Sustainability is not a legal jargon. However, we endeavour to look at how the legal framework of interest scheme touches upon the economic and governance aspects crucial for the sustainability of a memorial park. In this Article entitled “Private Memorial Park: Sustainability Matters”, we review the trust mechanisms built in to the interest scheme framework and the very purpose of such trust mechanisms.

Most if not all memorial parks in Malaysia offer perpetual right of use of the burial plots and niche compartments to the purchasers. When the Prospectus states that the duration of the memorial park scheme or the right of use that one acquires is “in perpetuity”, the next logical question to ask would be how the implied promise of the perpetual existence of the memorial park will be and can be honoured.

Tip: The word “perpetual” may not be seen nor expressly provided in the purchase contracts that purchasers usually enter into with the management company. The best way is for one to carefully read the Prospectus of the scheme, and determine whether the duration of the memorial park scheme is indeed stated as “in perpetuity” or there is a term or tenure for the memorial park scheme. Freehold land does not necessarily mean perpetual right of use.

First and foremost, it takes proper and careful planning to develop a more sustainable memorial park. However, this would mean higher capital outlay when developing the park which not all developers are capable or willing to invest. Building retaining wall to prevent slope erosion, building appropriate drainage to prevent flooding, selecting choice materials and designs that minimise maintenance and replacement costs, are just a few examples where hefty maintenance costs can be avoided in the future to ensure the park is safe for use by the public.

Most memorial parks span across tens or hundreds of acres of land where substantial landscaping effort is required to maintain the park appearance. Some parks offer elaborate facilities and amenities with, for example, air-cond and lights being switched on at all times, with or without visitors. All these come with high maintenance costs. Another example is the need to re-build a columbarium (especially the multi-storey or high rise ones) that is rendered unfit for use after some years. All buildings have a lifespan, no matter how solid the construction could be.

Apart from insurance coverage for accidental damage or loss, the high capital replacement costs and recurrent costs such as ever increasing manpower costs and electricity charges are big cost items in the operations, upkeep and maintenance of the memorial park. The more costly (economic) and more challenging the upkeep and maintenance, the more likely that the park will become neglected in the long run. Without active sales and steady income, the memorial park will be hardly sustainable leave alone in perpetuity.

What can be done then to ensure funds are available for sustaining the memorial park, especially when there is no more sales revenue to subsidise the upkeep and maintenance, as well as replacement? The interest scheme framework has built in a sinking fund mechanism to address this issue. At least 10% of the sale price will be required to be set aside in a sinking fund, usually in a trust account set up for the scheme and maintained by the trustee. The purpose of this sinking fund is for major upkeep and maintenance of the memorial park infrastructures.

The Trust Deed of a memorial park scheme will provide for establishment of such sinking fund and how funds in the sinking fund can be used. Under the law, the sinking fund is separately kept by the trustee appointed for the scheme instead of the management company as a precaution to ensure deposits and use of funds in the sinking fund are accounted for independently from the management company. The Accountant’s Report attached in the Prospectus will contain separate updates of the sinking fund and fund level. This will form an effective check and balance as the figures are periodically audited by professional and approved company auditor.

Tip: Before a purchase decision is made, enquire on the projected fund size of their maintenance fund and the total number of licences (for right of use of burial plots or niche compartments) to be issued in the memorial park scheme. This will give an idea of how much fund will be accumulated towards the maintenance costs for the park.

Regrettably, the interest scheme framework is silent on the need for a feasible and viable plan of upkeeping and maintaining the memorial park to be provided for public scrutiny in any legally binding documentation. The main obligation to ensure the park is properly unkept and maintained lies with the trustee for the scheme. As for the public, we can look into the Accountant’s Report to see how much is being spent every year for the said purpose. Just as a vivid investor would do when assessing financial standing of a public listed company.

We earlier explored the issue that leasehold land can also be used to develop memorial park, but this calls for some precautionary measures to set aside some funds to pay for premium charges when applying for leasehold renewal. In the interest scheme framework, this can be achieved by setting up a retention fund, which is also likely to be a trust fund kept independently by the trustee. If leasehold could not be renewed or extended, the retention fund can then be used to procure alternative burial ground to relocate to.

Having understood the need for memorial park to exist in perpetuity, a responsible consumer should scrutinise and question the environmental, social and governance footprints of a memorial park to determine its sustainability. A memorial park developer with good governance will develop and operate its memorial park in a responsible manner with sustainability in mind, instead of just looking for maximum economic returns from the business.

Do look out for a spin-off Article written in Chinese, analysing the various innovative initiatives adopted by several major memorial parks this Qing Ming festive in the midst of COVID-19 pandemic. By innovating tomb-sweeping practices responding to ever-changing market conditions, innovation is a crucial way to stay relevant in the future as well. This is also an important cue to watch out for in assessing whether the memorial park business model is sustainable.