Differences between JMB and MC: 5 things you should know

The general understanding is that both the Joint Management Body (JMB) and Management Corporation (MC) are entrusted with the powers and responsibilities to manage common areas of stratified developments, enforce by-laws and collect maintenance charges and contributions to the sinking fund and others. 
But how is the JMB different from an MC? Here are five things that differentiate them.

1 Establishment of JMB and MC
The JMB is tasked with responsibilities such as managing and maintaining common property before strata titles are issued while an MC takes over these responsibilities after strata titles are issued.

The JMB comes into existence upon the convening of its first AGM, usually with the assistance of the project’s developer. To prevent unnecessary delay in the establishment of the JMB, the Strata Management Act (SMA) sets the deadline for the first AGM of the JMB to be convened within 12 months from the date of delivery of vacant possession. 

If the MC comes into existence before the first AGM of the JMB, the first AGM of the JMB shall not be required and no JMB shall be established.
On the other hand, an MC is established upon the opening of a strata register book after the strata titles are issued. However, an MC does not actually function until the first AGM of the MC is convened and the management committee is elected. 

The first AGM of an MC may 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 three months from the date of the first AGM of the MC.

2 JMB’s limitation on entering into contracts
The JMB is merely intended to be an interim body to carry out some of the duties and responsibilities of the MC before  the latter is established. Primarily because of this, a JMB does not have all the powers entrusted to an 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 common property in the development area for any period exceeding 12 months.

This restriction, however, is not imposed on an MC save that it must engage its service providers on a yearly basis (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 periods are more than 12 months, failing which the agreement may be declared null and void.

In any event, as a matter of prudence and good governance, an 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 the situation changes.

3 Could the JMB borrow money and offer security?
While section 17 of the SMA provides that a JMB is a corporate body having perpetual succession, there are certain things that a JMB cannot do but the MC can.

Pursuant to the SMA, the powers of an MC include the following:
a)    to borrow monies required by the MC in the exercise of its powers or the performance of its duties; and
b)    to secure the repayment of money borrowed 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 have wide ramifications and could be abused easily. The Parliament has not entrusted the JMB with these two powers in the SMA and we are of the view that this is done intentionally. 

4 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 regards to the stratified development area. The MC can also accept the burden or benefit of easement imposed with regards to its lot while a JMB cannot do so because it is not the lawful proprietor of the lot.

5 Composition of management committee
The SMA states that the constitution of the JMB shall include the developer. This means that the joint management committee shall comprise a representative from the developer even if the developer has sold all the parcels in 
the development. 

One advantage of this is that fellow committee members can learn from the developer’s experience on how to exercise the powers of JMB and maintain the common property. The committee members may come from various backgrounds unrelated to property management and the developer’s guidance would be useful.

The developer’s representative can also help fellow committee members to follow up with the developer on the rectification of defects in the common property and the application for strata titles. 

What’s a Subsidiary-MC
A Sub-MC allows the creation of limited common property (LCP) where only certain proprietors have exclusive usage to. Exclusive benefits of the LCP comes with a liability in the form of separate charges and sinking fund contributions to the Sub-MC for the management and maintenance of the LCP. This concept is particularly useful in mixed developments of strata buildings for residential, commercial and retail uses. 

Pursuant to the current regime, the SMA only allows the Sub-MC to be established after an MC has been formed. As such, an MC should be formed as soon as possible if the Sub-MC needs to be formed in a development.

Conclusion
As we can see, the JMB and MC are different although they are often erroneously referred to interchangeably. Understanding how each works is important as it allows us to appreciate the dos and don’ts of the JMB and MC. Next time, when someone refers to a JMB as an MC or vice versa, you may want to correct them politely. 

Datuk Chang Kim Loong is the Hon. Secretary-General of the National House Buyers Association (HBA).
HBA can be contacted at: Email: [email protected]
Website: www.hba.org.my
Tel: +6012 334 5676

This story first appeared in the EdgeProp.my pullout on Jan 31, 2020. You can access back issues here.