Back then, Malaysians were more accustomed to landed houses. However, times have changed and in today’s market, first-time buyers are more likely to choose apartments or condominiums, mainly due to the location and price. If you are currently looking for your first house, you will most likely encounter the term “strata”.
The term “strata” was probably a foreign concept to Malaysian property owners before, especially to those who prefer landed houses or who own one. Currently, due to land scarcity and its high cost in the urban area, strata properties and high-rise housing developments are gaining popularity and demand among home buyers and investors.
While strata projects for high-rise residences continue to gain popularity, landed residential schemes that are constructed as strata developments are also becoming a norm. Having said that, do you know what it means to buy and live in a strata property?
What is the meaning of “Strata”?
The term “strata” was first introduced legally in 1985 with the 分层地契 Act 1985. The implementation of the Strata Management Act 2013 (SMA 2013) on 1 June 2015 has brought the term ‘strata’ into the limelight.
Strata is defined as a single property within a larger integrated development that shares common facilities. Basically, a strata title is a property development where the building or land is divided into different lots with the common properties managed under a management body. Examples of strata property include flats, apartments, condominiums, townhouses and houses in gated-and-guarded communities.
What is common property?
In today’s market, most developers offer various common properties and facilities in their strata projects to attract more home buyers and increase the market value of these strata properties. These properties refer to areas or facilities that do not belong to any particular owner such as the swimming pool, gym, park, lounge and other facilities.
In some strata properties, there are specific common areas that can only be utilised by specific property owners. Limited common property is what these areas fall under. For instance, only penthouse owners can access the private rooftop garden and the infinity pool.
So, what is the Strata Management Act 2013?
The Strata Management Act 2013 (SMA) was established to oversee the maintenance and management of stratified residences. With various parties involved in strata properties, including developers, owners and management bodies, this act is enacted to protect all respective parties, and ensure efficient management of these properties so that a better environment to live in will be maintained.
Commissioner of Building (COB)
When you decide to live in a stratified property, you need to know the importance of a Commissioner of Building (COB). A COB is an independent body that is appointed by the state of authority and acts as a neutral third party that ensures rules are fairly enforced to everyone involved.
The duties of a COB cover a whole range of property management obligations. They need to ensure proper management of stratified property for the benefit of all owners. Other than that, COB also conducts inventory on buildings within the relevant local area and ensures the establishment of a Joint Management Body (JMB) to oversee development. They also assist in resolving any dispute between the developer and the purchaser, as well as monitor the actions and activities of a developer in addressing any defects.
Basically, a COB is responsible to oversee, administer and enforce the obligations laid out in the Strata Management Act. Additionally, they can also investigate any potential violations of the act. If a violation is found, the COB has the authority to penalise those who are responsible.
What about the Strata Management Tribunal (SMT)?
As a strata property owner, you are protected under Strata Management Tribunal (SMT). While the COB focused on building maintenance and management, the SMT on the other hand deals with resolving disputes. Their jurisdiction was established under Section 107 of the Strata Management Act 2013 (SMA).
The SMT provides a fast and cheaper way to resolve disputes regarding strata management. With cheaper filing fees compared to a court proceeding, complaints or disputes can be handled at a minimum cost. However, the SMT cannot entertain a case exceeding RM250,000.
Some disputes that can be brought before SMT include a claim to revoke amendment of by-laws, a claim for recovery or charges, maintenance fees or sinking fund, a complaint concerning performance duties under the SMA, dispute regarding insurance claim as well as a dispute regarding repair cost for defects in common areas, and other claims as defined in the SMA 2013. One thing that SMT will not cover is issues pertaining to disputes of ownership.
Since strata properties involve a lot of people, a large number can raise the claim to SMT including developers, managing agents, and management corporations. The tribunal has the power to impose a fine of up to RM250,000, imprisonment up to three years, or both.
Who are the Management bodies under SMA?
The role of property management falls under the responsibility of the Management Corporation (MC) or Joint Management Body (JMB).
Upon completion of property construction, the developer will call for vacant possession and subsequently issue a notice to all unit owners to collect their keys within 14 days. The developer is also required to call for an Annual General Meeting (AGM) to form a JMB within a year from the end date of the 14-day notice. JMB is then established prior to the issuance of the strata title for the units.
When a particular development has hundreds of units, the JMB works with the developer so that the property can be maintained before it can be handed over properly. Apart from the proper documentation and accounts, the JMB also oversees everyday operations and ensures residents’ general safety.
Once the strata titles are issued, then the MC will be formed to take over the duties from JMB.
The MC can also be established after at least 25% of the aggregate share units have been transferred to owners. Each strata unit owner is represented by the MC. MC boards are voted by unit owners who attend the Annual General Meeting.
The MC is responsible for maintaining, managing and ensuring that the common property area is in a good state. They also determine, impose and collect the maintenance fee and sinking fund that will be utilised for maintaining the common areas. Therefore, they are entitled to create additional by-laws in relation to the governance and maintenance of the common property.
MC has the power to enforce the law under SMA and take necessary actions to keep the common property safe and tidy. MC also must comply with regulations enforced by local authorities, obtain insurance for the property, as well as ensure financial transparency of maintenance accounts.
If the property development is too large and difficult to be managed and maintained by a single committee, a Sub-MC can be formed. The Sub-MC functions independently in managing a large property such as mixed development that comprises both residential buildings and commercial space.
Why is Strata Title Important?
The National House Buyers Association urges house buyers to keep the strata title to their residential units. You can use a strata title to prove ownership of your unit and your share of the total built-up area of the building as well as how your share is apportioned among the total number of units. Additionally, should the owner wish to sell the property, strata title can facilitate the process and owners do not need to pay any consent fees to the developers.
Apart from that, the strata title is important in order for the owners to get involved when forming a Management Corporation to run the management and maintenance services of the property. It is also important to understand that having a strata title can prevent future complications should the developer companies go under liquidation or become insolvent.
Do I have to pay for the Strata Title?
The answer is yes. Since it is your proof of legal ownership, you will need to pay to obtain the title. Basically, the following must be paid:
the document transfers ownership
search fees (Land Search / CTC Title / ROC Search among others)
stamp duty on the memorandum of transfer.
Upon issuance of strata title by the land authority, the developers need to transfer the title to the home buyers within 30 days. As a homeowner, keep in mind that you should not neglect this step. It might become an issue once you wish to sell the house.
What is my right as a Strata Property owner?
As a strata property owner, you have your own responsibilities such as keeping track of maintenance fees and sinking funds. On the other hand, the management bears the responsibility to ensure the property is being managed and maintained. Nonetheless, if the management is not doing a great job, you can make your voice heard.
In a strata development, Annual General Meetings (AGM) serve as the medium for nominating the board members and representatives. These meetings also serve as a medium for you and the management body to work out important issues collectively. However, please ensure that you have paid all outstanding service charges prior to the meeting. Otherwise, you will not be allowed to cast a vote for any resolution.
In addition, you can request an Extraordinary General Meeting (EGM) if there is a matter that needs to be discussed after the AGM. The chairman of the committee should convene for an EGM within 6 weeks of receiving the written request. If the management ignores your request, you can then seek assistance from the Commissioner of Building or the Strata Management Tribunal.
Maintaining a property costs money. For strata developments, the money comes from the maintenance fees and the sinking fund you pay. Maintenance fees are monthly payments that are used to maintain the common facilities and property, whereas sinking funds cover future capital expenses like replacing fixtures or repainting the façade. As an owner, you will receive a copy of the financial report where you can see how your money is being spent on the upkeep of your property.
If you and your fellow strata owners are unhappy with the fees implemented by the management, or maybe when the management increases the fees, you can apply for review by the Commissioner of Building. The COB will either determine the right charges or engage with a registered property manager to suggest a suitable charge.
Do I have any responsibilities as an owner?
Other than paying maintenance fees and sinking funds on time, you must also adhere to the prescribed by-laws such as maintaining your own unit to avoid any defects that may affect other owners and not obstructing the common area by placing your personal belongings. In addition, you should not damage any furniture or installations, such as benches.
Sharing spaces with others requires an effort towards harmonious communal living, which is why strata by-laws exist.
What happens if I ignore the Maintenance Fees?
Section 12(5) of the Strata Management Act 2013 states that as a unit owner, you will need to pay the management within 14 days of receiving payment notice. If you fail to make the payment, you will be legally defined as a defaulter and charged interest on the amount you owed. Normally, the management will deactivate your access card to the residential complex without prior notice. Your access to the common properties will also be suspended, which includes the car park lots.
The management body can sue you in the Strata Management Tribunal if you fail to pay the outstanding charges too!
However, your management body cannot block your access to your own unit. They also cannot cut your electricity and water supply.
After reading all this, would you choose to buy a Strata Property?
Living in a strata development means living in a community with a set of rules. Be prepared to serve on the Management Committee, or take responsibility for tasks that benefit the properties as a whole.
Being part of a community, disputes and complaints are bound to happen. If you are thinking of purchasing a strata property, it is advised to learn and understand SMA as well as its rules and regulations. Hopefully, this article has answered some questions you may have had about strata ownership.