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Winning recipe: Responsibility and Accountability Winning recipe: Responsibility and Accountability
Share this on WhatsAppTHESE ARE KEY INGREDIENTS MANAGEMENT COMMITTEES MUST ADOPT TO TASTE SUCCESS BY Robert Tan The former American congressman, Jesse Jackson Jr,... Winning recipe: Responsibility and Accountability
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THESE ARE KEY INGREDIENTS MANAGEMENT COMMITTEES MUST ADOPT TO TASTE SUCCESS

BY Robert Tan

The former American congressman, Jesse Jackson Jr, pleaded guilty to misusing US$750,000 (RM3.3 million) in campaign funds. Prosecutors said the funds were siphoned to pay for his family’s personal living expenses and buy exotic items. In a plea agreement that would reduce his sentence, Mr Jackson said, “I used money I shouldn’t have used for personal purposes. Guilty, Your Honor. I misled the American people.” (http://www.nytimes.com/2013/02/21/us/politics/jesse-l-jackson-jr-pleads-guilty-to-wire-and-mail-fraud.html)

Mr Jackson Jr is the son of human rights leader and Baptist minister, the Rev Jesse L Jackson who once campaigned for the President of the United States.

People in public service wield great influence. They harness people’s trust. They remind themselves to keep personal beliefs and preferences separate from their oath of office, namely, to uphold the sanctity of public trust. They have a big responsibility. And they stand accountable to unbiased scrutiny.

In strata management, the principles of responsibility and accountability are vital.

Mr Jackson Jr confessed wrongdoing to his nation. As a congressman, he stood for responsibility and accountability. That was his legacy.

Responsibility and accountability are like two peas in a pod. They go hand in hand.

In strata management, these values are vital. They ensure good strata governance within a strata development.

Below is a story about responsibility and accountability of the management committee.

Pre-JMB

A developer managed a stratified building. It owned several unsold units (apartment parcels). It rented out a few of the units. The other units were vacant.

Each of the unsold units had its own car park. The car parks were rented. Parking fees were paid. However, the developer did not pay the maintenance charges and sinking fund for the unsold units. Meanwhile, it collected the maintenance charges and sinking fund from the other parcel owners.

JMB

When the Joint Management Body (JMB) was formed under the Building and Common Property (Maintenance and Management) Act 2007 (Act 663), the audited accounts of the maintenance account showed that the developer had not paid maintenance charges and sinking fund for the unsold units. The sum total almost RM80.000.

Before the Strata Management Act, laws were unclear about a great many issues.

There was a surplus of RM1million in the maintenance account. It was from the maintenance charges and sinking fund collected from the parcel owners.

The JMB asked the developer to pay the RM80,000 arrears. It asked the developer to handover the RM1million surplus fund.

The developer refused the requests. The JMB wrote repeated letters for the same.

The developer replied. Its’ letter written with legal poetry said, among others:

We notify you which we hereby do that your allegation that the arrears of maintenance charges and sinking fund amounting to RM80,000 belong to you are unfounded.

We further notify you which we hereby do that our client is not obliged to handover to you the alleged RM1 m surplus fund.

We further notify you which we hereby do that our client is not obliged by law or otherwise to accede to your requests.”

The developer enjoyed maintenance and management services for its unsold units. It ought to pay the maintenance charges and sinking fund for the units. It did not.

The surplus fund came from the parcel owners. It was to be used for the maintenance and management of the building and common property. Was there satisfactory reason for the developer to hold it?

Issues

The issues for the case are:

  • Must the developer pay maintenance charges and sinking fund for its unsold parcels?
  • Must the developer handover the surplus fund in the maintenance account?
  • Are the laws clear?

Let’s consider responsibility and accountability first.

Responsibility means acting with initiative, leadership and a sense of duty.

Responsibility

The JMB took over the responsibility of maintaining the building and common property. It opened a new bank account. The bank account lacked sufficient funds. The developer held the surplus fund.

Despite almost nothing in the JMB bank account, the JMB diligently collected the maintenance charges and sinking fund. The bank account soon grew to a comfortable sum.

The JMC (Joint Management Committee) committed their time and effort. It did administrative work. It supervised building maintenance contractors. It collected maintenance charges and sinking fund. It managed payment of utility bills. It monitored the do’s and don’ts of the by-laws. It held annual general meetings (AGMs).

Responsibility means acting with initiative, leadership and a sense of duty. The JMC considered responsibility important.

Accountability

The JMB wish to open a JMB bank account. But that took time. Most parcel owners paid cash for the maintenance charges and sinking fund. The JMB managed the cash. For the cheques, where would they go? The JMB account was yet opened.

It was suggested that the cheques would be banked into the JMC chairman’s personal bank account. He would account for the cheques. After all, this was for the short interim period until the JMB bank account was opened.

The chairman disagreed and said that the cheques, like the cash, are trust moneys. If they were banked into his personal bank account, it raises suspicion.

In the circumstance, the cheques were uncashed until the JMB bank account was finally opened. The cheques were cashed and subsequently banked into the JMB bank account.

The maintenance fund accounts were audited annually. Doubts on the accounts were clarified satisfactorily.

Accountability means answerability minus the shadow of doubt. The JMC emphasised on accountability.

Peas in pod

The JMB (with the seeming absent developer) managed and maintained the building and common property.

The JMC acted responsibly and sought to be accountable. The same JMC held office for several years.

Responsibility and accountability are values like peas in a pod. They go hand in hand. They won the parcel owners’ trust.

State Authority

The developer did not pay the maintenance charges and sinking fund for the unsold units. It held the RM1million surplus funds. The JMB sought the assistance of the National House Buyers Association (HBA) and persuaded the State Authority to intervene.

The authority wrote to inform the developer to pay the charges for the unsold units. The arrears are to be paid too. The RM1million surplus funds are to be handed over to the JMB.

The developer refused to do so.

Law

Before the Strata Management Act 2013 (Act 757) (“SMA”) was passed, the Building and Common Property (Maintenance and Management) Act 2007 (Act 663) (“BCPA”) governed JMBs. The BCPA had unclear provisions. It said little or nothing regarding the issues.

To resolve issues, judicial discretion was necessary. But the case outcome was uncertain. It would vary according to the Judge’s palate.

Thus, issues were in limbo. The SMA deals with the issues.

Unsold parcels

The SMA says that the developer must pay charges for the unsold units. Unlike the BCPA which is silent, the SMA say it clearly.

Specifically, section 10(3)(b) of the SMA says:

“The developer shall deposit into the maintenance account the Charges to be paid by the developer in respect of those parcels … which have not been sold …”

Surplus funds

Surplus funds belong to the JMB. The developer must transfer them out.

 Sections 10 and 11 of the SMA provide that all moneys in the maintenance account and sinking fund managed by the developer shall:

  • not form part of the developer’s property; and
  • be held in trust for parcel owners

Also, section 15 of the SMA provides that:

(1)       The developer shall, before the developer’s management period expires—

(a)       transfer all balances of moneys in the maintenance account and the sinking fund account, after payment of all the expenditure which have been properly charged to the accounts, to the Joint Management Body.

The SMA provides for responsibility and accountability. Parliament repealed the BCPA with the coming of the SMA.

The maintenance fund is trust money. Like taxes, it is paid as a matter of course. It is easy money, therefore it can easily be misused.

Conclusion

The JMB/ Management Committee (MC) manages the maintenance fund of the strata development. It has a big responsibility.

Being responsible, the JMB/ MC is also accountable.

Easy money corrupts and really easy money corrupts absolutely. Accountability is the antidote for easy money let alone really easy money.

Therefore, responsibility and accountability are necessary ingredients in the recipe for MCs to win over parcel owners’ support and confidence.

If all the above sounds like a mini government, it is in fact one. It has to be transparent, responsible and accountable to garner continuing support.

Robert Tan, author of Buying Property from Developers: What You Need to Know and Do” lives in Kuala Lumpur. He enjoys food and travelling.

*This article has been contributed to National House Buyers Association (www.hba.org.my) towards Education, Information and Empowerment and will be continued in the next issue of RED.

Property 360 Online

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