Contributed by Mary Lau
The recent Court of Appeal case overturning the High Court decision in the case of Muhamad Nazri Bin Muhamad vs JMB Menara Rajawali and Denflow Sdn Bhd has met with protests from professionals in the property industry
According to Mary Lau, an owner who is affected by different rates and dominant groups in strata mixed developments, it is not ideal for these rates to be used in the absence of subsidiary management committees (SMCs). She has written several articles and given talks on this issue.
Why all the drama surrounding this case and the issue of uniform versus different rates in mixed development projects?
Minority owners are affected by the decisions of dominant groups using the annual general meeting (AGM) to approve different rates without SMCs.
Think of a kingdom governing several villages – with each village having a different set of resources, cultures, and practices.
A decision made by the kingdom, such as setting a standard income tax rate, affects everyone but may only be beneficial to some villagers while being detrimental to others.
A more equitable approach to running this hypothetical kingdom would be to enable the recognition of each village’s sovereignty and the appointment of village councils.
The village councils could then figure out what tax rates can be afforded so that villagers can contribute to the upkeep of the larger organisation while continuing to enjoy the benefits of a well-run kingdom. Such benefits include the rallying of resources in ensuring security, the enforcement of laws, and the maintenance of infrastructure.
While the Strata Management Act 2013 (SMA 2013) contains provisions for the formation of SMCs (village councils in our analogy) – it still needs to address the practical problems of cost, complexity, and village councils going rogue.
It is already a feat to get everyone in the kingdom (or republic) to vote – many are busy and just want to enjoy their weekends.
Even if every villager took the time to cast their votes, the necessary two-thirds majority is often impossible to reach.
And even if the necessary votes are cast, the kingdom has to foot a hefty bill – and once a village council is formed, they could underperform or misappropriate funds.
In 2018, when the High Court allowed different rates to be used, so long as they are approved at the AGM – power was given to dominant groups to control the voting at the AGM using their large share unit votes.
In our analogy, the kingdom saw the problem and attempted to correct it by giving its citizens the right to decide for themselves – unfortunately, given how the square footage of property owned relates to the weight of a resident’s vote, this was to the advantage of owners with larger properties.
Photo by James Pond on Unsplash.
With dominant groups, the joint management committee (JMC) would have total control on how to manage and apportion the costs for the different components, which could lead to abuses.
But the usage of a single rate is not the solution either as component owners with less exclusive common property (ECP) and lower-end components, depending on the mix, would incur higher charges.
Either way, certain groups are disadvantaged. The SMA 2013 provides for different rates to be used after the Management Corporation (MC) is formed and when SMCs exist.
The Court of Appeal decision repealing the High Court ruling has called for practical solutions if different rates are to be used from the developer-managed period.
If and when legislation is amended, I hope legislators take into consideration the influence of dominant groups and the plight of minority owners.
Read on about how the SMA 2013 could be fixed and what you should know when buying into strata living.
About the contributor
Mary Lau graduated from the University of Reading, England, with a BSc Land Management (Valuation Specialisation) in 1991. In 2002, she was appointed High Court Assessor in Sarawak for compulsory acquisition and compensation cases and sat on the bench with the judge. She began her training with CH Williams and later held senior positions in valuation firms such as Henry Butcher, City Valuers and was a Director at Hasmi and Associates in 1999. She began her own setups in real estate investment and other ventures by 2007. She is a licenced valuer with the Board of Valuers in Malaysia.
Disclaimer
This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation.
Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.
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