By Abdul Hamid A. Rahman
This is the first installment in a three-part series by Bernama. It examines the growing burden of maintenance fee arrears in Malaysia’s strata developments. Experts from the property and real estate sector weigh in on the financial implications, systemic challenges, and potential solutions for ensuring the long-term sustainability of shared-living communities.
KUALA LUMPUR, March 11 (Bernama) -- Unpaid maintenance fees in strata developments have reached worrying levels, with arrears estimated in the hundreds of millions — and potentially billions, if unaddressed.
Low-cost housing schemes are particularly affected, where up to 50 per cent of the units struggle to keep up with payments.
The financial strain from these unpaid fees, coupled with rising maintenance costs and inconsistent collection rates, continues to undermine the long-term sustainability of strata properties. Ensuring financial viability while preserving property value remains a pressing challenge for the industry.
Industry players, including the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) and the Real Estate and Housing Developers’ Association (REHDA) Malaysia, have weighed in on the key factors shaping the maintenance fees landscape in Malaysia.
The Burden of Unpaid Maintenance Fees
PEPs committee member Ishak Ismail, who is also the president of the Malaysian Institute of Property and Facility Managers (MIPFM), said maintenance fee collection rates vary significantly across different property types.
“Based on industrial experience, low-cost housing developments have a collection rate of 40-50 per cent, medium-cost properties 60-70 per cent, and high-end developments 80-95 per cent. Default rates are highest in the low-cost housing segment, despite the lower fees compared to other property categories,” he said.
He added that there is no centralised database on outstanding maintenance fees across Malaysian properties, as the Commissioner of Buildings (COB) does not have a structured system to track arrears across all stratified buildings nationwide.
“There are approximately 2.8 million strata units in Malaysia. If we take an average, (unit owners of) around 40 per cent of them have difficulties paying maintenance fees. If we estimate an average fee of RM100 per month per unit, with arrears accumulating over six months, the total outstanding amount could easily reach hundreds of millions of ringgit,” he stressed.
Ishak explained that residents of low-cost housing often prioritise essential living expenses over maintenance fees, contributing to high arrears.
“The issue of unpaid maintenance fees worsened during the COVID-19 pandemic, as many homeowners deprioritised payments, especially for vacant units that were not generating rental income.
“While the Strata Management Act 2013 (Act 757) provides legal avenues for fee collection, enforcement remains weak, exacerbating the financial strain on joint management bodies (JMBs) and management corporations (MCs). Even though Act 757 allows legal action, enforcement is challenging as identifying and auctioning movable assets — especially in cases of shared ownership — can be complex and costly,” he said.
Despite these challenges, some low-cost developments continued to service their facilities despite significant arrears.
“There is a case in Johor where a JMB creatively generated income through alternative revenue streams, including leasing rooftop space for telco towers, renting out billboard spaces, and setting up vending machines.
"Through these efforts, the JMB was able to sustain operations without relying entirely on its maintenance fee collection," he said.
Cost Drivers and Fee Adjustments
Among the largest cost components in strata management include utilities, maintenance services, statutory contributions, security services, and property management fees. Among these, electricity, water, and security services form the bulk of its expenses.
According to REHDA Malaysia, developers in Malaysia determine initial maintenance fees based on estimated upkeep costs, as required under Schedule H, Fifth Schedule of the Sales and Purchase Agreement (SPA). These fees cover expenses such as security, utilities, cleaning, landscaping, and sinking fund contributions.
“Estimating maintenance fees requires careful cost projections, but developers face challenges due to inflation and fluctuating expenses. A project launched today will only be completed in three to four years, during which service costs may have risen significantly,” it said.
REHDA Malaysia noted that in practice, most JMBs and MCs review fees annually to ensure financial sustainability.
“Developers often set competitive initial rates based on market benchmarks, with the expectation that adjustments will be needed once actual costs become clearer,” it said.
The Singapore Model
Ishak noted that Singapore boasts a 99 per cent fee collection rate, largely due to strict enforcement mechanisms.
Meanwhile, Malaysia’s maintenance fee model is based on share units, using a single rate across different property types. In contrast, Singapore adopts a multiple-rate system, differentiating fees based on usage, leading to a more equitable cost-sharing mechanism.
"Malaysia’s lenient enforcement of maintenance fee collection has led to financial instability in many strata properties. Defaulters face minimal consequences.
“(In contrast,) non-payment is a criminal offence in Singapore. Authorities can seize and auction properties. In Malaysia, only movable assets can be seized, and the legal process for recovery is often lengthy and complex,” Ishak said.
Balancing Affordability and Financial Stability
To mitigate fee arrears, PEPS and REHDA Malaysia emphasise proactive financial planning, effective enforcement, and alternative revenue streams.
Ishak is recommending strict credit control measures, including taking early action against defaulters, restricting access to common facilities, and filing strata management tribunal cases.
"Taking swift action against defaulters, even within two months of non-payment, has proven effective in maintaining a stable cash flow for property management,” he said.
Transparent financial management, including clear annual financial reports, fosters trust and compliance, a principle supported by PEPS and REHDA Malaysia.
Providing financial reports and maintenance projections ensures a smooth transition of property management responsibilities from developers to JMBs and MCs. This prevents sudden fee hikes and fosters trust and compliance among residents.
REHDA Malaysia also emphasised that incorporating energy-efficient systems, durable materials, and smart maintenance planning from the design stage of a housing project can significantly reduce long-term maintenance costs.
“Early engagement with property managers is essential, allowing developers to forecast operational costs and optimise budget allocations. This approach balances affordability while ensuring sufficient funds for long-term upkeep,” it said.
Strengthening Act 757 for Better Compliance
PEPS advocates for enhancements to Act 757 to improve fee collection and property management.
PEPS believes that making the use of registered property managers mandatory will ensure that only qualified professionals handle strata developments.
“Act 757 still allows JMBs and MCs to hire non-registered individuals as property managers, provided they place a performance bond of RM50,000 or 12 months’ fees.
“However, this is often ignored, leading to governance issues. We strongly believe that only registered professionals under Board of Valuers, Appraisers, Estate Agents and Property Managers Malaysia (BOVAEP), should be engaged to ensure proper enforcement and financial accountability," he added.
Meanwhile, REHDA Malaysia noted that Act 757 enhances accountability, as all accounts must be audited annually. Developers must now carefully balance affordability for buyers while ensuring sufficient funds for long-term property upkeep.
“From a developer’s perspective, Act 757 has led to a more structured and responsible maintenance fee planning. While it requires stricter compliance and better cost estimation, it ultimately protects property value, enhances buyers’ confidence, and ensures long-term sustainability,” it said.
The Path Forward
Sustainable maintenance fees are crucial for preserving the value and functionality of strata developments. By striking a balance between affordability and financial sustainability, developers, property managers, and regulators can foster a more resilient strata management ecosystem.
Moving forward, all stakeholders — including policymakers, developers, property managers, and residents — must play an active role in strengthening enforcement, exploring alternative revenue streams, and adopting structured financial planning to safeguard the long-term sustainability of Malaysia’s strata properties.
-- BERNAMA
Part 2 tomorrow — Maintenance Fees: A Snowball that can Trigger an Avalanche
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