High Court rules error of law as 1 Mont’Kiara dan Kiara 2 MC imposed different rates of charges on owners

PETALING JAYA (Sept 30): The High Court has ruled that the 1 Mont’Kiara dan Kiara 2 Management Corp (MC) has committed an error of law in imposing charges contrary to the expressed powers under section 60 (3) Strata Management Act 2013 (SMA) in May this year.

Prior to the formation of Subsidiary Management Corps (SMCs), the MC has decided to divide the common property of the mixed development into “Exclusive Common Property” and “Shared Common Property” to derive the maintenance charges needed to be paid by the different owners in each component of the development.

This has breached the regulation under SMA, as the Act only recognised common property and does not provide for these further divided common properties. Hence, the report noted that the further divided common properties to allocate the share of the maintenance of such “common property” is unlawful. The MC must adhere to the requirements of Sec 60(3)(b) read together with sec 51, 52 and 59 of the SMA.

While the MC has the power to impose different type of charges subject to the following: - i) the proportion of the share units of each parcel ii) the parcels are used for significantly different purposes, the judge after reviewing the report by Burgees Rawson Management Sdn Bhd (BRM) found a material error that renders the charges to be unlawful and MC had acted ultra vires of its powers.

Under the SMA, the proportion of share units are calculated based on four factors – the type, size, usage and location of the parcel.

To recap, the 1 Mont’Kiara mixed-use stratified development in Mont’Kiara, Kuala Lumpur mixed development currently comprises four development components.

The first is 1 MK which was designed, built and completed in 2010 with two wings housing office parcels. The Premier Suite Wing is 34 storeys with 30 parcels while the Office Suite Wing is 29 storeys with 156 parcels.

The second component is a 19-storey en-bloc office called Wisma Mont’Kiara completed in 2010 while the third was 1 Mont’Kiara, a 4-storey mall completed in 2010 with car parks in the basement and upper levels all within one en-bloc parcel. The final component was i-Zen Kiara II – a 33-storey serviced apartment completed in 2006 with 238 residential and six commercial parcels.

The MC which is the defendant in this case was established on Dec 5, 2015.

Subsequently, three separate SMCs were established on April 9, 2019. The three SMCs are i-Zen Kiara 2 SMC, Menara 1MK SMC and 1 Mont’Kiara & Wisma Mont’Kiara SMC.

According to the Malaysian Law Journal by LexisNexis, BRM was engaged by the Joint Management Body (JMB), the predecessor to MC, to provide its opinion on the correct apportionment of income and expenses for Menara 1MK. It is understood that BRM reports suggested two options to be adopted which are Method A and Method B.

The report said that during the first Annual General Meeting of the MC on Dec 5, 2015, the proprietors passed and adopted Method B as the basis to levy and collect maintenance charges. The BRM report explains the finding on what they found to be “significantly different purposes”.

Method A was not explained in terms of its mechanics in the report.

The report stated that Sec 60(3) gives powers to the MC to impose different rates of charges due to the significant different purposes of the unit but the difference must be actual difference in the purposes of usage of the parcels.

“The mere commercial, retail or residential use are not the criteria that are stated in Sec 60(3) of the same act. What must be shown is that the use of the parcels is significantly different from those of the other parcels. Should the parcels be significantly different from those of other parcels, the rates must be reasonable and not arbitrary. This depends very much on the facts of each case,” the report said, quoting the judge.

In addition to that, the Plaintiff also challenged the decision of the MC to transfer a sum of over RM5 million being the surplus funds to the Sub MCs to be illegal and unlawful.

According to the report, Sec 66(2) read together with Sec 50(2) SMA, the judge is of the view that the MC have powers under SMA to transfer or apportion the sums paid by proprietors to SMCs.

“This is to ensure the limited common property (LLP) is well maintained following the requirements of the SMA. The MC has the power to transfer or apportion the funds that relate to the SMCs to enable the said entitled to comply with their duties under the SMA.”

As referred to earlier, the MC has the requisite power to do “all things reasonably necessary for the performance of its duties under this Act for the enforcement of the by-laws” and is under a duty to take all that is necessary “to ensure the proper maintenance and management of the subdivided buildings or lands and the common property”.

“The intention of the legislator indicates that these sums ought to be transferred or apportioned to the SMCs to enable the said entity to maintain the limited common property.

“The MC should then undertake the appropriate calculation to apportion the adequate amount from the original maintenance account taking account the correct share to be given to each SMC based on the proportionate size of the parcels that are involved,” the report concluded.

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