Contributed by property valuer Mary Lau
An observation of the frustrations that come with unequal voting rights at an Annual General Meeting (AGM)
This article gives insight into the property industry where unequal voting rights at the AGM can have a huge impact on a development. It summarises key points to guide owners in similar situations so that they can decide on the course of action to take. Specifics have been omitted to ensure anonymity.
For the first time, I stepped into the meeting hall of a mixed development project where I own a stylish modern office to attend the AGM. Though there are many owners, not a good percentage showed up.
There is widespread apathy among the owners of properties at this particular mixed development – and lately, I have counted myself among them. Some have not been actively involved in the management of their development, choosing instead to leave things to others – myself included.
It was very unlike me to not care. For a while, I adopted an attitude of “see no evil, hear no evil” and “ignorance is bliss”. I left things to others too – but in 2018, a notice about yet more arbitrary fines at my condo brought me to my senses. I didn’t relish the idea of getting involved, but the situation was urgent and it just rolled on from there.
This prestigious development has been wrought with problems from day one: flooding, recurring expenses for repeated repairs, and life-threatening fixtures. Even so, not enough owners had come forward to make a difference. Year after year, individual owners got out-voted by the corporations that still sit in the Joint Management Committee (JMC).
One of our main issues has been a recurring problem over the years: the usage of different rates for maintenance charges during JMB. (Read my previous two articles here on this subject, Maintenance 1 and 2). With rates further revised due to a rebate of surplus funds, the disparity between the highest and lowest rates now stands at more than RM5 per share unit. It is disconcerting to many owners.
A coup d’etat
An uprising surged when a representative of a corporation demanded to vote on a number of critical resolutions by poll and refused to withdraw the motion. Protestors felt trapped. Some units are huge but held under one strata title. A vote by hand would be one vote per strata title, but by a poll, all the shares would be counted. (Read my article here, Formula of Share Units).
Section 17 of the second schedule of the Strata Management Act 2013 (SMA) provides that a poll can be demanded by an owner or his proxy. The JMC and property managing agent held that the motion to vote by a poll could not be itself voted on once the motion had been demanded and not withdrawn. It had to be honoured, otherwise, the results would be void.
The aggrieved owners disrupted the meeting and refused to let it continue. In this situation, voting by a poll would be a disadvantage for owners of smaller units to pass resolutions that would have been important to them. Given that the quorum (Second Schedule SMA, section 14) had been met, the meeting could carry on even if the majority refused to vote or left the AGM.
One of the owners tried to take over the chairperson’s position of the meeting but the votes cast by poll had already determined the JMB chairman for 2018. For the sake of maintaining anonymity, we will call him “Mr X”. Some felt that he should have withdrawn himself from the nomination and given way to another member from the floor.
The same scenario concerning the choice of voting method played out at last year’s AGM but the demand for a poll was withdrawn. As a result of voting by hand, one of the group leaders, who we will call “Mr Y”, won the popular vote over Mr X and became the chairperson of the meeting. However, the voting of other resolutions was conducted by poll, as demanded – and the results went the way that members with greater share units wanted.
This was advantageous to corporations and the owners of large units. Owners of smaller units feel insignificant and their thoughts are swirling with questions on the allocation of costs and the fairness of rates.
Big fish, small fish
One owner from the floor supported the voting to be conducted by poll. He owns a massive unit held under only one strata title. He paid close to RM 15 million for his unit – which was many times more than what I paid for mine. In terms of share units, his would be 15 times more than mine and voting by show a of hands would entitle him to just one vote. His unit has been empty and his monthly mortgage instalments would put most people in severe financial distress. He became our new JMB chairman for 2019.
It did not go well with some of the other owners that his category was revised to the lowest rate at the AGM. The explanation given was that they had more surplus funds and hence more rebate (read my article about surplus funds here).
A little kindness
When the AGM ended, Mr X came over and shook hands with one of the group leaders, who appreciated the gesture. If relations can be improved, I believe it would go a long way towards promoting peace and understanding. JMCs and MCs need to earn the respect and trust of owners and be sensitive to their concerns.
An intervention gone awry
A representative from a Member of Parliament was at the AGM to support us. He witnessed all that happened. Earlier this year, a friendly meeting coined ‘budi bicara’ was held between representatives of the JMC and the owners, in the presence of relevant authorities and representatives of a Member of Parliament.
I was at that meeting. The call was for our JMC to work out the rates with aggrieved owners before passing them at the AGM. The JMC met with one group of aggrieved owners but could not resolve the disharmony. The new rates were nevertheless proposed and voted through at the AGM to the dread of many owners.
To the Court of Appeal
Last month, a group of lawyers from various groups brought the decision of the High Court in the Menara Rajawali case to the Court of Appeal, the aim being the overturning of the ruling which allows different rates to be used during the JMB period. The matter is still being deliberated.
The SMA expressly provides for different rates to be used when the management corporation (MC) is formed and Sub-MCs that can be created to take charge of their own sectors. Currently, there are no express provisions to form Sub-JMBs in the SMA. As written in my previous articles, the National House Buyers Association has submitted proposals for the SMA to include the formation of Sub-JMBs.
I am a tiny dot in the scheme of things, but as an owner, I ought to be concerned. With the help of a financial analyst, I hope to make sense of the workings behind the rates that have caused so much discontent. Since the AGM, we have had one session with JMB members and the property manager to get an explanation on the differential rates. This was time well spent. It would be a red flag if your management is not willing to be transparent.
As there are many details to look into, we still require an independent audit to review the figures. The audit report will focus on the expenses and their apportionment which determines the rates. We will propose that the JMB absorb the cost from the management funds.
What happened at this AGM is a stark wake-up call. I often hear of tales of the lone person carrying the load from readers and friends. One is considered fortunate if there are a few people to walk the journey with. Owners, wake up! Everyone needs to do their part.
About the contributor
Mary Lau graduated from the University of Reading, England, with a BSc Land Management (Valuation Specialisation) in 1991. In 2002, she was appointed High Court Assessor in Sarawak for compulsory acquisition and compensation cases and sat on the bench with the judge. She began her training with CH Williams and later held senior positions in valuation firms such as Henry Butcher, City Valuers and was a Director at Hasmi and Associates in 1999. She began her own setups in real estate investment and other ventures by 2007. She is a licenced valuer with the Board of Valuers in Malaysia.
This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation. Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.
Read another contribution from Mary Lau about a legal battle with an unscrupulous developer here.