Unfair to apply same maintenance rate on all parcel owners of mixed development – Burgess Rawson responds to High Court ruling

PETALING JAYA (Oct 6): There is no correlation between the selling price of a parcel and the apportionment of maintenance cost for common property, thus it’s unfair and unreasonable to apply a uniform rate of maintenance charges on the parcel owner of a mixed development, said Burgess Rawson Management Sdn Bhd managing director Wong Kok Soo.

Wong is responding to the High Court decision that ruled 1 Mont Kiara dan Kiara 2 Management Corporation (MC) had 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.

When approached by EdgeProp.my, Wong, who heads the property management of the development, said the public’s attention is drawn to the important decisions being made regarding two matters during the management period by the MC prior to the formation of the subsidiary MCs (SMCs), which are:-

(1) The MC has the right to determine different rates of charges for parcels which are used for significantly different purposes in accordance with Section 60(3), SMA; and

(2) It is illegal for the MC to subdivide the common property into exclusive common property and shared common property, thus rendering the charges to be unlawful.

To recap, the judgement read that the MC had divided the common property of the mixed development into two parts which were “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.

However, the SMA only recognises 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 Section 60(3)(b), read together with Sections 51, 52 and 59 of the SMA.

However, Wong explained that the share units in the 1 Mont Kiara mixed-use strata development are inequitable for the apportionment of maintenance charges as they were determined by the developer on the basis of selling prices.

“The fact is that there is no correlation between the selling prices of parcels and the apportionment of maintenance cost of common property. Due to the inequitable share units, it is unfair and unreasonable to apply a uniform flat rate of maintenance charges across the board to all the parcels of the different components, namely the multiple parcels of serviced apartments, the multiple parcels of office suites, the single en-bloc parcel of the office tower and the single en-bloc parcel of the shopping mall and carpark.

“Thus, there is a real need for the MC to determine the fair and reasonable different rates of charges for the parcels of the different components which are used for significantly different purposes,” said Wong.

He added that, it is a fact that if all the parcel proprietors are entitled to fully use and enjoy the common property without any form of exclusive/restricted use thereof, then only a uniform flat rate of maintenance charges shall apply.

“Then, it will be unfair and unjust to all the parcel proprietors of the different components, which are used for significantly different purposes, and compounded by the inequitable share units that are inherent in their respective parcels.

“Third, in actual fact, the MC did not subdivide the common property but granted exclusive use (i.e. restricted use) of the designated parts of the common property to each of the respective components through the passing of an additional by-law by special resolution in accordance with Section 70, SMA 2013.

“Based on the above grant of exclusive/restricted use, the MC was then able to determine the fair and reasonable different rates of charges for the different component types of parcels in accordance with Section 60(3), SMA,” Wong explained.

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

He also highlighted that that any MC will need to pass an additional by-law by special resolution as provided under Section 70(2)(b), SMA for exclusive/restricted use of the designated parts of the common property to a component group of parcels in order that the different rates of charges under Section 60(3) can then be properly calculated and applied by the MC to each of the component group of parcels.

“This will affirm the very purpose of Section 60(3), SMA to enable MCs to determine different rates of charges that are required in their strata developments, particularly the mixed-use strata developments prior to the formation of the SMCs,” he noted.

Three SMCs formed

The 1 Mont Kiara mixed-use stratified development in Mont’Kiara, Kuala Lumpur 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 is 1 Mont Kiara, a four-storey mall completed in 2010 with car parks in the basement and upper levels, all within one en-bloc parcel.

The final component is 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 – Izen Kiara 2 SMC, Menara 1MK SMC and 1 Mont Kiara & Wisma Mont Kiara SMC.

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