What Happens If an Owner Does Not Pay Maintenance Charges?

In a strata development, maintenance charges are a basic responsibility of every parcel owner.

These charges are not merely monthly payments to the management body. They are the main financial source used to ensure that the building, common property and shared facilities can be managed, maintained and properly used by all owners and occupants.

When an owner does not pay maintenance charges, the effect is not limited to that owner alone. Arrears can affect the finances of the building, disrupt daily operations, weaken maintenance and eventually affect the entire strata community.

For this reason, the issue of arrears in maintenance charges should be properly understood by parcel owners, occupants, the Joint Management Body, the Management Corporation, committee members and property managers.

1. Why Must Maintenance Charges Be Paid?

Maintenance charges must be paid because parcel owners share the use and benefit of the common property.

In a strata development, owners do not only own their respective units. They also share lifts, corridors, lobbies, parking areas, security systems, swimming pools, gymnasiums, gardens, internal roads, main pipes and other shared facilities.

All these facilities need to be maintained. Lifts need to be serviced. Common areas need to be cleaned. Security systems need to operate. Electricity and water bills for common areas need to be paid. Contractors and service providers also need to be paid for the services provided.

Therefore, maintenance charges are important payments to ensure that a strata development can continue to function properly.

The obligation to pay maintenance charges does not depend on whether an owner uses every facility. Even if an owner rarely uses the swimming pool, rarely uses the gymnasium or does not live in the unit all the time, the common property still needs to be maintained.

In strata living, owners share the benefits. Therefore, owners also share the responsibilities.

2. What Are Arrears in Maintenance Charges?

Arrears in maintenance charges arise when charges imposed on an owner are not paid within the required period.

Arrears may include monthly maintenance charges, sinking fund contributions, late payment charges, interest, additional charges or any other amount lawfully imposed in accordance with the applicable law and decisions.

In practice, arrears are usually reflected in the owner’s statement of account. The statement will show the charges imposed, payments made, outstanding balance and period of arrears.

Owners should check their statements of account regularly. If there is any confusion, owners should seek clarification from the management as soon as possible.

Problems often arise when owners allow arrears to remain unresolved for too long. An amount that was initially small may become substantial if left unattended.

3. Effect on the Building If Many Owners Do Not Pay

When many owners fail to pay maintenance charges, the finances of the strata development will be affected.

Possible consequences include:

a. security companies not being paid;

b. cleaning companies not being paid;

c. lift maintenance being disrupted;

d. building repairs being delayed;

e. electricity or water bills for common areas becoming outstanding;

f. shared facilities not being properly maintained;

g. contractors refusing to continue services;

h. the maintenance account going into deficit; and

i. the overall value of the development being affected.

In serious cases, the management body may have to reduce service levels or postpone important repair works because there are insufficient funds.

This eventually affects everyone, including owners who consistently pay their charges.

For this reason, arrears in maintenance charges are not merely a private issue between an owner and the management body. They are a community financial issue.

4. Effect on an Owner Who Has Arrears

An owner who has arrears may face several consequences.

Common consequences include:

a. receiving payment reminders;

b. receiving statements of arrears;

c. receiving demand notices;

d. being charged late payment charges or interest if permitted;

e. receiving a letter of demand from solicitors;

f. facing a claim in the appropriate forum;

g. bearing additional costs related to the claim; and

h. facing further action if an award or judgment is not complied with.

Arrears that are left unresolved for too long may become more difficult to settle. This is because the outstanding amount may increase and involve additional costs.

Therefore, if an owner has arrears, the best step is to check the actual amount, seek clarification and resolve it as soon as possible.

5. Can the JMB or MC Take Action?

Generally, the Joint Management Body or Management Corporation may take action against an owner who fails to pay charges that ought to be paid.

However, such action must be taken in accordance with the law and proper procedure.

The management body should not act hastily, inconsistently or without complete records. Any action against an owner in arrears should be supported by clear documents and proper basis.

Important matters usually include:

a. the rate of charges imposed;

b. relevant meeting decisions;

c. the owner’s statement of account;

d. invoices or bills issued;

e. payment records;

f. demand notices;

g. relevant minutes of meetings;

h. by-laws; and

i. records of communication with the owner.

Action taken without sufficient basis may create new disputes and weaken the position of the management body.

6. What Steps Are Usually Taken?

The steps taken in relation to arrears depend on the facts, amount of arrears, period of arrears and relevant records.

Generally, the common steps that may be considered include:

a. issuing payment reminders;

b. preparing an updated statement of account;

c. issuing a demand notice;

d. discussing or proposing payment by instalments where appropriate;

e. issuing a letter of demand through solicitors;

f. filing a claim in the appropriate forum;

g. obtaining an award or judgment; and

h. taking enforcement action if the award or judgment is not complied with.

Not every case needs to proceed immediately to legal action. If the arrears are still small or the owner is prepared to cooperate, an administrative solution may be more practical.

However, if the arrears continue for a long period, the amount increases or the owner refuses to pay without valid reason, further action may need to be considered.

7. Can Access Cards Be Blocked If There Are Arrears?

The issue of blocking access cards is a sensitive issue in strata management.

Some management bodies may consider blocking access cards as a measure against owners who have arrears. However, such action must be considered carefully.

The legal position, by-laws, meeting decisions, notices, internal procedures, type of access being blocked and the facts of each case should be assessed before any action is taken.

A management body should not assume that every form of restriction is automatically allowed merely because an owner has arrears.

At the same time, owners should not assume that they can continue to enjoy all facilities without fulfilling the basic responsibility of paying charges.

Therefore, access card issues should be handled carefully, based on the law and proper procedure.

8. Why Are Records and Procedure Important?

Records and procedure are very important in claims for arrears of maintenance charges.

The management body must ensure that its claim is supported by clear records. Owners should also keep proof of payment and check their statements of account from time to time.

Important documents include:

a. statements of account;

b. invoices or bills;

c. payment receipts;

d. minutes of meetings;

e. demand notices;

f. reminder letters;

g. records of service of notices;

h. communication records; and

i. meeting decisions relating to the rate of charges.

If records are incomplete, disputes may arise over the actual amount of arrears, period of arrears, rate of charges imposed or whether notices were properly given.

In arrears matters, documents are very important.

9. What Should an Owner Do If He or She Disagrees With the Charges?

If an owner disagrees with the charges imposed, the owner should not simply stop paying without taking the proper steps.

More appropriate steps include:

a. checking the statement of account;

b. seeking clarification from the management;

c. requesting relevant documents;

d. checking the meeting decision approving the rate of charges;

e. raising the issue at the appropriate meeting;

f. seeking advice if there is a legal dispute; and

g. using the correct dispute resolution channel.

If an owner stops paying without clear basis, the arrears will continue to increase and the owner may face a claim.

In many situations, dissatisfaction with the management of the building does not necessarily release an owner from the obligation to pay charges that have been lawfully imposed.

Therefore, owners should distinguish between the right to raise objections and the responsibility to pay charges.

10. Conclusion

Arrears in maintenance charges are a serious issue in strata developments.

When owners do not pay charges, the consequences may affect building management, daily services, maintenance of common property and the interests of other owners.

Owners should understand that maintenance charges are not optional payments. They are part of the basic responsibility in a strata community.

At the same time, the management body must ensure that any action relating to arrears is taken lawfully, transparently and based on complete documents.

Good strata management requires a balance between owners who pay charges responsibly and a management body that acts according to the law and proper procedure.

Prepared by:
Khairul Shahrizan bin Hamizi
Advocate and Solicitor
High Court of Malaya

Brief Note

This article is prepared for general information only and should not be treated as specific legal advice. Each issue concerning arrears in maintenance charges must be considered based on its own facts, statements of account, invoices, receipts, demand notices, minutes of meetings, by-laws and the applicable laws.