In Malaysia, many strata property owners assume that as long as maintenance charges are paid, the building will remain financially stable. However, from a legal, audit, and building maintenance perspective, this assumption is often incorrect. A significant number of strata properties are operating with underlying financial weaknesses
not because they lack funds today, but because they lack proper governance, financial discipline, and long-term maintenance planning.
Under the Strata Management Act 2013 (Act 757), Joint Management Bodies (JMB) and Management Corporations (MC) are legally required to maintain proper accounts, enforce collection of charges, and ensure the property is adequately maintained. These are statutory duties, not optional practices. Failure to comply may expose the management to disputes, enforcement actions, and reputational risks. One of the most common issues is weak collection of maintenance charges. When arrears are not actively enforced, even a small percentage of defaulters can disrupt cash flow and affect the ability to pay vendors and maintain services. This creates an unfair situation where compliant owners indirectly subsidise non paying owners.
Another major issue is the misunderstanding of the sinking fund. The sinking fund is intended for long term capital expenditure such as lift replacement, repainting, and major repairs. However, it is often misused for operational expenses or underfunded due to lack of planning. This results in insufficient reserves when major works become necessary.
Delayed and poor financial reporting is also a recurring problem. In many cases, financial statements are prepared months after year-end, with incomplete records and unsupported balances. This reduces transparency, complicates audits, and may constitute non-compliance with statutory requirements.
From an audit perspective, recurring issues such as unresolved debtor balances, unknown bank deposits, and incorrect fund classifications are frequently observed. The real concern is not the existence of these issues, but the failure to resolve them, leading to repeated findings year after year.
From a building maintenance standpoint, every asset has a lifecycle. Lifts typically require replacement after 15 to 20 years, repainting is needed every 5 to 7 years, and waterproofing systems require periodic renewal. Without proper planning, these costs become reactive rather than planned, resulting in sudden
capital calls and financial strain on owners. A common scenario illustrates this problem clearly. A property may have RM1 million in its sinking fund and appear financially healthy. However, if lift replacement costs RM2 million, the shortfall must be recovered from owners, often leading to dissatisfaction and disputes.
To ensure long-term sustainability, JMB and MC must implement strict collection enforcement, maintain clear segregation between maintenance and sinking funds, prepare financial statements promptly, address audit findings without delay, and establish a structured long-term maintenance plan.
