Whether there is a need for calling an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) before authorizing the JMB or MC to utilise sinking fund for meeting the actual or expected capital expenditure?

A lot of people may tend to agree with this but a further check on the Strata Management Act 2013 (Act 757), you may soon to realise that the Act does not spell out any requirement for calling an AGM or EGM for this purpose.

The Act 757 only mentions that the sinking fund shall be used ÔÇ£solelyÔÇØ for the purposes of meeting the actual or expected capital expenditure necessary in respect of:

(A) The painting or repainting any part of the common property which is a building or other structure;
(B) The acquisition of any movable property for use in relation to the common property;
(C) The renewal or replacement of any fixtures or fittings comprised in any common property (and any movable property vested in the MC);
(D) The upgrading and refurbishment of the common property; and
(E) Any other capital expenditure as the JMB or MC deems necessary

Please take note that the above paragraphs (D) and (E) do not cover on the developer. It means that the Developer can utilise sinking fund solely for the above paragraphs (A) to (C).

Failing which, the developer will be subject to criminal prosecution and on conviction, he shall be liable to a fine not exceeding RM250,000 or to imprisonment for a term not exceeding three years or to both.

However, JMB or MC will not be subject to the same criminal prosecution over their failure to abide by the laws. Is this another license given to the JMB or MC for them to manipulate the sinking fund?

In the absence of legal safeguards being capped on the JMB or MCÔÇÖs spending power, and also to ensure there is no floodgate opened for the JMB or MC to manipulate the sinking fund unnecessarily, I would think it is timely for all the JMBs or MCs (or by a resolution put up by an owner at least 7 days before the AGM or EGM if the management committee refuses to do so) to pass a resolution either in their AGM or EGM as to limit the JMB or MCÔÇÖs spending up to RM100,000 (some may even lower) for each project.

The resolution being proposed shall also plug on the loopholes whereby the management committee shall not take the opportunity to split an expenditure of more than RM100,000 into various sub-projects of not more than RM100,000 each, as to by-pass the need for calling an AGM or EGM in the future even though the actual spending for the same project is exceeding RM100,000.

Such a resolution will also cover the management committeeÔÇÖs spending from the maintenance fund account, to the extent that the JMB or MC cannot utilise an amount of more than RM100,000 from the maintenance fund with the excuse that the maintenance fund is sufficiently enough to cover that capital expenditure, as a way to avoid calling AGM or EGM for that purpose.

Is there any ultra vires for the AGM/EGM to pass such a resolution? I would not think so. Since Act 757 is only covering on the nature of expenses from each maintenance fund and sinking fund, and no limit was put on the JMB or MCÔÇÖs spending power, such a resolution might be seen as complementing and also as a check and balance mechanism on controlling the management committeeÔÇÖs spending patterns in the future.

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