The Basic Procedure on How a Strata Management Bodies May Recover Outstanding Maintenance Charges

The Strata Legislations provides for the maintenance and management of strata schemes and comprehensive procedures, scope of power and duties to different types of management bodies. Thus, it is essential for these different Strata Management Bodies to maintain and manage the subdivided buildings and their common properties in accordance with the statutory legislation [collectively “Strata Legislations”]. Few of the most important duties of these Strata Management bodies are to impose and collect maintenance charges from the parcel proprietors/owners of the subdivided buildings in accordance with the Strata Legislations in order to enable them to carry out their duties as mentioned above, especially those that requires expenses. But how does exactly a strata management body collect such charges?

To begin with, let us identify with what is the definition of maintenance charges. It is defined as simply means any money collected that are to be deposited into an account of what is called as Maintenance Account. In turn, Maintenance Account consists of following:

1. all charges which are paid by the Parcel Owners/Proprietors to the Strata Management Bodies at that material point of time;
2. all or any part of the charges imposed by or payable to the Strata Management Bodies;
3. all monies derived from the sale, disposal, lease or hire of, or any other dealings with any property, mortgages, charges, debentures that are vested in or acquired by the Strata Management Bodies;
4. all other monies and property which may in any manner become payable to or vested in the Strata Management Bodies in respect of any matter incidental to its functions and powers; and
5. all other monies lawfully received by the Strata Management Bodies including interests, donations and trusts.

THE OPTIONS TO RECOVER OUTSTANDING MAINTENANCE CHARGES

Now what are the different options or steps that the Strata Management Bodies can recover any of the outstanding maintenance charges?
There are three options of how these are done as explained below:

A. ISSUANCE AND SERVICE OF NOTICES OF DEMAND (FORMS 11 OR 20) AS THE FIRST STEP

What can any strata management body do to recover any outstanding sum from the defaulting parcel owner/proprietor?

• All of the related Strata Management Bodies may first serve an Invoice or Statement of Account to each of the Parcel Owner/Proprietor to deliver the 1st reminder in demanding any outstanding charges.

If The Parcel Owner/Proprietor Failed To Pay Within 14 Days After The 1st Reminder Or Demand?

• In the case of a Joint Management Body (“JMB”) , they can issue formally a Demand Notice based on Form 11 of the second schedule of the STRATA MANAGEMENT (MAINTENANCE AND MANAGEMENT) REGULATIONS 2015
• In the case of Management Corporation (“MC”), they can issue a Demand Notice based on Form 20 of the second schedule of the STRATA MANAGEMENT (MAINTENANCE AND MANAGEMENT) REGULATIONS 2015

The services of these Demand Notices of either in form 11 or 20 are done, in order to not only formally demand payments of the outstanding Maintenance Charges, but to also fulfil the prerequisite of the recovery procedure, as serving these notices are absolutely necessary before any legal action can be taken which can be done vide the following mode:

• To file a claim in the Strata Management Tribunal,
• To file a civil suit to the Courts of Malaysia and
• To file an application to seize properties vide Warrant Of Attachment.

THE SENTENCES AGAINST OFFENDER
It is also notable that pursuant with SECTION 34(3) STRATA MANAGEMENT ACT 2013 (“SMA 2013”), a defaulter that fails to comply with the demands made within said Forms 11 or 20, they may be liable to an offence and shall upon conviction, be liable to

• a fine of not more than RM5,000; or
• imprisonment for a term of not more than 3 years; or
• both of the above.

In the case of a continuing offence, the defaulter may also be liable to a further fine of not exceeding than RM50 for every day or part thereof during which the offence continues after conviction.

B. FILING OF CLAIM TO THE STRATA MANAGEMENT TRIBUNAL

By filing a claim to the Strata Management Tribunal, the Strata Management Bodies should be able to obtain Awards (which are equivalent to Civil Court Orders) in a more effective and smoother way without incurring further legal costs. It would also be vital to know that in respect of this option, the total amount of each claim must not exceed RM250,000.00 as the Strata Management Tribunal has its own limits of jurisdiction that any Strata Management Bodies must consider carefully first whether its claim:

• falls under the jurisdiction of the Tribunal in pursuant of Part 1 & 2 of the Fourth Schedule of SMA 2013; or
• is in accordance with section 107 of SMA 2013.

The Effect Of The Strata Management Tribunal Awards
Nevertheless, once the Strata Management Tribunal grants an award, according to Section 123 of SMA 2013, any person who fails to comply with the Tribunal’s award shall be deemed to commits an offence and shall upon conviction, be liable:

• to a fine of not exceeding RM250,000.00; or
• imprisonment for a term not exceeding 3 years; or
• both of the above, and
• in the case of a continuing offence, to a further fine not exceeding RM5,000 for every day or part thereof during which the offence continues after conviction.

C. RECOVERY OF SUMS BY WARRANT OF ATTACHMENT

Other than the two above, the Strata Management Bodies may also recover the outstanding charges vide the Commissioner of Buildings (“COB”) to issue a Warrant of Attachment against the defaulting parcel. The process are as follows:

• The Strata Management Bodies writes to the COB to apply for the issuance of Warrant of Attachment against the defaulting parcel;
• Upon Warrant of Attachment being issued, the Strata Management Body may execute force entry to the defaulting parcel or unit if they are not allowed to get in the unit upon request;
• the Strata Management Body prepares a list of inventory to attach any movable properties found to be in the building or the parcel unit of the defaulting owner/proprietor;
• The COB then authorizes the attachment of the said movable properties;
• The Management Strata Bodies may sell them vide public auction under the supervision of the COB; and
• The proceeds from the auction shall be remitted to the Strata Management Bodies at that material point of time.

D. FILING OF CIVIL SUIT ACTION VIDE SOLICITORS

Last but not least, the Strata Management Bodies may also appoint Solicitors to file a Suit in Civil Courts to which before doing so, they may issue a letter of demand (“LOD”) to the defaulter involved to demand for the payment of the outstanding Maintenance Charges at the initial stage and if the defaulter still fails to comply with the said Letter of Demand, they may proceed to file a civil action against the said Defaulters.

Strata Management Bodies may opt for this in the event that their claim is not within the purview of the Strata Management Tribunal jurisdictions i.e. claim of more than RM 250,000.00 outstanding charges, etc. The Strata Management Bodies may also seek further legal advices and representations for Court proceedings from their appointed Solicitors.

CONCLUSION

The procedures explained above are simple and straight forward methods however, in many cases they have not been followed, which surprisingly, the main reason that the Strata Tribunal has been rejecting claims on arrears of Charges and sinking fund contributions is due to merely the failure on the part of the Strata Management Bodies to serve the requisite notice of demand of Form 11 in accordance with s.34(1) [for JMB] of the SMA 2013 or Form 20 in accordance with s.78(1) [for MC] of the SMA 2013 before filing its claims against the Defaulter.

Therefore, it is advisable for the Strata Management Bodies to consult and seeks legal advices from a legal professional which includes a Solicitor that may give legal advices accordingly with the Strata Legislations in force, before taking any steps of filing its claim, even before the Tribunal.

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.