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Defining "Common Property" under the SMA 2013

by MH Law | May 29, 2024 | Legal Updates | Case Spotlight

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Overview


In the case of AUM Capital Sdn Bhd v Menara UOA Bangsar Management Corporation [2024] 3 AMR 662, the Court of Appeal made a significant ruling. They emphasized that the degree of usage or benefit by individual parcel owners doesn't impact the determination of whether the centralized air conditioning facilities qualify as common property. This stance contrasts with the notion that exclusivity or extent of usage should influence the classification. The Court referenced its prior decision in Perbadanan Pengurusan 3 Two Square v Two Square Sdn Bhd & Yong Shang Ming [2019] 1 LNS 2281, where it was established that common property encompasses all areas of the development not specifically designated as individual parcels, regardless of who benefits from them.


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Brief Facts


[AUM Capital Sdn Bhd v Menara UOA Bangsar Management Corporation [2024] 3 AMR 662]


The appellant owns a parcel in Tower A of Menara UOA Bangsar, while the respondent manages the property. Menara UOA is a mixed-use development comprising office Tower A with 426 parcels, office Tower B with three parcels, nine retail parcels in the podium, and two parking parcels. Almost all parcels in Tower A, Tower B, and the carparks are owned by UOA Real Estate Investment Trust, except for a few.


The centralized air conditioning facilities (CACF) in Menara UOA provide chilled air to common areas of Tower A, Tower B, and the carparks, as well as to private parcels in Tower B and the retail section.


The appellant argued that under the Strata Management Act 2013 (SMA 2013), the CACF couldn't be classified as 'common property' because its benefits extended to private parcels in Tower B, and some parcel owners enjoyed it more than others.


Additionally, the appellant accused the respondent of unlawfully using maintenance account funds for CACF maintenance and sought full reimbursement.


Consequently, the respondent initiated a legal process to determine preliminary questions of law under relevant court rules.

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Question of Law


The High Court (and subsequently the Court of Appeal) was tasked with addressing five key questions of law:


  1. Does the Strata Management Act 2013 (SMA 2013) classify components of the centralized air conditioning facilities (CACF) outside individual parcels of Menara UOA as 'common property,' even if some private parcel owners benefit from them?

  2. If the answer to the first question is yes, is the management corporation obligated under section 59(1)(a) of the SMA 2013 to cover the operational and maintenance costs of the CACF?

  3. Is the management corporation legally empowered and required to pursue full reimbursement from private parcel owners in Tower B for their share of CACF expenses ("Full Reimbursement")?

  4. Could the management corporation be deemed negligent for not pursuing Full Reimbursement?

  5. If the answers to the first and/or second questions are affirmative, should the management corporation take necessary measures to ascertain the total sum for a complete reimbursement of CACF maintenance expenses?


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Decisions of the High Court and Court of Appeal (Q1 &2)


Section 2 of the SMA 2013 outlines the definition of 'common property' concerning a subdivided building. It encompasses portions of the lot not included in any parcel and accessible or enjoyed by occupants of multiple parcels. Furthermore, section 59(1)(a) mandates management corporations (MCs) to maintain and manage the subdivided building, including common property, in good repair.


The High Court emphasized a 'locational' perspective in determining common property status. Since the CACF in Tower B exists entirely outside private parcels, it logically falls under common property, thus the respondent's responsibility for its maintenance is clear. Any attempt to shift this responsibility to specific parcel occupants would disregard legal obligations.


Similarly, the Court of Appeal recognized the CACF's location outside private parcels, affirming its classification as common property under relevant legislation. This entails the respondent's obligation, under section 59(1)(a), to cover operational costs, including using maintenance account funds.


Regarding the relevance of proprietors' usage of common property, the High Court criticized narrowly defining it based on universal enjoyment across all development sections. The Court of Appeal echoed this sentiment, asserting that strata law generally regards common property as a whole, irrespective of individual proprietors' usage levels.


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Decisions of the High Court and Court of Appeal (Q3,4 & 5)


Section 59(3)(b) of the SMA 2013 addresses the management corporation's authority to seek reimbursement for repairs or work performed on common property. If such repairs primarily benefit specific parcels or their proprietors, the management corporation can recover expenses from the relevant proprietors jointly and severally.


The High Court clarified that the management corporation's reimbursement authority doesn't extend to work on common property. Maintenance and operational costs for common property are the non-delegable responsibilities of the management corporation.


The Court of Appeal highlighted that the CACF benefits both common property and some individual parcels in Towers A and B, as well as the carparks. Therefore, the management corporation's payment for CACF electricity charges doesn't solely benefit certain parcels but also benefits common property. Consequently, the management corporation cannot utilize section 59(3)(b) to seek reimbursement from Tower B parcel proprietors for these charges. Furthermore, there's no legal obligation for the management corporation to pursue reimbursement for maintenance costs from the maintenance account.


Both the High Court and the Court of Appeal affirmed affirmative responses to the first and second questions and negative responses to the third, fourth, and fifth questions based on the outlined reasons.


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Conclusion

The case underscores two crucial points: firstly, the enjoyment of benefits from the centralized air conditioning facilities (CACF) doesn't affect its classification as common property, and secondly, the management corporation (MC) is responsible for maintaining and managing common property, including bearing operating costs like electricity charges for equipment situated on common property.


Section 60(2) of the SMA 2013 empowers the MC to utilize maintenance account funds for general upkeep expenses of common property. These funds encompass maintenance charges from all proprietors, regardless of their benefit from the common property.


In scenarios where common property exclusively benefits select parcel proprietors, section 17A of the Strata Titles Act 1985 allows the MC to designate limited common property and establish subsidiary MC(s) to represent the varied interests of parcel proprietors. Expenses solely related to limited common property are then shared among all entitled parcel proprietors in accordance with section 65 of the SMA 2013. This ensures fairness for parcel owners who don't directly benefit from certain common property amenities.


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