Mixed-use property is the hallmark of modern development. The idea is to create an environment where people can live, work, and play in one area, embodied into a development of a property complex consist of residential condominium, office, and shopping mall (“Mixed-Use Development”).

While the Mixed-Use Development becomes a trend in the real estate market, it does not mean that there is no problem that follows when it comes to the management. The Mixed-Use Development consists of multiple types of estate, and each type of estate has it owns joint property and joint facility. For instance, the escalator in shopping mall, the swimming pool in apartment, etc. It indicates that the group of owners in one type of estate has different interest with the group in the other type of estate.

The management of the joint property and facility will be managed by PPPSRS,1 a legal entity consists of owners and occupants of condominium,2 through its management board.3  The management board of PPPSRS is led by a chairman, who is elected by all owners during the PPPSRS formation discussion using ‘one man one vote’ mechanism,4 a mechanism which only allow an owner to cast 1 (one) vote regardless he/she owns more than 1 (one) unit within the developed property. The chairman then must appoint people to serve as the secretary, treasury, and department who responsible for management and occupancy affairs.5

The fundamental rules of PPPSRS organization in managing the joint property and joint facility, as well as occupancy affairs of all the owners are set out in the articles of association and bylaws of PPPSRS (“AD/ART”).6 The AD/ART of PPPSRS must consist of (i) PPPSRS’s duties and functions; (ii) organizational structure of PPPSRS; (iii) rights, obligation, prohibition, and sanctions for the owners; (iv) house rules; and (v) any other provisions as determined by PPPSRS to the extent that they do not violate the regulations.7 Regulation of Minister of Public Works and Housing No, 14 of 2021 on Association of Condominium Owner and Occupant (“Regulation 14”) provides the model of AD/ART as the guidelines for the preparation of AD/ART.

The owners are entitled to cast a vote during PPPSRS meeting, related to occupancy, ownership, and management affairs.8 Occupancy affairs consist of establishment of house rules and the amount of charges on environmental management (iuran pengelolaan lingkungan) for security, cleaning, and social affairs. Ownership affairs consist of the utilization of the joint land, joint property, and joint facility. Management affairs consist of the operational activity of operational, maintenance, and care of the joint land, joint property, and joint facility. Voting right for occupancy affairs uses the ‘one owner one vote’ mechanism, while for ownership and management affairs, the voting right takes into account the NPP.9

Sources  Draft Bill of Omnibus Law on Environmental Law

Although Condominium Law recognizes the concept of mixed-use function, a combination of residential function and non-residential function,10 Condominium Law and its implementing regulations do not govern clear rules on how the Mixed-Use Development should be managed. The model of AD/ART provided by Regulations 14 only suits for the condominium development with a single function. Hence, the benchmark of the management of Mixed-Use Development is vague.

We have established that in the Mixed-Use Development, owners in one type of estate have different interest with the owners in other type of estate. By implementing the organizational structure of PPPSRS under the existing regulation, the interest of each group of owners could not be well represented.

One of the solutions towards this problem in the management of Mixed-Use Development is to establish a two-tier PPPSRS organization. This two-tier PPPSRS consists of main PPPSRS and Sub-PPPSRS. In essence, the main PPPSRS represents the interests of all of the owners, and the Sub-PPPSRS represents the interest the group of owners within the same estate. Based on this division of authority, in terms of the management of joint property and joint facility, the main PPPSRS will manage the joint property and joint facility which are used by the entire owners, e.g. parking lot, entrance ramp, etc. Meanwhile, the Sub-PPPSRS manages the joint property and joint facility of each type of estate. For example, the Sub-PPPSRS of residential condominium manages the swimming pool that has become part of the joint facility of residential, while Sub-PPPSRS of shopping mall managed the escalator that has become part of the joint facility of shopping mall.

In essence, the main PPPSRS retains authority with regards to the common interest of all owners. The Sub-PPPSRS has the same authority as the main PPPSRS only to the extent of the group of owners within the same estate. Therefore, the interest of the group of owners in one type of estate will be well represented in the Sub-PPPSRS.

Although the two-tier organization could be the solution over the debacle of the management of joint property and facilities in the Mixed-Use Development, the implementation of this structure might take a long and winding road. Below are the actions that the developer should take in order to ensure the smooth implementation of two-tier PPPSRS organization.

Firstly, the developer, during the preparation of title of division, must determine that certain joint property and facility are exclusively belong to a relevant type of estate (“Exclusive Joint Property”). For example, the swimming pool is the Exclusive Joint Property of residential estate. The title of division should reflect the layout, boundaries, or other physical aspect of Exclusive Joint Property, hence the Exclusive Joint Property could be identified and distinguished from the other property. The goal is to avoid dispute between the main PPPSRS and Sub-PPPSRS or between Sub-PPPSRS pertaining to the management of Exclusive Joint Property.

Sources  Organizing the Annual General Meeting of Members, Extraordinary General Meeting of Members, and Consensus on the Establishment of PPPSRS During the Covid-19 Pandemic

The organizational structure of two-tier PPPSRS must be illustrated under the AD/ART.11 This draft of AD/ART must be prepared by developer before the PPPSRS formation discussion and it must be consulted first to the Housing Agency.12 During this stage, the developer should propose this two-tier organization structure in the draft of AD/ART, and this draft AD/ART must be legalized during the voting in the discussion by taking into account the total amount of owned units,13 if the decision cannot be obtained amicably.14 Further, the legalized AD/ART must be delivered to the Housing Instance to be registered.15

Another issue might arise when the Housing Instance is reluctant to give its approval, either for the title of division illustrating Exclusive Joint Property, or during the preparation of AD/ART, since the existing regulations on condominium have not recognized the concept of two-tier PPPSRS organization. Therefore, it would be desirable for the local government to be more flexible on its approach or the central government to provide clearer or different regulation on the management of mixed-use development to allow the two-tier PPPSRS organization to be implemented.

Kevin Samuel Fridolin Manogari

Sources

  1. Association of Condominium Owner and Occupant (Perhimpunan Pemilik dan Panghuni Satuan Rumah Susun)
  2. Article 75 paragraph (1) of Government Regulation No. 13 of 2021 on Condominium
  3. Article 27 of Regulation of Minister of Public Works and Housing No, 14 of 2021 on Association of Condominium Owner and Occupant
  4. Article 92 paragraph (6) of GR of Condominium
  5. Article 22 paragraph (3) of Regulation 14
  6. Article 31 paragraph (2) of Regulation 14
  7. Article 31 paragraph (3) of Regulation 14
  8. PPPSRS meeting consists of annual general meeting of the member of PPPSRS meeting and extraordinary general meeting of the member of PPPSRS
  9. Proportional Comparison Value (Nilai Perbandingan Proporsional)
  10. Article 50 of Law No. 20 of 2011 on Condominium as lastly amended by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation
  11. Article 31 of Regulation 14
  12. Article 13 paragraph (5) of Regulation 14
  13. Article 92 paragraph (4) of GR of Condominium
  14. Article 92 paragraph (3) of GR of Condominium
  15. Article 33 paragraph (1) of Regulation 14