How Strata Management Bodies Can Recover Outstanding Maintenance Fees Under the Strata Management Act 2013 (SMA)

By:

Bryan Lui (Co-Managing Partner) [bryanlui@luibhullar.com]

Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]

Sophia Au (Associate) [sophia@luibhullar.com]

Understanding Maintenance Fees and Sinking Funds

Under the Strata Management Act 2013 (SMA), strata management bodies are responsible for maintaining strata properties, including their buildings and common facilities. To fulfill these obligations, they rely on maintenance fees and contributions to the sinking fund collected from parcel owners.

1. Maintenance Fees:

   • Funds collected for the upkeep of common facilities such as lifts, swimming pools, security services, and landscaping.

     
     

2. Sinking Fund:

   • A reserve fund for future repairs or improvements, typically set at 10% of the maintenance fees.

These funds are deposited into a Maintenance Account, which also includes income from property dealings, donations, and interest earned.

Options to Recover Outstanding Maintenance Charges

A. Issuance of Demand Notices (Form 11 or Form 20)

The recovery process begins with serving a Demand Notice to defaulting parcel owners:

1. For Joint Management Bodies (JMB):

   • Issue Form 11 under the Strata Management (Maintenance and Management) Regulations 2015.

     
     

2. For Management Corporations (MC):

   • Issue Form 20 under the same regulations.

Failure to comply within 14 days of receiving the notice may lead to further actions, including:

• Filing a claim with the Strata Management Tribunal.

• Filing a civil suit in Malaysian courts.

• Applying for a Warrant of Attachment to seize the defaulter's assets.

Under Section 34(3) of the SMA, defaulters may face penalties such as:

• A fine of up to RM5,000.

• Imprisonment for up to 3 years.

• A daily fine of RM50 for continuing offences.

B. Filing a Claim with the Strata Management Tribunal

The Strata Management Tribunal offers a streamlined process for recovering sums up to RM250,000. Key considerations include:

• Ensuring the claim falls under the Tribunal's jurisdiction (Part 1 & 2 of the Fourth Schedule, SMA 2013).

• Complying with Section 107 of the SMA 2013.

Failure to comply with the Tribunal's award may result in penalties, including:

• A fine of up to RM250,000.

• Imprisonment for up to 3 years.

• A daily fine of RM5,000 for continuing offences.

C. Warrant of Attachment

Strata management bodies can apply to the Commissioner of Buildings (COB) for a Warrant of Attachment. This process involves:

1. Applying for the warrant against the defaulter.

2. Preparing an inventory of movable assets in the defaulter's unit.

3. Authorizing the attachment and auctioning assets under COB supervision.

Proceeds from the auction are then used to settle outstanding fees.

D. Filing a Civil Suit

When claims exceed RM250,000 or fall outside the Tribunal's jurisdiction, strata management bodies can pursue legal action through civil courts. This process may include:

1. Issuing a Letter of Demand (LOD) to the defaulter.

2. Filing a suit if the defaulter fails to respond.

Conclusion

Recovering outstanding maintenance fees under the Strata Management Act 2013 requires strict adherence to procedures, including issuing demand notices in Form 11 (for JMB) or Form 20 (for MC). Non-compliance with these requirements often leads to claim rejections by the Tribunal.

Strata management bodies are advised to consult legal professionals for guidance on recovery options and compliance with the Strata Management Act and related regulations.

For further assistance, contact our team of experienced strata lawyers.

Please contact us for a free consultation via WhatsApp (+60143000960) or E-mail (admin2@luibhullar.com) for any queries regarding Strata Management matters.