Empowering Strata Management with Litigation Financing: A Solution to Address Defaulters

In the Malaysian strata community, one of the most pressing issues faced by Joint Management Bodies (JMB) and Management Corporations (MC) is the prevalence of defaulters who owe management fees. These unpaid dues can significantly strain the financial health and operational efficiency of these bodies, affecting the overall maintenance and management of the property. Addressing this challenge requires a robust and sustainable solution. This is where litigation financing comes into play, offering a viable means to empower strata management to tackle defaulters effectively.

Understanding Litigation Financing

Litigation financing, also known as legal financing, involves a third party providing the necessary funds to cover the legal costs associated with pursuing litigation. In the context of strata management, this means that JMBs and MCs can access financial resources to take legal action against defaulters without bearing the immediate financial burden.

Benefits of Litigation Financing for Strata Management

1. Financial Relief: Litigation financing alleviates the financial strain on JMBs and MCs, allowing them to pursue legal action without depleting their operational funds.
2. Access to Justice: Many management bodies may hesitate to take legal action due to the high costs involved. Litigation financing democratizes access to justice, enabling all JMBs and MCs, regardless of their financial standing, to hold defaulters accountable.
3. Risk Mitigation: The financing company typically assumes the risk of the litigation. If the case is unsuccessful, the JMB or MC is not obligated to repay the funds, thereby mitigating financial risk.
4. Deterrent Effect: The knowledge that management bodies have the financial backing to pursue legal action can act as a deterrent to potential defaulters, encouraging timely payment of dues.

Current Budgeting Practices and the Need for Change

Most JMBs/MCs currently allocate the majority of their funds towards maintenance expenditures such as cleaning, security, preventive maintenance, and repairs. While these are essential for the upkeep of the property, there is often no budget allocated for the recovery of default payments and credit control. This lack of financial planning for income recovery can lead to significant cash flow problems.

Even when JMBs/MCs attempt to allocate funds for this purpose, the costs can be prohibitive. For example, if each defaulter costs RM5,000 in legal fees and there are 20 defaulters, the JMB/MC would need to allocate RM100,000 to cover these expenses. This is not only a significant financial burden but also unfair to owners who pay their fees on time, as their payments are effectively subsidizing the cost of chasing defaulters.

Introducing Jurbly (www.jurbly.com)

Jurbly is at the forefront of providing litigation financing services tailored specifically for the Malaysian strata community. By partnering with Jurbly, JMBs and MCs gain access to the financial resources necessary to enforce their rights and ensure the timely collection of management fees.

Jurbly’s services are designed to be transparent, efficient, and supportive, offering a lifeline to management bodies struggling with high rates of default. Through comprehensive assessment and strategic funding agreements, Jurbly empowers strata management to pursue justice without compromising their financial stability.

The Defense and Attack Mechanism

Jurbly’s unique approach involves a strategic defense and attack mechanism designed to handle defaulters efficiently:

1. Defense Mechanism:
   • Owner Alertness: After deployment, owners become more alert regarding their management fee payments, understanding the severe consequences of defaulting.
   • Stabilized Monthly Collection: This mechanism helps stabilize monthly collections, ensuring a steady cash flow for JMBs and MCs.
2. Attack Mechanism:
   • Aggressive Recovery: Jurbly goes all out in recovering debts from hardcore defaulters by performing various legal executions.
   • Execution of Judgments: Methods such as garnishee orders, judgment debtor summons, writs of seizure and sale, and bankruptcy actions are employed to enforce court judgments and recover debts.

How Litigation Financing Works

1. Assessment: The litigation financing company assesses the merits of the case and the likelihood of success. This involves evaluating the evidence and legal grounds for pursuing action against the defaulters.
2. Funding Agreement: If the case is deemed viable, a funding agreement is established. This outlines the terms of the financing, including the repayment conditions contingent on the case’s success.
3. Legal Action: The management body, with the support of the financing company, initiates legal proceedings against the defaulters. The financing covers legal fees, court costs, and other related expenses.
4. Resolution: Upon a successful resolution, the management body repays the financing company from the recovered funds which are backcharged to the defaulters [REF: Section 59(6) of the Strata Management Act (SMA) 2013]. If the case is unsuccessful, the management body is not liable for repayment.

Long-Term Solutions for Strata Defaulter Problem

Jurbly provides a structured approach to stabilize monthly collections and recover defaulted amounts through automated legal proceedings. This includes initiating legal actions for payments defaulted over a certain period, summoning defaulters to civil court, and performing various execution methods such as garnishee, judgment debtor summons, writ of seizure, and sales, and bankruptcy actions.

Conclusion

Litigation financing presents a strategic solution for addressing the issue of defaulters in the Malaysian strata community. By leveraging the financial support offered by companies like Jurbly, JMBs and MCs can take decisive action to recover unpaid dues, ensuring the smooth operation and maintenance of their properties. This innovative approach not only provides immediate financial relief but also fosters a culture of accountability and timely payment within the strata community.

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