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STRATA MANAGEMENT – MANAGEMENT FEE SHOWDOWN – RESIDENTIAL VS. COMMERCIAL – WHO’S PAYING FOR THE EXTRAS?

Summary and Facts
In Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu & Anor and another appeal [2024] 1 MLJ 948, the dispute involved a mixed development called Pearl Suria, which comprised residential units, a shopping mall, and a car park. The developer, Aikbee Timbers Sdn Bhd, and the management corporation imposed different maintenance charges and sinking fund contributions for residential and commercial parcels, reflecting their distinct purposes and benefits.

A residential owner, Yii, challenged this arrangement, and the High Court ruled that uniform rates must apply. Dissatisfied, the developer and management corporation appealed to the Court of Appeal, arguing that the differentiated rates were lawful and justified under the Strata Management Act 2013 (SMA 2013).

Legal Issues
i. Can developers impose different maintenance and sinking fund rates for residential and commercial parcels during the preliminary management period under the SMA 2013?
ii. Is a management corporation allowed to set different rates for parcels based on their significantly different purposes?

Court Findings

  • The SMA 2013 allows developers and management corporations to impose different rates for maintenance and sinking fund contributions in mixed developments based on the distinct purposes and benefits of parcels.
  • Charges must reflect actual use and benefits. Residential owners pay for exclusive facilities, while commercial owners are not burdened with unrelated costs.
  • Budgets must clearly separate expenses for shared and exclusive facilities, ensuring fairness and compliance.
  • The High Court wrongly required uniform rates and failed to apply the “significantly different purposes” test under the SMA 2013.

Practical Implications
Developers must set and justify differentiated rates transparently, ensuring alignment with parcel usage and benefits. Management corporations should maintain clear and detailed budgets to support varied rates for mixed developments, ensuring fairness and compliance with the law. Property owners should understand that charges may vary based on parcel type and usage rights in mixed developments. Legal practitioners should advise clients on the proper application of the SMA 2013 and the importance of equitable cost allocation.

This decision reinforces fair cost-sharing practices while balancing the rights of all stakeholders in mixed strata developments.

Reference Case and Legislation

  • Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu & Anor and another appeal [2024] 1 MLJ 948
  • Muhamad Nazri bin Muhamad v JMB Menara Rajawali & Anor [2020] 3 MLJ 645; [2019] 10 CLJ 547, CA (distd)

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