Call for financial management regulation for properties

KOTA KINABALU: Subsidiary Title Owners and Purchasers Association, Sabah (STOPS) has proposed to incorporate financial management regulation to be imposed on the management of subsidiary title properties in the review of the Land (Subsidiary Title) Enactment 1972.

STOPS chairman Ken Lo said the financial management regulation was imposed upon West Malaysia, whereby management of subsidiary title properties in West Malaysia had to comply with the guidelines on how to collect and spend the management fee.

For instance, Lo said cash collected by the management had to be banked into the trust account, or management account, within 48 hours in West Malaysia. Developer or management who fails to comply will be liable to imprisonment or fine.

Lo said he used to chair the management committee of a condominium in Kuala Lumpur in which it was found the owners had been paying RM9,000 a month to a manager from the developer’s company just to attend a meeting with the committee when the developer was running the management.

He said the developer of a shopping mall outside Kota Kinabalu charged RM200,000 to RM300,000 a year in the management fee like consultation to the management.

“Is that allowed? They (the developer) charge any amount they want.”

Lo said there had yet to have financial management ruling in Sabah which dictated what the property management could or could not spent.

“There is a loophole. If I am a developer, I can put my good friend or relative to help the management for RM10,000 a month. Is that allowed or not allowed? At the moment, there is no law to say so,” he said in an interview here yesterday.

As such, Lo said it was important for the management to justify its budget and the owners to ask for justification of the spending.

He said management fee was one of the common issues faced by subsidiary title property owners.

He said owners should be aware that while the developer charged 15 or 20 sen per square foot (psf) as management fee in the beginning, which might look cheap, the rate was usually insufficient a few years down the road.

“When developers estimate the service fee and sinking fund, they seldom take into account inflation in the next five years and people who do not pay, which leads to cash flow problem.”

Consequently, when the time for the developer to hand over the property to the management committee comes, there will be a huge deficit in the account in some cases, he said.

But instead of coming up with a new budget, Lo said the management of subsidiary title properties should take measures to cut costs first.

“The management should think about how it could do more for less.”

He said the management should also find out the reason for the deficit in order to justify its new budget to the owners.

“If the management can justify, I as the owner will be happy to accept the new budget,” he said.