The Strata Management Act 2013 (“SMA”) governs, among others, the imposition of maintenance charges and contributions to sinking fund by management corporation (“MC”), calculated based on the share units allocated to each parcel.
However, a recurring issue in the management of stratified mixed developments is whether the SMA permits an MC to impose different rates of charges on different types of parcels, such as residential versus commercial units.
This alert examines three recent Court of Appeal decisions addressing this issue:
1. Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu & Anor and Another Appeal [2024] 1 MLJ 948
This case involved a mixed development known as Pearl Suria – Menara Pearl Point 2, comprising residential units, a shopping mall, and a car park block. The developer, and later the MC, imposed higher rates of charges on residential parcel owners. One such owner brought an action against the developer and the MC, claiming the charges were unfair.
The High Court ruled that all parcel owners, regardless of parcel usage, must be charged uniformly. However, the Court of Appeal overturned that decision, holding that Section 60(3) of the SMA permits different rates of charges where parcels are used for substantially different purposes. The Court reasoned that the residential parcel owners had exclusive access to more common facilities, and a higher charge was, therefore, justified. In recognising that parcels used for residential purposes are significantly different from those used for commercial purposes (such as the mall or car park), the Court observed that imposing a uniform rate across differing parcel types would defeat the objectives of a social legislation like the SMA.
The Court further referred to Chapter 4 of the SMA, read with Section 17A of the Strata Titles Act 1985, which recognises that certain common property may be for the exclusive benefit of specific proprietors, who should then bear the corresponding maintenance costs. These provisions imply that different chargeable rates may be imposed.
The Federal Court later dismissed leave applications filed by the respondents.
2. Yong Kein Sin & Anor v Perbadanan Pengurusan Springtide Residences and other appeals [2025] MLJU 1469
This dispute involved Springtide Residences, a mixed development consisting of two apartment towers and three landed residential villas. One of the appeals concerned the MC’s imposition of a different rate of maintenance charges for the apartments and villas. The villas had limited access to common facilities (e.g., lifts, swimming pool, gym, security surveillance), while they independently maintained private facilities such as private home life, swimming pool, garden. The apartment parcel owners challenged the differential rates. The MC argued that these operational distinctions justified lower charges for the villas.
While the High Court accepted the MC’s rationale and dismissed the challenge, the Court of Appeal reversed the decision. It held Section 60(3) of the SMA permits differential rates only if the parcels are used for “significantly different purposes” – such as residential versus commercial – not merely due to differences in access to common facilities. Since both apartments and villas are residential in nature, the MC had acted ultra vires Section 60(3) of the SMA in imposing different rates, and such rates were declared unlawful.
3. Perbadanan Pengurusan PD1 v SCP Assets Sdn Bhd [2025] MLJU 2051
This case concerned Pusat Dagangan Phileo Damansara 1 (PD1 Complex), a mixed commercial development comprising seven blocks of shops/offices, one office tower, and surface and basement car parks.
The respondent, SCP Assets Sdn Bhd, acquired all car park parcels from the original purchaser. At the MC’s first annual general meeting, the MC passed a private motion to impose higher rate of maintenance charges on the car park parcels compared to other commercial parcels.
The MC justified the higher charges on the basis that the car parks incurred higher common property maintenance expenditure and that the original allocation of share units was allegedly unfair. The MC relied on Section 60(3) of the SMA to argue that the car parks serve a “significantly different purpose”.
The High Court disagreed, ruling that there was no valid basis to impose differential rates where all parcels were commercially designated. The Court of Appeal upheld this decision, reaffirming that Section 60(3) of the SMA requires a significant distinction in “use”, not merely cost implications. As all parcels are commercial, there was no legal basis for differential treatment.
Key takeaways
These appellate decisions offer much-needed clarity on the permissible scope of differential charges under the SMA.
In summary:
(a) MC may impose different rates of charges, but only if the parcels are used for significantly different purposes.
(b) The phrase “significantly different purposes” under Section 60(3) of the SMA has been strictly interpreted. In Aikbee Timbers, the residential-commercial distinction was accepted. However, in both Yong Kein Sin and PD1, the courts held that variations in facility usage or operational costs within the same category of use (e.g., residential or commercial) do not justify different rates.
MCs are therefore cautioned to exercise their powers strictly within the limits of the SMA. Operational or design differences alone are insufficient to justify departures from the statutory requirement of uniformity, unless the parcels are used for purposes that are clearly distinct in character.
For a more detailed discussion on Aikbee Timbers, please refer to our earlier publication titled Different Rates for Maintenance Charges in Stratified Mixed Development: Yes or No?
For any inquiries, please contact Associate, Man Weng Keat (mwk@lh-ag.com), or his team Partner, Ho Ai Ting (hat@lh-ag.com).
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