Court of Appeal: JMB has no power to fix different rates of maintenance charges for different types of parcels
22 October 2019
On 14 October 2019, the Court of Appeal in Muhamad Nazri bin Muhamad v JMB Menara Rajawali and Denflow Sdn Bhd [Civil Appeal No: W-02(NCVC)(A)-2057-10/2018] overturned the decision of the High Court and held that a joint management body formed pursuant to the Strata Management Act 2013 (‘SMA’) has no power to set different rates of maintenance charges for different types of parcels comprised in a mixed stratified development project.
The appellant is the owner of a residential unit in a mixed condominium development known as Menara Rajawali. The 1st respondent is the joint management body of the development (‘JMB’) and the 2nd appellant, the owner of all the car parks in the development.
At the first annual general meeting of the 1st respondent, the meeting unanimously resolved to give mandate to the joint management committee (‘JMC’) to fix the maintenance charges at a rate not exceeding (a) RM3.26 per share unit for residential parcels and retail shop parcels, and (b) RM1.68 per share unit for car park parcels (‘JMB Resolution’).
Pursuant to the JMB Resolution, the JMC fixed the maintenance charges at RM2.80 per share unit for residential parcels and retail shop parcels, and RM1.68 per share unit for car park parcels (‘JMC Resolution’).
The appellant sought a declaration that the JMB Resolution and the JMC Resolution are null and void ab initio as the different rates of maintenance charges discriminated against retail shop and residential parcels and were unlawful as it went beyond the JMB/JMC’s legal power or authority. The application was dismissed by the High Court. The appellant appealed to the Court of Appeal.
Decision of the Court of Appeal
The Court of Appeal allowed the appeal. The reasoning of the Court of Appeal is two-fold –
- The share units to be allocated to a parcel is calculated according to the formula set out in the First Schedule of the SMA which takes into account three weightage factors. These factors allocate different weightage to a parcel, depending on the prescribed factors such as the type of parcel, the type of facilities provided to the common areas of a parcel (e.g. air-conditioning and lift services), and whether an accessory parcel is located within or outside a building. As a general rule, the First Schedule assigns a lower weightage factor to a car park parcel than to an apartment parcel for the purposes of calculating the shares units to be allocated to a parcel.
Sections 21 and 25 of the SMA require the JMB to determine the maintenance charges “in proportion to the allocated share units of each parcel”. The Court held that in light of the three weightage factors that have been applied in the calculation of the share units of the car park, the JMB is only empowered to fix one rate that is applicable to all types of parcels.
The Court agreed with the appellant’s contention that as a lower weightage had already been given to the car parks in the calculation of the allocated share units under the First Schedule of the SMA, the imposition of a lower rate of maintenance charges for such parcels would be an additional discount which runs counter to the legislative framework which is intended to avoid an inequitable, unfair and discriminatory practice in determining the rate of maintenance charges.
Accordingly, the Court of Appeal concluded that the JMB Resolution in fixing different rates of maintenance charges for different types of parcels did not conform with sections 21 and 25 of the SMA.
- The Court of Appeal opined that there is no provision in the SMA which confers power on the JMC to decide on the rate of maintenance charges or which permits the JMB to delegate its decision-making duty under section 21 of the SMA to the JMC. The Court held that the duty to determine the rate of maintenance charges is non-delegable and must be made by the JMB at a general meeting. As such, the JMB Resolution to delegate the duty to the JMC is in excess of the JMB’s powers under the SMA and is invalid, null and void.
For the reasons set out above, the Court of Appeal set aside the JMB Resolution and the JMC Resolution for being invalid, null and void.