A lot of people have heard of Joint Management Body (‘JMB’) and Management Corporation (‘MC’). The general understanding is that both JMB and MC are entrusted with the powers and responsibilities to manage common area of stratified developments, enforcing by-laws, collecting maintenance charges and contribution to sinking fund etc. Some may think that both JMB and MC are synonymous to each other.
While both JMB and MC do share a lot of common features, contrary to popular belief, they do have certain differences other than the names itself.
We set out 5 things that you want to know in respect to the differences between the JMB and MC.
Establishment of JMB and MC
Both JMB and MC come into existence under different situations and on different dates.
Generally speaking, JMB is a body tasked with responsibilities such as managing and maintaining common property before strata titles are issued for a stratified development area while a MC takes over these responsibilities after strata titles are issued.
Specifically, a JMB comes into existence upon the convening of its 1st AGM usually with the assistance of developer.
In order to ensure that a developer does not unnecessarily delay the establishment of JMB, the Strata Management Act (‘SMA’) set out the deadline to convene 1st AGM of JMB. The deadline to convene 1st AGM is within 12 months from the date of delivery of vacant possession of parcels. For existing stratified development areas wherein vacant possession of the parcels have been delivered prior to the coming into force of the SMA, the first AGM shall be convened on or before 31 May 2015 (except Penang, which is before 11 June 2016).
If the MC comes into existence before the 1st AGM of the JMB, the 1st AGM of the JMB shall not be required to be convened and no JMB shall be established for the stratified development area.
On the other hand, a MC is established upon the opening of strata register book, i.e. after the strata titles are issued. However, a MC does not actually function until the 1st AGM of the MC is convened and the management committee is elected. The 1st AGM of a MC could only be convened after proprietors representing at least 25% of the aggregate share units of the development area (excluding the original proprietor of the land and the developer) have caused the strata titles to be registered in their respective names.
A JMB is automatically dissolved within 3 months from the date of the 1st AGM of the MC.
JMB’s Limitation on Entering into Contracts
As we can see above, JMB is merely intended to be an interim body to carry out some of the duties and responsibilities of the MC before the strata titles are issued and its 1st AGM is convened. Primarily because of this reason, a JMB does not have all the powers entrusted to a MC pursuant to the SMA.
Section 21(3) of the SMA states that a JMB shall not enter into any contract relating to the maintenance and management of any building intended for subdivision of parcels and the common property in the development area for any period exceeding 12 months. This restriction however is not imposed over a MC save for its service providers to be engaged on a yearly basis under paragraph 6 of the Second Schedule, SMA.
This means a JMB must not enter into any property management agreements with third parties if those contractual period is more than 12 months, failing which the agreement may be declared null and void for being illegal.
In any event, as a matter of prudence and good governance, a MC is not encouraged to enter into a long-term contract with any parties. A long-term contract will also unfairly deter the future committee from renegotiating the terms if situation changes.
Could JMB borrow money and offer security?
While section 17 of the SMA provides that a JMB is a body corporate having perpetual succession, there are certain things that a JMB could not do.
Pursuant to the SMA, the powers of a MC include the following powers:
to borrow moneys required by the MC in the exercise of its powers or the performance of its duties; and
to secure the repayment of moneys borrowed by it and the payment of interest thereon by negotiable instrument or by a charge of unpaid charges to the maintenance account (whether already imposed or not), or by a charge of any property vested in it or by a combination of any of those means.
The powers to borrow money and offer security for repayment of moneys borrowed have wide ramifications and could be abused easily. The Parliament has not entrusted the JMB with these 2 powers in the SMA and we are of the view that this is done intentionally.
This means that by implication, a JMB does not have powers to borrow money and offer security.
Acquisition of additional land, and acceptance of easement
Section 74(1) of the SMA provides that, being the lawful proprietor of the lot, the MC can acquire land to be used for purposes with regard to the stratified development area, and the MC can also accept the burden or benefit of easement imposed with regard to its lot. A JMB cannot do so because it is not the lawful proprietor of the lot.
Composition of Management Committee
The SMA provides that the constitution of the JMB and the joint management committee shall include the developer. This means that the joint management committee shall comprise a representative from developer even if the developer has sold all the parcels in the development area.
One of the advantages of having a representative of developer in the joint management committee is that the representative is able to share his experience with the fellow committee members on how to exercise the powers of JMB and maintain the common property. The fellow committee members may come from various background which is not related to property management at all and the guidance by the representative is likely to prove valuable and useful.
The other advantage is that the representative can help the fellow committee members to follow up with the developer on the rectification of defects in the common property and on the application for strata titles.
What’s a Subsidiary Management Corporation (Sub-MC)
Subsidiary Management Corporation (‘SMC’) is a concept introduced pursuant to the SMA. It allows the creation of limited common property (‘LCP’) wherein only certain proprietors have exclusive benefit to use the same. Exclusive benefit of the LCP is not limited to its use or enjoyment and comes with a liability in the form of separate Charges and sinking fund contributions to the SMC for the management and maintenance of the LCP. Under this concept, a SMC is in charge of the responsibility to maintain the limited common property. This concept is particularly useful in cases of mixed development of strata building for residential, commercial and retail uses.
Pursuant to the current regime, the SMA only allows SMC to be established after a MC has been formed over a stratified development. As such, a MC should be formed as soon as possible if SMC is needed to be formed in a development.
As we can see above, JMB and MC do have certain differences despite them being often erroneously referred to interchangeably. Understanding the differences is important as it allows us to appreciate the dos and don’ts of JMB and MC.
So next time, when your friend refers to a JMB as a MC or visa versa, you may want to correct him politely.
This article is written by Koh Kean Kang, a practicing lawyer and it has been contributed to National House Buyers Association (www.hba.org.my) towards Education, Information and Empowerment
This article was contributed by The National House Buyer’s Association to the Real Spaces team and edited by Gunaprasath Bupalan.