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Lai Chee Hoe

Lai Chee Hoe

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Strata Management Case Update 1

Since I am involved in both operational and dispute on strata management, issues, I now share summaries of some of the cases I have handled and the recent Malaysian court decisions in interpreting the provisions in Strata Management Act 2013, Strata Management (maintenance & management) Regulations 2015 and Strata Management (Strata Management Tribunal) Regulations 2015.

Can a developer/ JMB/ MC impose charges or seek a contribution to the maintenance account or sinking fund over and above the monthly maintenance charges?

A developer / JMB / MC sometimes may impose further charges over and above the monthly maintenance charges and sinking fund. Most if not all are genuine expenses incurred, for example, upgrading of façade, repairing of defects, payment for legal expenses. There were however many instances where the expenses incurred were not recovered since the mechanism they used were incorrect. This frustrates the developer/ JMB / MC since the additional expenses incurred although is for the good of the proprietors in general yet it gets defeated in court / tribunal.

The issues were considered in cases below (note however these were cases pre Strata Management Act 2013 and also before the amendment of the Strata Titles Act 1985, but is equally being applied in the current statutory regime).

  • Perbadanan Pengurusan Endah Parade v Magnificient Diagraph Sdn Bhd [2012] 1 LNS 1137 [KLHC Civil Suit No. 22NCVC-790-201]1 (Writ);
  • Magnificient Diagraph Sdn Bhd v Perbadanan Pengurusan Endah Parade [2014] 1 LNS 1109. [KLHC OS No. 24NCVC-2068-2011](“OS”; and
  • Perbadanan Pengurusan Endah Parade v Magnificient Diagraph Sdn Bhd [2013] 6 MLJ (CA)

In essence, the facts are as follows:

  • Magnificient Diagraph (operator of hypermarkets chain “Carrefour”) (“MD”) filed an OS in 2011 against the Endah Parade MC (“EPMC”) and claimed some of the charges are ultra vires.
  • 2 AGMS were held, one on 19.4.2010 and the other one on 7.7.2011;
  • On 21.4.2011, MD received 2 notices dated 1.4.2011 from EPMC informing that it was decided by majority votes that the EPMC shall review the contribution to the Management Fund which was to be paid into a Special Account [Sinking Fund Account]
  • At the 2nd AGM, EPMC resolved, to increase monthly service charges.

The 1st prayer in OS was:

“A declaration that the 15% increase in the portion of contributions to the management fund to be paid by the Plaintiff into the special account established under Section 16 of the Strata Titles Act 1985 in respect of the Plaintiff’s Property, as notified by the Defendant to the Plaintiff vide a notice dated 1.4.2011, is null and void.”

EPMC responded by filing the Writ claiming for unpaid charges amounting to RM444,872.60. The main defence of MD is that EPMC is not entitled to impose fees and charges other than the monthly service charges. Both parties agreed to hear the Writ and OS together. J Prasad Abraham (as it was then) delivered decision after trial of the Writ and dismissed the OS as a consequence of the decision in the Writ.

Both parties then appealed to the Court of Appeal.

The Judge referred to among others, Section 41(5)(b), (ba) Strata Titles Act (now repealed) and opined that that is the only power than can be used to levy funds from unit owners.

If it is found that the management fund contributions are insufficient to cater for all these expenses then the Plaintiff (EPMC) will have to go back to the general meeting to increase the rate of contributions to the Management Fund. The Plaintiff (EPMC) cannot levy the Defendant (MD) for all these charges separately, but it will have to be covered by the Management Fund and any attempt to levy these charges directly from the Defendant is void ab initio as it is ultra vires the strata Tiles Act 1985.

The Judge disallowed the claims because it must be paid from the management fund as provided in the said Act.

Maintenance Charges

“ I can do no better than to quote the Judgment of Yong Pung How of Chief justice of Singapore (as he then was) in the Singapore Court of Appeal Case of Management Corporation Strata Title No. 473 / De Beers Jewellery te ltd [2002 ] 2 SLR page 1 at page 10 of the report where he said:

“Firstly, it is trite law that a body created by a statute only has powers granted expressly or by implication in that statue. A Management Corporation’s power to raise contributions is clearly and exhaustively provided for in S42 of the LTSA. Anything done outside these powers is void ab initio.

“The Management Fund is to cater for all these expenses and if it is found that the management fund contributions are insufficient to cater for all these expenses then the Plaintiff will have to go back to the general meeting to increase the rate of contributions to the Management fund. The Plaintiff cannot levy the Defendant for all these charges separately, but it will have to be covered by the Management Fund and any attempt to levy these charges directly from the Defendant is void ab initio as it is ultra vires the Strata Titles Act 1985

“It is for aforesaid reasons that I disallow these claims of the Plaintiff as such expenses must be paid for from the management fund as provided in the said Act, and it the Plaintiff felt that the fund was insufficient to cover these expenses, then the Plaintiff by general meeting should move to increase contributions from unit owners to the fund.”

Sinking Funds

With regards to the sinking fund…. The unit owner makes one payment as determined by the general meeting but a portion of that sum is to be paid to the Special Account.

Section 41(5)(ba) clearly stipulates that unit owner is levied one payment and out of that payment, a portion would be contributed to the Special Account. The Plaintiff’s attempt to levy a sum over and above the service charges is void ab initio as it is in contravention of the said section referred to aforesaid .

…. Management Corporations like the Plaintiff must be reminded that they can only levy one payment from a unit owner ie, a contribution to the Management fund and from that sum a contribution to the Special Account all it at is to be approved at a general meeting and nothing else.

The High Court Judge dismissed the expenses below and only allowed those in red for Lot LG-001 and …

Continue reading by downloading your FREE copy of the

Strata Management Case Update
(18-pages in PDF format)

 

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Lai Chee Hoe

Lai Chee Hoe

Partner at Chee Hoe & Associates. With 10+ years of experience under his belt, he specializes in civil and corporate litigation. He is also the current Chairperson of various Joint Management Bodies.

 
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