Commissioner Of Buildings (COB) In Malaysia, And Their 6 Main Functions

Klik sini untuk versi BM.

Have you heard of the Commissioner of Buildings (COB)? Maybe it’s whispered about in your apartment complex at night — "be sure to pay your maintenance fees, or the Commissioner of Buildings will get you".

Don’t worry, it’s not as scary as that! The COB is actually a valuable part of effective facility management, and that’s particularly important when you live in a large stratified property.

So, let’s dispel the myths and get down to the truth. Here’s everything you need to know about the Commissioner of Building in Malaysia, and why that’s important to you as a property owner.

Understanding The Commissioner Of Buildings

The Commissioner of Buildings is essentially an enforcement officer designed to police the rules and regulations of the Strata Management Act 2013 (SMA).

This Act is the framework of regulation, which ensures stratified properties are managed and maintained in an effective and fair manner.

It’s the set of rules that lays out the rights and obligations of every single stratified property owner in Malaysia, as well as other relevant parties, such as management bodies and developers.

It includes essential elements of stratified property ownership, such as the rules and limits around maintenance fees and sinking funds.

A COB will only ever be appointed to oversee stratified properties such as apartments, condos, or flats, so you don’t have to worry about someone turning up at your bungalow looking to enforce any rules!

Stratified properties are those where owners possess a strata title to individual property units as part of a larger shared development, and some less common property types like townhouses.

In addition, the Commissioner of Buildings is empowered by a local council authority within a given state.

So, for example: the Commissioner of Buildings Selangor will have separate agents appointed by, and responsible for, municipal councils from Subang Jaya, Petaling Jaya, Kajang, and so on.

You can find a handy list of Commissioner of Buildings compiled by the National House Buyers Association to refer to here.

The COB is empowered to investigate and adjudicate on breaches of the SMA, providing a neutral third-party that ensures all rules are fairly applied to everyone involved. Basically, they’re kind of like the sheriff of building management.

PropertyGuru Tip

The term ‘adjudicate’ simply refers to the process of determining how much stamp duty is payable for the instrument of transfer.

A Commissioner of Buildings’ role isn’t just about punishing people though. It’s designed to ensure proper management and upkeep of stratified property is maintained for the benefit of all.

They’ve even got a cool description of their objective, taken from the official Klang Commissioner of Buildings’ website:

To ensure maintenance of joint property is implemented, based on the law and procedures, for creating harmony in life sharing joint property for the development of elevated [buildings].

What Does The Commissioner Of Buildings Do?

Like we’ve highlighted above, the Commissioner of Buildings enforces the rules laid out in the Strata Management Act 2013. But what does that really cover?

It’s not just maintenance fees and sinking funds like you might think. There are six main functions of the Department of Building Commissioner, as noted by the Klang COB:

1. Conducting inventory on buildings within the relevant local area.
2. Ensure the establishment of a Joint Management Body (JMB) for development involving stratified planning.
3. Resolving any dispute between the developer and the purchaser relating to the establishment of the JMB and account maintenance.
4. Monitor the action of a developer in addressing repair defects.
5. Enforce the law stipulated in the Strata Management Act (Act 757) 2013 and the Strata Management Act 2013 (Act 757).
6. Provide periodic learning about administrative management, audited accounts, financial provisions and other various topics related to the management of JMB/MC.

That list of duties covers a whole range of property management obligations, from accounts right through to education and support for the Joint Management Body (JMB) or Management Corporation (MC).

The Commissioner of Buildings is entitled to a range of powers in order to fulfill the obligations highlighted above.

They include, but are not limited to, access to accounts of management boards and developers for the purpose of auditing.

That means all decisions made by the COB should be informed by the latest financial information to ensure appropriate oversight.

The COB can also step in and appoint an individual to assemble meetings in order to meet the obligations of building management, or order the MC itself to hold an extraordinary general meeting (EGM) if required.

Commissioner of Buildings, or authorised personnel designated by the COB, may access a property for the purpose of carrying out essential repairs at any time.

The COB also has power to prosecute any individuals who fail to meet their payment obligations such as management or maintenance fees, and adjudicate on any dispute around payment of such fees.

That includes obligations around the defect liability period that’s laid out in the Housing Development Act.

Is The COB Always Right?

It might sound like the COB is some sort of all-powerful overseer of strata property management, but that doesn’t mean they’re not also held accountable.

The COB is answerable to the Strata Management Tribunal. On top of that, the rulings of the COB are ultimately answerable to legal processes in the courts, and challenges to COB decisions can be brought in via this way.

In one example from 2010, a Management Corporation (MC) for a development in Penang challenged the COB in the High Court over a ruling that only unit owners could be elected as council members of stratified property management corporations.

The COB ruling, and the following appeal, were later upheld. The COB isn’t always in the right, however.

In 2013, the COB ruled on a case whereby a developer owed a JMB for a shortfall of RM500,000 in overdue maintenance funds.

The JMB referred the matter to the COB, who ruled that the sum was owed by the developer to the JMB. A court ruling later dismissed this, citing lack of jurisdiction in this matter by the COB.

What’s The Difference Between COB And Strata Management Tribunal?

At this point, some of you might be wondering where the Strata Management Tribunal (SMT) comes into play?

The Strata Management Tribunal is another legally recognised body, which, like the Commissioner of Buildings, provides a vital service in overseeing stratified properties.

While the COB is concerned with the general needs and enforcement of building maintenance and management, the SMT is a body which exclusively deals with resolving disputes. There are some subtle differences however, that should be recognised.

Ultimately, the COB is answerable to the SMT, since it’s the empowered legal authority for overseeing the implementation of the full Strata Management Act 2013. The Strata Management Tribunal is limited to claims brought by the following parties:

• Developer
• Purchaser
• Proprietor
• Joint Management Body (JMB)
• Management Corporation (MC)
• Subsidiary Management Company (SMC)
• Managing agent
• Relevant parties (Special permission granted by Tribunal)

The SMT is designed to provide an affordable and accessible dispute resolution body for problems of stratified ownership. There’s no legal representation required, except in extremely complex cases where it’s deemed that one party may be disadvantaged by lack of representation.

The critical point to understand about the SMT in relation to the COB is that the SMT will only hear claims covering financial costs up to a maximum RM250,000.

Any cases over that amount, such as the 2013 disputed claim noted above, are outside that scope. You can find out more about the full details of the Strata Management Tribunal here.

Breaking down the difference between SMT and COB in the most simple way possible – the Commissioner of Buildings is the sheriff and the enforcer, the Strata Management Tribunal is the judge(s) who oversee application of the law.

These are all important measures to ensure all stratified properties don’t end up becoming like the Wild Wild West of property management!

Relevant Guides:

• Serviced Apartment vs Condo In Malaysia – What’s The Difference?

• What You Should Know About Living In A Strata Landed Property In Malaysia

• 9 Townhouses Below RM500,000 In Klang Valley You Should Check Out!

Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

Source link

Related posts:

Weed out the problematic, errant, incompetent officers early

‘Review Strata Management Act’

 

House buyers' traps: purchasers lose their homes because of defaulting developers

WHY does this keep happening to house buyers in Malaysia?

This incident happened two years ago in Taiping where a laid-back community of mainly retirees found the roof over their heads nearly, and in some cases, actually, blown away. The purchasers had paid the developer and had moved into their houses and lived there for 10 years. Problem was that the purchasers paid the developers in cash remittance without taking out end-financing loans.

Unknown to the purchasers, the developer did not pay the developer’s bank to settle the developer’s loan vide bridging loans. The developer’s charge remained and grew into bigger indebtedness to the bank.

Apparently, the developer’s bank had not been collecting payment of the loan from the developer, even as the developer was collecting the instalments of the purchase price from the purchasers, as provided in the sale & purchase agreement (S&P) schedule.

Having waited for 10 years for the developer to settle his loan, the bank realised that the developer was not going to pay; that foreclosure was unavoidable.

The bank had a problem. Apart from the developer’s loan having ballooned over the years because of the bank’s laxity in not insisting on the developer paying promptly, there was also political repercussion. There are a few issues here, namely, the destruction of a settled community in a pleasant location, the injustice of the S&P; the solicitousness for developers in preference to purchasers on the part of the powers that be; and the embarrassment resulting from the bank’s philanthropic ramifications.

Has the bank breached the fiduciary duty of care to the purchasers as the bridging loan financier to the defaulting developer?

The crux of the problem is that the Housing Ministry-prescribed S&P allows the developer to build the purchaser’s house with the instalments of the purchase price paid by the purchaser from the day the S&P is signed. On top of this, and even more seriously, the developer is allowed to borrow from the developer’s banks on the security of the purchaser’s property.

Where a purchaser has paid the purchase price in full to the developer, and the developer does not pay the developer’s loan secured by the purchaser’s property, the developer’s bank may foreclose, auction off the purchaser’s property to recover the developer’s loan.

The developer suffers nothing. It has received the purchase price and pocketed it. The developer borrowed from its bank and gave the purchaser’s property as security, and with foreclosure the developer’s bank recovers its loan, and so the developer owes no money to the bank. It takes no risk, suffers no loss.

Purchasers the victims

It is the purchaser who loses. He loses his house and he has to settle the loan he took to buy the house with increasing interest on it. He is blacklisted, which means he can never borrow again. He may never buy a house again! Is this fair to the buyer who never did anything wrong to the developer or to the developer’s bank? In the Taiping housing fiasco, some of the purchasers had to buy their houses again at prices bloated by 10 years’ arrears of interest (i.e. pay the developer’s debt) to stave off foreclosure.

Who is to blame for this sad state of affairs? We will consider each one in turn. The most obvious candidate is, of course, the developer. Not so. It is the Housing Ministry for providing a standard form S&P that allows this to happen. Firstly, the S&P allows the developer to borrow money from a bank with a charge on the whole housing development land before it is sub-divided and sold. This pre-sale loan is referred to in the recitals to the S&P. This is understandable as the developer needs money before sale. The result of this is that the purchaser buys an encumbered property but the purchaser is not told how much of the developer’s loan, if apportioned equally, is borne by each purchaser’s sub-divided land (the redemption sum). After sale, the developer collects money from the purchaser from the day the S&P is signed, and should be able to make use of it to meet all the expenses of the development. However, after the sub-divided land is sold, the developer keeps borrowing, and no effort is made to keep the purchaser informed about the increasing amount of the developer’s loan/ the redemption sum.

The purchaser’s consent to the additional, post-sale loans is taken for granted. In fact, the purchaser cannot withhold his consent as long as the purchaser receives some fig-leaf protection from the developer’s bank in the form of an undertaking not to foreclose.

What is the use to the purchaser of the developer’s bank’s undertaking not to foreclose? What the purchaser needs is the absolute undertaking by the developer and the developer’s bank that a purchaser who has paid the purchase price will not face foreclosure vis-à-vis the disclaimer(s). This would have helped the Taiping purchasers. It is, therefore, a matter between the developer’s bank and the developer, with the Housing Ministry playing the proper protective role required of it by law, to ensure that such an undertaking/ disclaimer is given by the developer’s bank to the purchaser. This and other issues arising from the S&P have been raised by HBA with the Housing Ministry which continues to procrastinate.

To the developer’s bank, the loans to the developer on the security of the purchaser’s land is regarded as if it is the developer’s property entirely; it is of no concern to the developer’s bank that some of the purchasers have paid the developer and the developer may or may not have forwarded some of these payments to the developer’s bank.

The developer’s bank’s concern is whether the whole loan has been settled by the developer-borrower. If not, the developer’s bank feels secure in the knowledge that the entire housing development land is available to the developer’s bank to recover its loan/s. In so far as the developer’s bank is concerned, payments made by each purchaser to the developer is of no consequence. The transaction between the bank and the developer is the one that matters.

Under the then S&P, there is also no control over how much the developer should be allowed to borrow, for what purpose and by when it should be settled. Each loan to the developer increases the risks to the purchaser.

In the recent past, developer’s borrowed only for the purpose of meeting the expenses of the housing development. The developer was allowed to borrow twice only – once before sale and once after sale. Although the developer was not required to disclose the redemption sum, there was a very important safeguard. And that is, the developer had to settle the redemption sum to the developer’s bank before completion of construction so that at the end of the 24- or 36-month construction period, as the case may be, the property was free from the developer’s encumbrances and safe from foreclosure, even if the property was not transferred to the purchaser just as promptly. It was at least safe from foreclosure.

Bank initiatives

Banks/financial institutions should take the initiative to recover progressively the loan it had given the developer. Banks should stipulate as a condition for giving loans to their customers (developers) that the latter open its Housing Development Account (HDA), a statutory requirement, with the same bank and require the instalments of the purchase price be paid into it, and authorise the bank to deduct the developer’s loan by instalments from the HDA so that when the purchaser completes payment, the developer’s loan is also settled.

There is no such statutory requirement in the S&P so that if it happens at all, it’s serendipity!

HBA had meetings with the Housing Ministry to propose changes to the law and S&P with the view of giving greater protection to purchasers within the framework of the sell-and-build (which Rehda defend so fervently) but some pertinent ones had been objected by Rehda.

As if that is not enough, the ministry too have rejected those proposals vis-a-vis pre-determination of redemption sums in the S&P transaction. And that notwithstanding the Housing Development Act 1966 stating that it is inter alia for “the protection of the interests of purchaser.”

The next continuing article will dwell on the new “protection” or whatever in lieu thereof approved by the Attorney-General’s Chambers vis-à-vis “redemptions and disclaimers”.

Buyers beware by Chang Kim Loong

Chang Kim Loong is secretary-general of the National House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation.

Related posts:
 

Who is responsible: developer, contractor, local council ... Nov 15, 2014 ... By CHANG KIM LOONG - Buyers Beware The Star Nov 15 2014. Chang Kim Loong is the honorary secretary-general of the National House ...

 

 Reponsible housing developers' traits and qualiies ...

Feb 1, 2015 ... By Chang Kim Loong AMN who is the secretary-general of the National House Buyers Association. Related posts: Who is responsible: ...

 

 Home, sweet home for young couples will lead to ...

Oct 12, 2014 ... HBA secretary-general Chang Kim Loong also said the housing scheme for young married couples was commendable. However Chang said ...

 Malaysian homes more unaffordable than Singapore ...

Oct 14, 2014 ... Its secretary-general, Chang Kim Loong, said speculators have taken advantage of the low entry cost of buying a property at the expense of ...