Court rules developer gets only RM500 instead of RM65,000 admin fee

A developer which attempted to charge a RM65,000 administration fee to provide its consent pending the issuance of a separate strata title, got only RM500 instead in a court ruling recently.

In the case filed in the Court of Appeal in 2015, the property owner, KAB Corporation Sdn Bhd (KAB), had sought consent from the land’s Master Title holder, Master Platform Sdn Bhd, to assign the property to a bank for additional revolving credit facility for the benefit of KAB’s related company, Impiana Sdn Bhd.

Master Platform had then imposed an administration fee of RM65,000, which is equivalent to 1% of the facility sum, as the condition for the consent, reported the New Malaysia Times.

Although it is common practice for developers to charge an administrative fee for the request of consent pending the issuance of separate strata titles, the rate was not stipulated in the agreement between KAB and Master Platform.

Subsequently, KAB and Impiana filed a suit which, among others, sought a declaration that the charge of RM65,000 was exorbitant and excessive, and that any administrative fee imposed by Master Platform should be nominal.

Lawyer Dato’ Seri Rajan Navaratnam, who represented KAB and Impiana, had argued that a purchaser who has paid the purchase price in full becomes the absolute beneficial owner of the property, and the developer is merely a bare trustee pending the issuance of the separate strata title. Furthermore, a developer is contractually and statutorily bound to apply and obtain the said separate strata titles for its purchasers.

As such, Rajan contends that a purchaser owes no further obligation to a developer and  should not be liable for any administrative fee pending the issuance of a separate strata title.

Rajan also pointed out that the only reason such consent was required in the first place was because a developer has either failed or delayed in applying for the issuance of a separate strata title. Hence, a developer should not be allowed to reap a benefit or profit from its own wrong or neglect.

Rajan added that even if a developer has a discretion to impose an administrative fee in the absence of any stipulation at the rate of 1%, then such discretion must be exercised in good faith, rationally and not arbitrarily nor abused, because that would put purchasers, through no fault of theirs, at the mercy of developers.

Rajan cited a recent decision by the UK Supreme Court in the case of Berganza vs BP Shiiping Limited and Another, where the Supreme Court held that any contractual discretion must be exercised in good faith and not arbitrarily so that such a discretion would not be abused. It must be exercised consistently with its contractual purpose by concepts of honesty, good faith and genuineness and the need for the absence of arbitrariness, capriciousness, perversity and irrationally.

The Appellate Court concurred with Rajan’s discourse and ruled that the appelants were only required to pay a nominal sum of RM500 to Master Platform for their consent, thereby setting a landmark ruling restricting developers from imposing exorbitant fees for their consent pending the issuance of separate strata titles.

The unanimous decision by the Appeals Court also stated that while developers may retain the discretion to impose such a fee, such fee should only be nominal.

The panel of judges was led by Datuk Vernon Ong, and comprised Datuk Harmindar Singh Dhaliwal and Datuk Has Zanah Mehat.