Maintenance charges for stratified mixed development projects

The question of whether a uniform rate should be used or not in a mixed development project during the Joint Management Body (JMB) period has been an ongoing debate. Strata Management Act 2013 (SMA) Sec 60 (3b) provides for different rates of maintenance charges and sinking fund contributions after titles are issued and the Management Corporation (MC) is formed but during the JMB period, it is not written.

The amount of charges payable is in proportion to the allocated share unit of each parcel (SMA Sec 12 (3), 25(3). If your unit is larger, you would need to pay more, but you should have more voting power by poll. It depends on the budget too.

SMA Sec 19(1)(b) requires the annual budget to be considered at the first AGM of the JMB and to determine the amount of charges and contributions payable (Sec 19(1)(c)).

Annual budget X Share units of parcel = Annual charges payable
Total shares unit
Although there are no specific provisions in the Act, it has been allowed at the Annual General Meeting (AGM) to propose resolutions for different rates to be passed as in the case of Muhamad Nazri Bin Muhamad V JMB Menara Rajawali and Denflow Sdn Bhd in 2018.

At the AGM held in 2016, mandate was given by a unanimous resolution to the JMB to fix different rates of charges: Residential and retail shop not exceeding RM3.26 per share and car park not exceeding RM1.68 per share. Subsequently at the third JMB meeting, the rate was imposed at RM2.80 per share for residential/retail units and RM1.68 per share for the car park.

The High Court held that the SMA does not prevent the JMB from fixing different rates of charges for different categories of units so long as they are approved at the AGM. It was valid and legal for the JMB to fix different rates of charges for the residential/retail units and car park units as that was within the mandate imposed by the AGM.

After reading the whole case, I think it is acceptable in this situation as the residential and retail units have the same rate which is not high and well within the general market rate. Furthermore, it was agreed to by all in the unanimous vote and the facts are reasonable.

However, it is not uncommon in a mixed development to have a corporation owning a whole component or building and have majority votes. Individual owners would be easily outvoted and if adopted rates are not fair, aggrieved owners would be caught.

I am one of the affected owners in a scheme in Kuala Lumpur paying a rate that is so much higher than the norm for my office unit. At the AGM, we were outvoted by two corporations which then imposed very high rates, through the JMB where they have majority seats, for categories under individual parcel owners. We are in still in mediation with the JMB to lower our rates.

Let’s look at the rationale behind the use of different rates. After the MC is formed, they can create one or more subsidiary management corporations (SMC) to represent the interests of different category parcel owners (SMA Sec 63 to 65).

The common property and facilities used by all parcel owners would be managed by MC and its SMC would manage the limited common property (LCP) meant exclusively for different parcel owners. Different rates of charges and contributions depending on the facilities available at each category of building will be under the authority of each SMC.

A point to note is that the frequency of usage, general maintenance of common areas, whole floor and accessory parcels are incorporated into weightage factors before allocated share units for each parcel are established by a licensed surveyor appointed by the developer. (SMA 2013, First Schedule, Sec 8).

There are the arguments stating that this formula cannot fit all mixed schemes as it does not take into account factors specific to each project. However, some say that it is all encompassing.

In addition to the Rajawali case, proponents have used SMA Sec 32 (3b) as the statutory provision that allows JMB to grant exclusive use of certain common property to parcel owners of a component or building and hence, the need to pay more than others.

This section provides for JMB to make additional By-Laws or make amendments to such additional By-Laws concerning details of any common property of which the use is restricted. I think “Use is restricted” would be more appropriate to mean restricting use of said facilities to 10 pm or that the function hall can only be used for certain activities.

They have also contended that SMA Third Schedule reg 4, which allows a proprietor to sign a written agreement with the MC for exclusive use of part of the common property for a defined period subject to terms and conditions, as creating LCP. There are stringent requirements to be fulfilled before SMC and LCP can be created, therefore it should not be confused with reg 4.

This procedure requires the boundaries of LCP to be clearly defined and marked on a special strata plan. Together with comprehensive resolution and poll results from the general meeting of MC, these are submitted to the Land Title Office for approval (Strata Titles Act Sec 17a).

The passing of resolution during AGM to change the contribution towards the maintenance charges for different categories during JMB period can cause a riot if rates are deemed unfair. If different rates are allowed, then JMB should be allowed to form sub JMB. The plan can be marked before titles are issued. There will be more on SMC and the substantial impact of allowing sub JMB in part two of this article.

Although dissatisfied parties can take their cases to the Commissioners of Building, courts or the Strata Management Tribunal, the latter two routes can be lengthy and expensive.

Before exhausting all avenues and firing bullets, aggrieved parties can seek the assistance of relevant authorities to mediate for an amicable solution. Sometimes, we need to go the “budi bicara” way.

Source : StarProperty