance operation.

To proposed the milestone on your works

Annual budgeting on maintenance operation.

Master Plan

Generally there are no specific synopsis contents to highlight here as you are having different type of development based on the previous proposal. However you need to explore on this maintenance topic as if you are maintaining the development and having million ringgit of investment in your development what are the best way to manage and maintain , to have good rental return and investment appreciation in the near future.

To start your draft on the synopsis you have to figure out or decide on what type of maintenance standard you intend to carry out for your building or development.

Determine the area to manage and maintain. These will consists the common property and common area shared by all or your tenants, units owner within that development area.

Determine provision of facilities and services you intend to have within the development area.

Decide on the scope of works and maintenance functions.

Decide to set up the organization structure for your maintenance management company.

Determine best service provisions and set out the procurement plan.

Further strategize for improving the return from your development.

In this exercise you need to explore the statutory requirements on setting up the maintenance and management plan for your building. For example Local Authority rules on renovation works, refurbishment works, extension works; taxation, permits and rule to adheres in carry out the maintenance for the specific buildings.

Life-cycle cost analysis (LCCA) is a method for assessing the total cost of facility ownership. It takes into account all costs of acquiring, owning, and disposing of a building or building system. LCCA is especially useful when project alternatives that fulfill the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings. For example, LCCA will help determine whether the incorporation of a high-performance HVAC or glazing system, which may increase initial cost but result in dramatically reduced operating and maintenance costs, is cost-effective or not. LCCA is not useful for budget allocation.

Lowest life-cycle cost (LCC) is the most straightforward and easy-to-interpret measure of economic evaluation. Some other commonly used measures are Net Savings (or Net Benefits), Savings-to-Investment Ratio (or Savings Benefit-to-Cost Ratio), Internal Rate of Return, and Payback Period. They are consistent with the Lowest LCC measure of evaluation if they use the same parameters and length of study period. Building economists, certified value specialists, cost engineers, architects, quantity surveyors, operations researchers, and others might use any or several of these techniques to evaluate a project. The approach to making cost-effective choices for building-related projects can be quite similar whether it is called cost estimating, value engineering, or economic analysis.