Saturday, 18 August 2007

Conflicts of Interest II - Sale Committee vs Management Council

I posted a while back what are the implications if a member of the management council (MC) sits in the sale committee (SC), largely centered around the problem of conflict of interest. You can read about this here. Since then, I've heard of more and more SC members who are members of the MC, in some cases dominating the MC completely.

Can you do anything about it? Maybe :) The Building Maintenance and Strata Management Act (2004) (BMSMA) makes for interesting reading. Did you know that as a subsidiary proprietor (SP aka owner), you can write an application into the management corporation to make available for inspection certain documents kept by the MC? (BMSMA 47(1)-(4)). Why is this even useful?

Because you can ask for:-
  1. The names and addresses of the chairperson, secretary and treasurer of the MC as well as the managing agent.
  2. The minutes of the general meetings of the MC
  3. Book and statement of accounts
Why would you need these? (1) is useful to know. (2) will be relevant later when I explained another section of the BMSMA. (3) is useful because of the period between the date of legal completion and date of vacant possession, which I've explained here and here before. You want (3) to have evidence that the existing level of expenditure is maintained by the developer, when they take over your estate. I'll explain (3) in greater detail in a future post, especially considering the recent forum articles about developers entering the premises and constructing showflats even while people are staying there, or deteriorating existing levels of service and maintenance quality. Knowing what are the typical monthly expenditures for maintenance is good ammunition should you wish to challenge the developer for not holding up their end of the promise to maintain the estate at its original level (if stated in the SPA).

But (2) is interesting for the conflict of interest issue. For this, you need to know BMSMA Article 60 - Disclosure of Interests in Contracts, Property, Offices, etc. 60(5) states clearly:

Every member of a council who holds any office or possesses any property whereby, directly or indirectly, duties or interests might be created in conflict with his duties or interests as a member of the council shall declare at a meeting of the council the fact and the nature, character and extent of the conflict.

In other words, if you have someone in the SC who is also in the MC, that person must declare "the fact and the nature, character and extent of the conflict". Not only must he declare the nature of the interest (60(1)(a)), he shall not take part in any discussion, consideration, or vote on any matters related to the enbloc sale (60(1)(b)), and even be asked to withdraw by the chairperson (60(1)(c)) unless the council explicitly requests for information from the SC/MC member.

The declaration must be made at council meetings and the secretary must document every declaration in the minutes.

This is why you need the minutes, preferably before anyone doctors the documentation and inserts in any declaration. After all, if the SC/MC member fail to comply with this requirement, he/she is liable on conviction of a fine not exceeding $5000 or jail not exceeding 12 mths or both.

Do verify this with a lawyer or the managing agent. Check your minutes - was any declaration made? If not, why not? If the SC/MC member is convinced there is no conflict of interest, it is not up to him to assert that, since 60(5) above states that the SC member, who holds an office (in the SC), and has interests in selling the estate (which contradicts the role of MCs in upkeeping and maintaining the estate), directly or indirectly, is in conflict with his duties or interests as a MC member. Even after declaring his interests, unless asked by the MC, he is not allowed to discuss, participate in any discussion, on any enbloc matter raised in the MC meetings.

Given the complexity of this conflict of interest, should the SC/MC member not give up one committee seat or the other? If not, one must ask, why not? After all, if it's often a thankless voluntary job being in such committees, why take on 2 thankless voluntary jobs?

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