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Government grants extensions to stakeholders under Strata Management Act

28 June 2021

Four statutory orders issued by the Minister of Housing and Local Government were gazetted on 23 June 2021. They are:
 
In essence, the aforesaid orders (“Orders”) exempt the respective stakeholders from compliance with certain provisions applicable to them under the Strata Management Act 2013 (“SMA”), subject to the applicable condition(s) of exemption set out in the Orders being satisfied.  
 
The Orders are deemed to have come into operation from 18 March 2020 until 30 June 2021 (“Relevant Period”), being the period during which various movement control orders were imposed in Malaysia to contain the outbreak of the Covid-19 pandemic.
 
The exemptions are discussed below.
 
P.U.(A) 274/2021 – Exemptions applicable to the Developer
 
Provision
  Conditions of Exemption
Section 10 SMA – Developer to establish maintenance account This section sets out, among others, the requirements for a developer to establish and operate a maintenance account If the developer’s management period expires during the Relevant Period
Section 11 SMA – Developer to establish sinking fund account This section sets out, among others, the requirements for a developer to establish and operate a sinking fund account If the developer’s management period expires during the Relevant Period
Paragraph 14(1)(c) – Duties of developer in relation to accounts This paragraph requires a developer to submit a certified true copy of the audited accounts and the auditor’s report of the maintenance account and the sinking fund account to the Commissioner of Buildings (“COB”) within 14 days of the accounts being audited. If the developer submits the certified true copy which need to be filed with the COB during the Relevant Period by 1 July 2021
Section 15 SMA – Handing over by developer to the joint management body (“JMB”) This section provides for the handing over to the JMB of, among others, balances in the maintenance and sinking fund account If the developer’s management period expires during the Relevant Period
Subsection 18(1) SMA – Duty of developer to convene first annual general meeting (“AGM”) of the JMB This subsection sets out the requirements for the developer to convene the first AGM of the JMB If the first AGM of the JMB which needs to be convened within the Relevant Period is convened by 1 July 2021
Paragraph 49(1)(b) SMA – Restrictions during preliminary management period This paragraph prohibits, amongst others, the developer from entering into maintenance and management contract which extends beyond the preliminary management period
If:
  1. the preliminary management period expires within the Relevant Period; and
  2. the period of such contract entered into within the Relevant Period does not exceed one month after the AGM is convened.
Paragraph 50(1)(c) SMA – Developer to establish maintenance account in the name of management corporation (“MC”) This paragraph requires the developer to open and maintain a maintenance account in the name of the MC under the circumstances set out in this paragraph  If the developer establishes the maintenance account by 1 July 2021
Section 51 SMA – Developer to establish sinking fund account in the name of MC This paragraph requires the developer to open and maintain a sinking fund account at the same time when the developer is required to open and maintain the maintenance account under subsection 50(1) of the SMA If the developer establishes the sinking fund account by 1 July 2021
Paragraph 54(1)(c) SMA – Duties of developer in relation to accounts This paragraph requires the developer during the preliminary management period to file with the COB a certified true copy of the audited accounts together with the auditor’s report within 14 days of the accounts being audited If the developer submits the certified true copy which need to be filed with the COB during the Relevant Period by 1 July 2021
 
Section 55 SMA – Handing over of control to MC This section provides for the handing over to the management committee of the MC of, among others, the control of all balances in the maintenance account and sinking fund account If the developer’s management period expires during the Relevant Period
Subsection 57(1) SMA – Duty of developer to convene first AGM This subsection sets out the requirements for the developer to convene the first AGM of the MC If the first AGM of the MC which needs to be convened within the Relevant Period is convened by 1 July 2021
Subsection 92(1) SMA – Developer to pay deposit to rectify defects on common property This subsection sets out the requirements for the developer to pay a deposit with the COB for rectification of defects If the deposit which need to be paid to the COB within the Relevant Period is paid by 1 July 2021
 
P.U.(A) 275/2021 – Exemption applicable to the Commissioner of Buildings
 
Section 92 of the SMA requires a developer to pay a deposit to the COB for the purpose of rectification of common property defects. Sub-section (5) of section 95 requires the COB to return the unexpended deposit to the developer on the expiry of the defect liability period for the development area. P.U.(A) 275/2021 exempts the COB from the requirement in sub-section 5 subject to the following conditions:
 
  1. the developer submits an application for the repayment of the deposit to the COB; and
  1. the COB is satisfied with the conditions of the common property before the deposit is refunded to the developer.
P.U.(A) 276/2021 – Exemptions applicable to the Management Corporation
 
Provision
 Conditions of Exemption
Paragraph 62(1)(c) SMA – Duties of MC in relation to accounts This paragraph requires the MC to file with the COB a certified true copy of the audited accounts together with the auditor’s report within 14 days of the accounts being audited If the MC submits the certified true copy which need to be filed with COB during the Relevant Period by 1 July 2021
Paragraph 6 of the Second Schedule SMA – Power to employ agents and servants This paragraph gives the management committee power to employ agents and servants on a yearly basis in connection with the powers and duties of the MC.
If:
  1. the preliminary management period expires within the Relevant Period; and
  2. the period of such contract of employment entered into within the Relevant Period does not exceed one month after the AGM is convened
Paragraph 10 of the Second Schedule SMA – AGM This paragraph provides the timeline within which the MC shall hold an AGM If the AGM which needs to be convened within the Relevant Period is convened by 1 July 2021
 
P.U.(A) 277/2021 – Exemptions applicable to the Joint Management Body
 
 Provision  Conditions of Exemption
Subsection 21(3) SMA – Duties and powers of JMB This subsection prohibits the JMB from entering into maintenance and management contract exceeding 12 months
If:
  1. the contract expires within the Relevant Period; and
  2. the period of such contract entered into within the Relevant Period does not exceed one month after the AGM is convened 
Subsection 23(1) SMA – JMB to establish maintenance account This subsection requires the JMB to open and maintain a maintenance account If the JMB establishes the maintenance account by 1 July 2021
Subsection 24(1) SMA – JMB to establish sinking fund account This subsection requires the JMB to open and maintain a sinking fund account If the JMB establishes the sinking fund account by 1 July 2021
Paragraph 26(1)(c) SMA – Duties of JMB in relation to accounts This paragraph requires the JMB to file with the COB a certified true copy of the audited accounts together with the auditor’s report within 14 days of the accounts being audited If the JMB submits the certified true copy which need to be filed with the COB during the Relevant Period by 1 July 2021
Paragraphs 27(2)(a) and (b) SMA -  Dissolution of JMB These paragraphs provide for the handing over to the MC of, among others, balances in the maintenance account and sinking fund account If the obligations which need to be performed within the Relevant Period are performed by 1 July 2021
Subsection 27(3) SMA - Dissolution of joint management body This subsection requires the JMB to hand over to the MC the audited accounts If the handing over which need to be done within the Relevant Period is done by 1 July 2021
Paragraph 10 Second Schedule read together with paragraph 22(2)(a)  - AGM This paragraph provides the timeline within which the JMB is to hold an AGM If the AGM which needs to be convened within the Relevant Period is convened by 1 July 2021
 
Exclusions
 
  1. The exemptions under the Orders shall not affect any legal proceedings commenced or judgment or award obtained from 18 March 2020 until the date of publication of the Orders in the Gazette, i.e. 23 June 2021.
  1. The exemptions under the Orders shall not affect the validity of any action taken by the respective stakeholders under the SMA before or on the commencement of the Orders and shall not affect any legal proceedings commenced by or against the respective stakeholders.  
Comments
 
The exemptions serve to ensure that the respective stakeholders affected by the implementation of the various movement control orders would not be penalised for their failure to comply with their duties and obligations under the SMA. However, as many of the exemptions are given on the condition that the relevant duty or obligation be complied with by 1 July 2021 and given that the exemptions were only gazetted on 23 June 2021 and the current Full Movement Control Order has been further extended, there may not be sufficient time for compliance especially if affected offices remain closed. 
 
Alert prepared by Jesy Ooi (Partner) and Seen Qin Ying (Associate) of the Real Estate Practice of Skrine

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