Condominium Living in Malaysia

The concept of condominium living in Malaysia is already promoted for few years before and almost all the people in the city will accept this type of housing. Due to the rapid rate of urbanisation and scarce of land available, condominium become the most popular housing types which lead to maximise the usage of land available with providing the facilities.

Condominium living has become more common in a feature of the residential landscape in many parts of the country, especially in densely populated areas such as Kuala Lumpur and Penang. This is mainly cause by the scarcity of land in big cities and rapid urbanisation due to massive population migration. Other than population migration, the needs of people and changing lifestyle have also contributed to the development of the high-rise building over the country. Limited land has driven up the prices of properties, especially the place such as those in the Kuala Lumpur city centre and the fast developing corridors in the Klang Valleys (The Star, 2004).

Since Malaysia is now promoting a policy, housing-owning democracy with a target which every family will own a house. With this policy, there is an opportunity to let the people choose what kind of housing is likely to be bought. Condominium living can open up an opportunity to strengthen the relationship between three major ethnic for racial integration. It is to help the political and economic stability in the country. All the residents will share their responsibility and give their effort over the common areas and facilities such as corridor or the recreational facilities within the condominium.

There are many reasons why people make their homes in condominiums. Some is because their children have grown up and moved out, and their homes are now too large. Others consider it because it is cheaper to buy a unit in a condo rather than a landed property in the location they want (National House Buyers Association, 2009). Living within the condominium where neighbours can be easily call upon when problems arise will increase the mutual understanding between the neighbours.

Condominium living is about “lifestyle” and buying a condominium is actually investing in a lifestyle (Chan, C. K., 1991). Some rich people will buy the condominium just because of the facilities it is provided. They can just rent the condominium in term of it location or equipped by good facilities such as 24-hour security, swimming pools and barbecue pits.

From this chapter, we will understand concept of condominium development, definition of condominium, the types of condominium, basic instrument for purchasing condominium, the units, common areas, Strata Title Act (1985) and Building and Common Property (Maintenance and Management) Act 2007 (Act 663).

The Concept of Condominium Development:

“Condominium” means to control (dominion) a certain property jointly with (con) one or more persons (Chan, C. K., 1991). This housing development is a form of co-ownership over a multiple-unit property, for instance flat. The co-ownership will own a unit and have their own interest in the air space and an undivided interest in the common area, such as corridor, lobbies, playground, garden, swimming pools and car park.

Condominium development is to be introduced and solved the problem because of the rapid urbanisation and limited of land available. Due to these problems, condominium is more popular in the crowded city such as Kuala Lumpur. Desa Kudalan project was the first project launched in Kuala Lumpur which was located in the up-market area of Jalan Pekeliling (Chan, C. K., 1991).

Demand of condominium is rise in crowded cities and there will be some of the factors that contributed to the demand such as scarcity of land and high land cost. Because limited land available in cities, it driven up the land price goes up. Condominium developments help the citizen to have their own house which in the multiple-unit property, condominium where each individual has their own interest known as unit. As the population rise, some cities are facing shortage of housing. Multiple-unit property will help the citizen to have their own house which fulfilled the housing democracy which now promoting by the government where every citizen owns their house. People nowadays are more educated and they will meet and satisfy their need to fulfil the life they want to be. Changing lifestyle is one of the factors for the contribution of condominium development. There are many facilities provided by living in condominium such as24-hour security and swimming pool.

The types of condominium development are different in the form of low rise and high rise, integrated linked type, cluster of repetitive nature, in varying community density, in more central urban region and the suburban as well as areas of resort, in varying cost values; but in all cases, the concept of mutual benefitting community living remains the basic (Sze To, K. Y., 1979).

The concept of condominium development is consider quite success in the crowded city compare to rural area. This has helped to create a market for condominium housing and citizens have more choice to choose according to their favourite.

Definition of Condominium:

Con-dominium is derive from two word which mean “joint sovereignty” or in the more historical sense “joint control of a State by other States”. In housing development, it is referred to “subsidiary title” coupled with “common title” or as defined under the National Land Code in previous days (Sze To, K. Y., 1979).

The word condo or condominium comes from the two Latin words- con means together and dominium, means property. A condominium can be an apartment, house, townhouse or a unit in an apartment house in which the units are individually owned. Hence, there is always common property owned with others- recreation areas, lawns, basement, garage as well as the individual units are owned outright ( Kalia, A., 2007).

Others than that, condominium is the home ownership that owned by the individual units, which is known as condominium units. Undivided interest means a share or right that owned by the unit holder, but the ratio or the share cannot be defined apart from the whole (Holeman, J. R., 1980). Each unit owner has the same interest which is called shared rights towards the common areas that used together, for instance swimming pool, car park, barbecue pits, elevator and others. Management of the condominium is responsibility to well manage the common area in order to provide a harmonies environment within the condominium. An amount of money, which is management fee, will be paid by the unit owners every month in order the property management are sufficient money to manage the common areas. Normally, home owners will form an association, to maintain and manage the common areas.

There are various types of design unit within a condominium, such as studio unit, penthouse and duplex. Penthouse and duplex are expensive condominium living and normally rich people will purchase this kind of condominium to match their luxury lifestyle.

1. Studio unit is consists of dining, living and bedroom that combined together to become a large room. The kitchen facilities as a part of the central room. Bathroom in this unit has its own smaller partition.
2. Penthouse which high classification in the condominium is located at the top of the building. It is separate from with others building to have privacy by unique design such as high ceiling.
3. Duplex consist of two floors connected by internal staircase in condominium.

• Types of Condominium:

There are several type of condominium such as residential condominium, non-residential condominium, standard condominium and phase condominium.

Residential condominium is owned by the individual units which the owner will occupy for living purpose. Some of the owner will rent out to others to earn the rental income. They will pay monthly maintenance fee to management department of condominium for maintaining and managing the common area that all the owners have the shared right on it.

There is also non-residential condominium can be found in the property market such as hotel, services apartment, retail shop and office building. The structure is the same with the residential condominium but the difference is the usage of the building.

Standard condominium is just a general type of condominium that can be found in any country. This kind of condominium is subdivided into units and common area. Hence, this kind of owner will own different but inseparable entities. One is the well defined space that used for residential purpose; one is the common area which the owner have shared interest on it. This shared interest between the owners cannot be defined from the whole part.

Phased condominium is a condominium developed according to stages. Normally, the time to complete the development will not exceed 10 years. Hence, the condominium development size will increase from time to time until the development is complete. The advantage of this type of condominium is the purchasers do not have to wait for so long for the development to complete. There is also a benefit for the developer which the income does not influence by the period to occupy or awaiting title. This type of condominium will use “phase one” to be the name that completed first. The owners is also own different but inseparable entities.

Basic Instrument for Purchasing Condominium:

Before the condominium can be purchased, there are three instruments used in order to purchase condominium, deed of Mutual Covenant, declaration of condominium and bylaw of condominium association.

• Deed of Mutual Covenant:

When a person purchases a property where there are common areas that need all the involvement of all the unit owners, the owner will asked to enter into a Deed of Mutual Covenant (DMC) while the Sale and Purchase Agreement (SPA) is signed upon. Deed of Mutual Covenant is an agreement of mutual involved between the developer and the purchaser. The contents different from developer to developer, and they are distinctly separate from those in the SPA (National House Buyers Association, 2004). Housing Development Act does not regulate the contents in DMC compare to Sale and Purchase Agreement. The contents consist of the clauses which assure the purchaser and the developer. There are some clauses are as follows:

1. Maintenance Charges.

The maintenance charges are the agreed amount that valid for a period. After the period, the agreed amount will be increased to a reasonable amount.

1. Undertaking Not To Lodge A caveat.

DMC restrict the purchaser or owner to lodge any caveat on the property.

1. Right of the developer to cease supply of utilities.

Developer has the right to cut the utilities such as electricity and water supply, in case of any default or delay payment by the resident.

1. Consent fees.

National House Buyers Association (2004:1) stated.

“The amendment to the Housing Regulations, effective Dec 1, 2002, developers can only charge a sum of 0.5% of the purchase price or RM500, whichever is lower. This is regardless of when the SPA was signed. The amended Housing Regulations also states that: ‘… No housing developer shall collect any fee by whatever name called for giving his consent to any purchaser or subsequent purchaser of a housing accommodation to assign his rights and benefits to and in the contract of sale to any financial institution providing a loan for such purchaser to finance or part finance the purchase of the housing accommodation …”

Period of validity of the DMC.

The validity period of DMC is the strata titles have been issued to the each unit owners and the management corporation is formed.

                There are many dispute causes by the clauses between developers and buyers. The maintenance charges will be increase to a ‘reasonable amount’ after certain period. Some buyers do not check during signing the DMC or do not understand what is the ‘reasonable amount’ will be stated. The disputes begin with developers after certain period when buyers realise they have to pay more for maintenance charges. Although the buyer is owned the property, he is no right to enter any caveat to his own property to secure his rights. Government should solve the dispute between developers and buyers by standardize contents of DMC like Sale and Purchase Agreement to ensure the equilibrium balance between developers and buyers.

• Declaration of Condominium:

                The declaration of condominium (also known as the declaration of restrictions or master deed) establishes the definition of the private and common elements within the condominium community, and outlines the rights and obligations of the owners. It is actually a legal instrument recorded that create a condominium development under law. This declaration of condominium will set up a fund to maintain the property, and creates the condominium association. Instructions for how amendments are to be when the change of conditions of demand should be given by the declaration of condominium. For instance, the developer has to prepare a declaration of condominium to fully state the ownership rights of the owners according to their units (Holeman, J. R., 1980).

• Articles of Incorporation:

                Constitution condominium community is a set of rule and regulation which same as the articles of incorporation and declaration of condominium. The articles of incorporation will constitute the rule and regulation for the purpose of condominium and it will be stated there whether it is for investment purpose or just for resident occupation. The condominium will operate according to the rules and regulation when the article of incorporation is legally bound while condominium by-law will establish the guidelines of condominium. Membership requirements, election procedures, and the powers and duties of the directors and officers are regulated by by-law. They determine how the finances are to be handled, and how the project is to be maintained, insured, and restricted. By-law will continuous change and amend to meet the suitable condition (Holeman, J. R., 1980).

Bylaw of Condominium Association;

By-law should be abided by the condominium unit owners. Developers or the purchaser of the units are generally draft the rules and regulation of condominium in by-law of condominium. Normally, by-law will establish the electing officers or board members procedures of the condominium association, inform the member when the meeting is being held, and also responsible for the building maintenance and insurance in common areas. Some of the restrictions may impose to restrict unit holders to do something against the rule and regulation or penalties for not compliance to the rules (Answer Corporation, 2009).

Rules and Regulation;

Rules and regulations are required by managing the condominium as the by-law gives the rules for living together with harmonies. These rules and regulations will determine and enforce by the board of Director. Some of the rules and regulations are stated as below:

1. Homeowners Dues.

The monthly homeowners due must be paid according to the period that has been determined. Condominium may take some action towards homeowners who are refused to pay it.

1. Common Elements.

The homeowner or residents are not allowed to making loud noise which will disturb other residents within the period that has been determined. The balconies must be neat and clean in appearance. No any blocking items or store room are allowed to be place at common area.

1. Parking.

Vehicles have to be parked in the designated parking spaces. Vehicles are not allowed to park their vehicle at the prohibited area such as in front of garage.

1. Pets.

Some of the condominium may allow the residents to have their pets. Some condominium will not. If allowed, it must consistent with the responsibilities associated with living in a condominium.

The Unit:

Unit is the description which usually contained in the declaration of condominium. The most important element is boundary described, because homeowners are responsible to maintain, manage, insure and decorate their own unit. Each unit owner shall be entitled to exclusive possession of his apartment, subject to the provisions of the condominium documents (Holeman, J. R., 1980).

Common Areas:

The documents refer to common area shared by condominium owners as that part of the projects exclusive of all private units. The ownership of each condominium unit includes an undivided interest in, as well as rights and title to these common areas (Holeman, J. R., 1980).

The common areas are divided into two: general common interest and limited common elements. Generally, common areas include the land, main walls, foundations, roofs, hallways, elevators, swimming pools and other recreational areas and parking lots. Detached carports and garages are sometimes owned by the association and assigned to individual unit owners, and sometimes they are owned with the unit (King, B., 2003).

Limited common elements are a physical part of the common areas, but are for the exclusive use of a particular unit owner or group of owners. Limited areas usually refer to parking spaces, patio space, Storage space, and entrances ways (Holeman, J. R., 1980). Neighbourhood Link (2009:1) explained.

” Limited common elements could also be any air conditioning or heating units, chute, flue, duct, wire, conduit, bearing wall, bearing column and other fixture, whether located within or outside of the boundaries of a unit, which serve only that unit or are allocated solely to that unit. Any shutters, awnings, window boxes, doorsteps, stoops, porches, decks, balconies, entryways, patios, exterior doors and windows, other fixtures designed to serve a single unit, but located outside the Unit’s boundaries are limited common elements allocated exclusively to that unit.”

Strata Title Act (1985):

The interest of unit holders and developers are subjected in sub-division of building for subsidiary titles (Strata Titles). This legally abided title has contributed a more effective implementation when some of the disputes are arise (Kok, S. T., 1979).

The Federal and Director General’s Land and Mines Department (2009:1) explained that strata Title was first introduced in 1966 by the Malaysian National Land Code 1965, to better cope with the legal ownership of multi-storey buildings. Previously, it was known as subsidiary titles by reference to the buildings erected on alienated land. By 2007 strata title legislative amendment, the strata titles concept was extended to be applied for land parcels created on alienated land.

Definition:

Strata title is a form of ownership for multi-storey buildings or blocks or multi layer of land on a piece of alienated land. The ‘Strata’ part term refers to subdivided units being on different levels (The Federal and Director General’s Land and Mines Department, 2009).

Management Corporation is formed under Strata Title Schemes where combination the individual parcels and common property with a self-governance of Strata Corporation. The individual parcel is indicating condominium, apartment, town house, and each of the individual units will be hold a different title. Management Corporation is formed automatically when the strata title is registered by opening of a Book of Strata Register (The Federal and Director General’s Land and Mines Department, 2009).

The Management Corporation has to elect a council who responsible to perform the MC’s duties and powers and carry out the MC’s business. The council is consisting of not less than three and not more than fourteen proprietors of multi-storey building. Under section 41 of Strata Title Act 1985, the first Annual General Meeting (AGM) must be conducted within one month after expiration of the “initial period”.” Initial Period” is the period commence from the day of the MC is formed and the end on the day on which there are at least one- quarter of aggregate share units, not including the proprietor of the lot who known as original proprietor of Master Title (Tan, R., 2007).

By-Laws:

By-laws under the Third Schedule of Strata Titles Act, 1985 are applicable to all subdivided buildings. Additional by-laws and continuous amendment can be made by management corporation so that by-laws does not contracting with the Third Schedule of the Strata Titles Act, 1985. All owners in Management Corporation must comply the additional by-laws as long as the law is applicable. And the additional by-law shall be publishing in the public for their awareness. Records of all such by-laws must be properly kept by Management Corporation for inspection (National House Buyers Association, 2009).

Requirement of Subdivision of Building:

Homeowner will be given a separate title which is sub-divided any building into each individual title of the proprietor of the land with approval of The Federal and Director General’s Land and Mines Department. Any building which intends to sub-divide to an individual title has to be subject to some of the conditions as follow:

1. The land is only held as one lot under registry title.
2. Building must have 2 or more storeys above the ground level, with an area at least 5,000 square feet.
3. The building must approved and certified by a Licensed Surveyor. The boundary of the lot with will be examined carefully by him.
4. The sub-division does not contravene any restriction in interest in the land or any requirement that has been gazetted in title.
5. The building has to be constructed in accordance with the plan submitted where the planning permission was required by for the building and it should certified by Architect(register under the Architect Ordinance 1951).
6. here is no item of land revenue is outstanding in the respected land.

Formation of Management Corporation:

MC is the medium through which the proprietors control and manage the strata scheme pursuant to the Strata Titles Act 1985 and the Rules made there under. If it is a subdivided building or multi-storey building, it is automatically register under strata title. The MC is known by the name appearing in the book of the strata register relating to the subdivided building (National House Buyers Association, 2009). It is a body corporate having perpetual succession and a common seal. It is not necessary to register it under the Societies Act 1966 or any other law. In the case of a subdivided low-cost building, however, the MC does not come into existence automatically with the opening of the strata register. Under section 64 of the Strata Titles Act 1985, the MC comes into existence upon the completion of the transfer of strata title in respect of all the parcels by the original proprietor. On the other hand, the proprietors, other than the original proprietor, having share units totalling more than half of the aggregate share units of all the parcels may apply o the Director of Lands and Mines for an order to establish the management corporation as provided for under section 64A.

Duties, Powers and Responsibilities of the Management Corporation:

Normally, the duties, powers and responsibilities of MC are under section 43 of the Strata Title Act, 1985. National House Buyers Association (2009) stated that the MC should exercise their duties, powers and responsibility according as below:

1. To collect the contributions from parcel proprietors.
2. To purchase the movable property for the use as common property.
3. To secure the repayment and the payment interest.
4. To do all things necessary for the performance of its duties.
5. To manage and maintain the common property.
6. To insure and keep insured the subdivided building against fire and other risks.
7. To pay insurance premiums, quit rent and other rates.
8. To comply with any notices or orders given by an public authorities to execute any works in respect of the reasonable time.
9. To prepare and maintain a strata roll for the subdivided building.
10. To be the custodian of the issue of the document of title of the relevant land.
11. Tot purchase additional land, grant or accept an easement.
12. To provide an appropriate receptacle for postal deliveries.

Financial Management:

Management Corporation has to establish a management fund in order to manage and maintain, control the common properties, paying taxes, rates and insurance. Some acquisition and investment activities may also allowed for MC to proceed. MC will decide the amount of homeowner to levy the contribution according to their respective share unit and the interest rate whoever homeowner is in respect of late payment of contribution for maintain the management find accounts. A portion of money from the management fund account are distributed for painting the building, purchasing movable property for the purpose of common property, replacement of fixture and fitting in common property and others expenditure for maintenance.

Building and Common Property (Maintenance and Management) Act 2007 (Act 663):

Building and Common Property (Maintenance and Management) Act 2007 (Act 663) was first came to enforce on 12 April 2007. It is an Act to provide for the proper maintenance and, management of buildings and common property, and for matters incidental thereto (Lee, S. S., 2007). There are some problems during the duration after vacant possession is delivered by developer to purchaser and before the establishment of the Management Corporation. Hence, this present law is to cover what is inadequate in addressing the problems during that period. The developer is responsible for the maintenance and management of the common property before the formation of the Management Corporation (Lee, S. S., 2007). The maintenance and management of building and common property under the Building and Common Property Act 2007 covers all types of building that will be or have been subdivided and issued with strata titles namely residential buildings such as condominiums flats, apartments and gated community developments, commercial buildings such as office blocks, shopping complexes, service apartments, mixed developments and industrial buildings. In respect of building with strata titles, it includes all parcels, accessory parcels and common property (Maidin, A. J., 2007).

According to the section 4 of the Building and Common Property (Maintenance and Management) Act 2007 (Act 663), a Joint Management Body is formed which comprise the developer and purchasers to administer the maintenance and management of the building during the initial period before the Management Corporation fully takes control of the common property of the development from the developer (Soong, D., 2007).

Joint Management Body:

The first meeting of the Body has to be convoked by developers no later than 12 months from the commencement of the act for the building concerned was completed before the commencement of the Act. In cases where the building is completed on or after the commencement of the Act, the meeting must be held no later than 12 months from the delivery of vacant possession to the purchasers. Unlike the Management Corporation, the developer’s duty to convene the first meeting of the Body is effectively tied to the delivery of vacant possession to the purchasers and not effected by how long it takes the developer to apply for and procure the opening of the strata register for the development or whether the developer has sold and transferred 25% of the development to purchasers (Soong, D., 2007).

Formation of Joint Management Body:

Before the JMB is established, the developer has responsibility to carry out the maintenance works and to ensure the building is free others risks. Developer has the duty to have a first meeting with all the purchasers within specified period. If developer fails to do so, the developer will be fined not more than RM25, 000 or imprisonment in a period not more than three months or both.

Duties of Joint Management Body

Joint Management Body is a body corporate, hence there are boned to be sued if anything found in default. The duties of the JMB are, among others, to:

1. Maintain the common property and keep it in good serviceable repair.
2. Fix and impose charges for the maintenance works.
3. Insure the building and apply insurance moneys received for rebuilding and reinstatement.
4. Prepare and maintain a register of all purchasers.
5. Ensure that the Building Maintenance Fund (BMF) is audited and provide financial statements to purchasers.
6. Enforce house rules (Wong, A. F. H., 2009).

Powers of Joint Management Body:

Joint Management Body’s powers under Building and Common Property (Maintenance and Management) Act 2007 (Act 663) are almost the same with those of the Management Corporation under Strata Titles Act. The Body is essentially a form of Pre-management Corporation (Soong, D., 2007). In essence, the Body is required to perform all acts required for the proper maintenance and management of the building, such as maintaining audited accounts and enforcing house rules for the proper maintenance and management of the building. The JMB is empowered to:

i.

1. Collect maintenance charges from purchasers.

ii.

2. Authorise expenditure for carrying out the maintenance works.

iii.

3. Recover monies due from purchasers.

iv.

4. Acquire property for use by purchasers in connection with the common property.

v.

5. Secure the services of a person to undertake the maintenance works.

vi.

6. Make house rules (Wong, A. F. H., 2009).

Building Maintenance Account:

Financial statements which include the maintenance and management of the development are specified by the Act has to be maintained by developer and the Body before the account is being passed to the Management Corporation. Ensuring funds to be audited which held for the maintenance of the development and provide the audited financial statements for the information to purchasers is part of the duty of the Body (Soong, D., 2007).

In each development, developer is required to open a Building Maintenance Account before vacant possession is delivering to homeowner. Other than that, developer also required to deposit all the money received for the purpose of Building Maintenance Account which the money does not go directly to developer. Building Maintenance Account must to be audited by a public and professional auditor, and the auditor’s report must be attach and report to Commissioner within 14 days. Commissioner has the power to engage their own auditor to investigate the entire document related, such as account of the developer’s company.

Under Part IV Section 16, before delivery of vacant possession, the developer of a strata development must open a Building Maintenance Account (BMA) in the name of the strata development for each development. This applies to all newly completed strata development where the vacant possession has not been delivered to the purchasers as of 12th April, 2007. For developments where vacant possession has been given but the management corpora