INTRODUCTION
On 3 February 2026, the Court of Appeal in Badan Pengurusan Bersama Gurney Paragon Residential v Hunza Properties (Gurney) Sdn Bhd & Ors [2026] 3 MLJ 903; [2026] 4 CLJ 351 held that a Joint Management Body (“JMB”) has no power to provide for the separate management of residential and commercial common property within the same development area. During the JMB management period, the JMB must manage all common property collectively with one maintenance account and one sinking fund account.
However, the imposition of different rates for residential and commercial parcels in a mixed development is separate from the establishment of two different sets of maintenance and sinking fund accounts. Different rates may be imposed where they are just, reasonable, fair and justifiable, provided that the JMB presents a proper budget setting out the actual expenses attributable to the respective components.
BACKGROUND FACTS
The Appellant is the JMB established on 14 October 2014 for Gurney Paragon, a stratified mixed development under one lot comprising residential towers, an office tower, a shopping mall, St Jo’s Heritage Building and a retail car park.
The First Respondent was the developer, the Second Respondent was the original proprietor and owner of the commercial parcels, and the Third Respondent operated the car park management and valet services.
At the first annual general meeting held on 14 October 2014 (“1st AGM”), resolutions were unanimously passed to separate the management and maintenance of the residential component from the commercial component.
The resolutions provided for two separate sets of maintenance and sinking fund accounts, with the residential accounts managed by the JMB and the commercial accounts managed by the parcel owners of the commercial component.
The commercial parcel owners were not invited or given voting rights at the 1st AGM or subsequent AGMs, while the JMB’s budgets and audited accounts only envisaged the residential component.
On 7 April 2017, the Commissioner of Buildings (“COB”) decided that the JMB was only to collect maintenance charges for the residential component, whereas the commercial component would be managed by its respective proprietors.
The JMB subsequently commenced proceedings to recover RM56,930,645.52 in maintenance charges and sinking fund contributions for the period from October 2011 to November 2017 and sought the handover of the common property.
The High Court held that the First and Second Respondents were not liable to pay the charges and contributions into the accounts managed by the JMB and that the Second Respondent could continue managing the commercial component common property.
The JMB appealed on the ground that the High Court’s decision was inconsistent with the express provisions of the Building and Common Property (Maintenance and Management) Act 2007 (“BCPA 2007”) and the Strata Management Act 2013 (“SMA 2013”).
ISSUES BEFORE THE COURT OF APPEAL
The Court of Appeal considered whether the developer and commercial parcel owners were legally entitled to institute a regime of separate management and maintenance of the commercial parcels and the common property within the commercial component, thereby confining the JMB to the residential component only.
The Court also considered whether the resolutions passed at the 1st AGM were ultra vires and void, whether the JMB could recover maintenance charges and sinking fund contributions retrospectively, and whether residential parcel owners could seek refunds of payments made pursuant to the resolutions.
FINDINGS OF THE COURT OF APPEAL
Separate Management During the JMB Period
The 1st AGM marked a critical transition from the developer control phase to the purchaser control phase through the establishment of the JMB.
Once formed, the JMB becomes responsible for the management and maintenance of the common property, and the developer is obliged to hand over the maintenance account, sinking fund account and register of purchasers to the JMB.
There are no provisions for the establishment of any subsidiary maintenance or sinking fund accounts during the JMB management period. The BCPA 2007 (repealed) and the SMA 2013 provide for the JMB to manage the entire development area as a single entity, with one maintenance account and one sinking fund account, even for a mixed-use development.
Although the SMA 2013 permits a subsidiary management corporation to manage limited common property, this is only permitted during the management corporation management period.
Therefore, the JMB has no power to provide for the separate management of residential and commercial common property within the same development area. Gurney Paragon comprised one development area under one lot, and there could only be one JMB managing all common property collectively and charges maintenance and sinking fund contributions proportionately to the share units across the parcels regardless of the residential and commercial mix.
The COB’s decision and the unanimous approval of the resolutions could not transform an ultra vires act into a lawful one. The resolutions passed were therefore ultra vires and void.
The obligation to pay maintenance charges and sinking fund contributions arises from statute and not from the resolutions passed at the 1st AGM.
The 1st AGM only determines the rate and does not create the underlying obligation to pay. Residential and commercial parcel owners therefore remain liable to pay regardless of whether they attended, voted at or objected to the 1st AGM. The commercial parcel owners’ lack of opportunity to vote did not exempt them from their statutory obligation to pay.
Although the rates were determined under invalid resolutions, the liability to pay was not extinguished. In this case, the Court directed the JMB to convene a general meeting to determine new and valid rates by proper resolutions and to apply those rates retrospectively from the date when the charges and contributions should have accrued.
The developer was similarly responsible for the maintenance charges and sinking fund contributions attributable to the unsold parcels during the developer’s management period, and the JMB was empowered to recover arrears originating before its formation.
Different Rates
The Court distinguished the imposition of different rates from the establishment of separate maintenance and sinking fund accounts. Different rates may be imposed where they are just, reasonable, fair and justifiable, having regard to the different rights of use and costs of the common property and facilities.
The JMB must convene a general meeting to be attended by all residential and commercial parcel owners and present a proper budget for the common property of the entire development area, with a breakdown of the actual expenses attributable to the respective components.
Where different rates are proposed, the resolution must state the proposed rates, the reasons for the differential rates and their effective date. The rates must be ascertainable, consistent and uniform, and parcels of the same type with similar use and share units must be charged according to the same budget and rate formula.
Even if the commercial parcel owners controlled the votes, they could not legally impose unfair charges, as the charges and contributions must be fair and equitable, having regard to the use and cost of the common property.
No Refunds for Residential Parcel Owners
The Court held that permitting residential parcel owners to seek refunds would destabilise the property management operations of the development and create financial chaos for the JMB.
Although the resolutions were invalid, only the determination of the rates was illegal and invalid. The parcel owners’ underlying obligation to pay remained imposed by statute.
The residential parcel owners were therefore prohibited from claiming refunds, particularly as they had received the benefit of the maintenance and capital expenditure incurred by the JMB. It would not be right in equity to permit refunds, having regard to the need for continuity in maintaining the common property and the difficulty of unwinding years of accounts.
Once the JMB determines new and valid rates, overpayments must be credited or set off against future charges, while underpayments or non-payments must be calculated retrospectively using the valid rates.
The commercial parcel owners may seek reimbursement for expenses necessarily and reasonably incurred for the genuine maintenance of common property, subject to proper documentary proof and invoices.
Common Property Must Be Surrendered to the JMB
The JMB was the sole body entitled to manage and maintain the common property of Gurney Paragon until the management corporation was formed. The Respondents cannot continue managing common property merely because it was situated within the commercial component.
As the finalised strata plan identified the relevant areas as one common property, those areas had to be administered by the JMB. The Second Respondent therefore cannot claim or control the commercial common property.
The Respondents were ordered to surrender the management and maintenance of the common property within the commercial component and to provide the relevant strata plans, schedule of parcels and share units, register of parcel owners and details of facilities and services to the JMB.
IMPACT AND KEY TAKEAWAYS
During the JMB management period, there must be a single JMB managing all common property, with one maintenance account and one sinking fund account for the entire development area. JMB cannot permit the developer, original proprietor, a subcommittee or any separate group of commercial parcel owners to determine and manage separate commercial common property accounts.
A JMB may nevertheless impose different rates on residential and commercial parcels where the rates reflect the different rights of use and actual costs of the common property and are just, reasonable, fair and justifiable.
An invalid determination of rates does not extinguish the parcel owners’ statutory obligation to pay maintenance charges and sinking fund contributions. Once new and valid rates are determined, overpayments are to be credited against future charges, and arrears are to be calculated retrospectively at the valid rates.
Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.
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About the authors
Chew Jin Heng
Principal Associate
Dispute Resolution
Halim Hong & Quek
jhchew@hhq.com.my
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Hee Sue Ann
Principal Associate
Real Estate
Halim Hong & Quek
sahee@hhq.com.my
