Friday, May 4, 2007

LAW & REALTY: Management Corporation

The Sun

From its inception to the 1st AGM

Law & RealtyA management corporation (MC) exists by operation of law upon the opening of a book of the strata title in respect of a sub-divided building such as a condominium or land such as a gated community development.

In simple terms, when individual strata titles are issued for these individual parcel units or land parcels, the MC is deemed to have been set up. 

Duties and powers of the MC

Generally, the duties and powers of the MC are set out in section 43 of the Strata Titles Act, 1985 (“the Act”). Subject to any restrictions or directions imposed at a general meeting, the Council may conduct the MC’s business and exercise and perform any of the duties and powers or delegate the exercise and performance of any of these duties or powers to any one or more of the Council members.

The Council

However, until and unless a Council is elected, the MC is still technically being run by the original proprietor who is the developer of the building or land. The Council can only be formed and elected at the 1st annual general meeting (AGM) of the MC.

Under section 41, the 1st AGM of the MC must be convened within one month after the expiration of the initial period.

“Initial period” means the period commencing from the day the MC is formed and ending on the day on which there are proprietors of at least one-quarter of the aggregate share units, excluding the proprietor of the building lot (who is usually the original proprietor of the Master Title) who is registered as the proprietor of a parcel or a provisional block.

Restrictions and responsibilities imposed on the MC during initial period

During the initial period, the MC cannot:

(a) amend its by-laws in such a manner that a right is conferred or an obligation is imposed on one or more but not all proprietors or in respect of one or more but not all or provisional blocks;

(b) borrow moneys or give securities; or

(c) enter into any maintenance or service contracts for any periods extending beyond the expiration of the initial period.

Without prejudice to any other remedy available against the original proprietor, Management corporation if a MC contravenes any of the above, the original proprietor shall be liable for any loss suffered by the MC or any parcel proprietor as a result of the contravention, and the MC or any parcel proprietor may recover from the original proprietor as damages for breach of a statutory duty, any loss suffered by it or him in consequence of such contravention.

During the initial period, the MC is required to prepare proper accounts under its name relating to all monies of the MC with regard to its income and expenditure. Such accounts must be audited by a registered auditor appointed by the original proprietor and the audited accounts shall be presented to the Commissioner of Buildings (“the Commissioner”) appointed under the Building and Common Property (Maintenance and Management) Act 2007 who may on an application made by a parcel proprietor, make available the audited accounts for inspection at all reasonable times.

Contributions payable during the initial period

The amount payable as contribution to the management fund during the initial period shall be determined by the original proprietor. Before the Strata Titles (Amendment) Act 2007 (“the Amendment Act), which came into force on April 12, 2007, the amount had to be approved by the Director of Land and Mines.

However, the Amendment Act allows any proprietor who is not satisfied with the sum determined by the original proprietor to apply to the Commissioner for a review and the Commissioner may: 

(a) determine the sum; or

(b) instruct the original proprietor to appoint a registered property manager to recommend the sum payable and submit a copy of a report to the Commissioner for his approval and the Commissioner shall determine the sum payable as he thinks just and reasonable.

Notice and agenda of the AGM

A notice of not less than 14 days before the AGM specifying the place, the date and hour of the meeting and the general nature of the business to be transacted must be given to every proprietor and every first chargee of a parcel in the building or land who has notified his interest to the MC.

If the original proprietor fails to convene the first AGM within one month after the expiration of the initial period, he shall be guilty of an offence and shall be liable on conviction to a fine not exceeding RM25,000 and to a further fine not exceeding RM2,000 for each day the offence continues to be committed.

Further in this case, the Commissioner may, on application by the purchasers, a proprietor or chargee of a parcel, appoint a person to convene the 1st AGM of the MC within such time as may be specified by him.

The agenda for the 1st AGM shall include the following matters:

(a) to decide whether to confirm, vary or extend insurances effected by the MC;

(b) to decide whether to confirm or vary any amounts determined as contributions to the management fund;

(c) to determine the portion of contribution to the management fund to be paid into the special account to be maintained under section 46;

(d) to determine the number of members of the council which shall not be less than three and not more than 14 proprietors, and to elect the council where there are more than three proprietors;

(e) to decide whether to amend the additional by-laws in force immediately before the holding of the meeting; and

(f) to present the audited accounts of the MC.


The quorum at the AGM is one half of the persons entitled to vote. However, if within half an hour after the time appointed for the meeting, the quorum is not present, the meeting shall be adjourned to the same day in the next week at the same place and time. If at the adjourned meeting, a quorum is not present within half an hour after the time appointed for the meeting, those persons entitled to vote who are present shall constitute a quorum.

Chairman of the meeting 

The meeting shall be presided by a chairman who shall be elected from among the persons present who are entitled to vote. 

Persons entitled to vote 

Section 37(2) has been repealed by the Amendment Act. With this deletion, a parcel proprietor is now entitled to vote personally even though the property is subject to a charge. Before this, only the chargee had the right to vote personally unless he had appointed the proprietor as his proxy or the charge agreement between them stated otherwise.

However, no proprietor is entitled to vote or to be elected to hold office at a general meeting unless he has duly paid all contributions to the management fund. A “proprietor” means a person who is for the time being registered as the proprietor of his parcel.

A proxy, however, need not be a proprietor but it does not include the original proprietor or his agent or servant. But a proxy is not entitled to vote except on a poll. 

Co-proprietors may vote through a jointly-appointed proxy. In the absence of a proxy, co-proprietors are not entitled to a vote on a show of hands except where a unanimous resolution is required.

Transfer of strata titles

It is common to see the original proprietor retaining control of the MC by electing its representatives to the Council at the 1st AGM primarily because not many parcel purchasers would have registered themselves as a registered proprietor. Some may not have also fully settled all the contributions to the management fund, even though a proprietor is entitled to demand proof at the AGM whether the original proprietor has done so before the latter is entitled to vote.

Pursuant to section 40A, which was inserted by the Amendment Act, both the original proprietor and the purchaser are required to execute the documents of transfer of strata titles within a specified period. The original proprietor is required to do so within 12 months from the date of issue of strata titles by the Land Administrator or any extended period approved by the Director of the Land and Mines upon the opening of the strata register. The purchaser must do so within 12 months or any extended period approved by the Director from the date of notice of transfer of strata titles issued by the original proprietor or from the date of purchase of the parcel, whichever is the later. 

If either party fails to do so, the penalty is a fine of not less than RM1,000 and not more than RM10,000 ringgit per parcel.

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