Managing the components of a mixed development
Joseph Wong 

OVER six million people, or 20% of the country’s population, are living in strata properties. While many of these properties tend to be of a singular classification, that is residential units, the lines are fast blurring with the many mixed development projects that are emerging these days. In fact, many more mixed development projects are yet to be launched.

This can turn into a potential flashpoint because the common facilities shared by the unit owners can be a major cause of conflict.

With mixed developments, three or more components such as commercial, offices, hotel and serviced residences are housed within one tower. Hence, this begs one pertinent question: Who will be responsible for managing their common facilities?

For unit owners of mixed developments, they will have to grapple with issues not yet fully covered by the Strata Management Act 2013 (SMA), despite its attempt to be as comprehensive as possible.

There’s no denying that the ultimate power is in the hands of unit owners. However, these owners will have to agree on the direction they will take to better manage the properties and facilities. Otherwise, it could lead to further conflicts and allegations of mismanaged funds.

“In any stratified development, the ultimate owners are the parcel owners with collective responsibilities through their elected JMBs (joint management bodies) or MCs (management corporations),” Malaysia Shopping Malls Association (PPK) president Tan Sri Teo Chiang Kok tells FocusM.

“Developer-owned parcels are pari passu (on equal footing) with all other parcel owners. [But] in a mixed-use development, the needs and operations of the different components have different expectations and challenges,” he explains.

Teo is also a director of See Hoy Chan Holdings Group, Bandar Utama Corporation Sdn Bhd and First Nationwide Group.

To complicate matters, not all common areas in mixed developments are shared by every unit owner, he says.

Given the situation, the JMB or MC will need to identify the common areas deemed as “universal” to all parties concerned and these areas would fall under its jurisdiction, he explains.

Furthermore, it us up to the JMB or MC to ensure that things are properly run and the owners believe that the JMB or MC will do the right thing, he says.

There is an unofficial JMB oath: “The JMB will not abuse its powers nor neglect its duties, and the vital role of the JMB is to maintain and manage the building and common property for the benefit of the strata unit owners and residents – and not for themselves.”


Rise of the sub-MCs

Then, there are other common areas shared by some of the unit owners, but falling under the jurisdiction of the subsidiary management corporation (sub-MC), he says.

However, this could mean that there could be more than one JMB or MC per mixed development, depending on how the project is parcelled out, says RCMC Sdn Bhd registered building manager Richard Chan. “But there will be several sub-MCs if all the common areas are to be properly maintained,” he says.

The concept of the sub-MCs emerged for various components or phases to be better managed and focus on the different needs of each component, says Teo.

But there are issues as the forming of a sub-MC may not be a pragmatic solution. In addition, there is the worry of having a “too many cooks spoil the soup” scenario with many not being on “the same page”.

“The current regulations under the Strata Management Act allows the sub-MCs to be formed only after the MC is formed. This (requires) 2/3 of owners’ votes (for its formation),” he says.

He proposes that the developer, at the onset, decides the number of sub-MCs to represent different components and phases. In this way, purchasers know at the point of purchase what facilities and common properties will be managed by the MC and by the respective sub-MCs.

“This clear demarcation will allow the direct control of their specific ‘limited’ common property and also the ‘universal’ common properties. They will have control of the specific ‘limited’ common properties immediately upon completion,” he says.

Even as it stands, there are four different management periods, which are established under specific conditions and time frames.

In the first stage, the developer is responsible for maintaining and managing the strata property during the preliminary management period, which is for a year.

According to the Real Estate and Housing Developers Association (Rehda), in the event that a strata title is not issued during the first year of vacant possession (VP), a JMB is formed.

Once the strata title is issued and 25% of the aggregate share units are transferred to the owners, an MC can be formed, followed by the sub-MCs.

For strata-titled property, the maintenance fee is usually estimated by the developer, since it has the responsibility of managing the property for the first year.

In later stages, the maintenance charges are proposed by the JMB or MC, as well as the sub-MCs, and approved by the respective owners in general meetings, says Teo.

“To ensure that the property is properly maintained, strata managers, also known as building managers, are engaged by the MC/sub-MCs to manage the respective common properties,” he says.

However, according to Teo, there is a big difference between a building manager and a property manager.

“A property manager is someone engaged by the parcel owner to manage that specific parcel or strata unit vis-a-vis seeking tenants and taking care of the tenant issues and maintenance needs of that parcel (not the common properties).

“[Whereas], a strata or building manager answers to the MC and sub-MC. The services of the strata or building manager is engaged and paid for by the MC or sub-MC from the maintenance fees collected from all the parcel owners,” he says.

There is yet another consideration that further muddles strata-titled properties. This happens when some developers wish to retain components like the car park to generate recurring funds for themselves.

“In cases like this, we must recognise the cost of construction of the car park can only either be passed onto the unit purchasers or developer as investment properties,” says PPK committee member for research YL Lum.

There must also be integrity and professionalism, he says, adding that public perception is that developer-operated car parks have a higher possibility of abuse and fraud, compared to having them managed by the JMB or MC for the owners.

Chan, who is a PPK past president and a corporate member of Building Management Association of Malaysia (BMAM), says the best way to eliminate as many conflicts as possible is to plan efficiently from the onset.

There are several criteria to consider for an effective management in a mixed development which involves segregation, logistics control, traffic control and utilities back-up, he says.

“If done right, conflicts should be a minimal occurrence. That’s why the expertise of building managers should be employed during the planning stages as they are aware of the conflict areas as well as the requirements of the relevant authorities,” he says.

For example, the Fire and Rescue Department of Malaysia would require having adequate fire escape routes as well as various fire safety equipment and facilities such as fire control room, fire pump room, and basement jet fan.

While there are usually segregated entry and exit points for the commercial, retail and office components from the residential one, when it comes to the Fire and Rescue Department, it will seek common fire exits, says Chan.

This, if not sorted out early, may cause issues since those access ways, which may be part of a shopping mall, will be automatically classified as “universal” common areas and no longer be in control of the mall operator, he says.

Chan adds that no area of the strata management should be overlooked in terms of maintenance.

These include structural elements of the building, stairways, fire escapes, entrances and exits, corridors, lobbies and others that serve more than one parcel, he says.

“This is why the sub-MCs should be allowed the freedom to deal with these [non-universal] common areas without interruption,” he says.

There are still many aspects of the SMA 2013 that require fine -tuning, he says, suggesting that the government adopt the rules and regulations that have been successfully enacted in other Asian countries like Singapore or Hong Kong.

“There is no need to reinvent the wheel. We just need to refine it to suit the Malaysian context,” he says. FocusM

This article first appeared in Focus Malaysia Issue 294.