Introduction
In a residential strata setting, the operation and management of car parks, especially when used commercially, raise questions about individual rights versus collective welfare. In this article, Lum Man Chan and Goh Li Fei will discuss the grounds of judgment released by the Court of Appeal in Target Term Sdn Bhd v. Waldorf and Windsor Management Corporation, which sheds light on these issues, particularly on whether car park accessory parcels should remain private property or be reclassified as common property. The COA’s analysis in this case provides insights into how management corporations (“MC”) can balance private ownership rights and community welfare within the framework of Malaysian strata law.
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Background Facts
Target Term Sdn Bhd (“Target Term”) acquired from the developer, 420 car park lots as accessory parcels alongside two (2) apartment units within a residential strata development. It is not disputed that Target Term and the developer of this property are related companies. The saga begins when the Management Corporation imposed maintenance fees on Target Term for the upkeep of these car parks, which led to Target Term filing a suit to challenge these charges. In response, the Management Corporation counterclaimed, seeking to nullify the purchase and have the car parks classified as common property. The Management Corporation argued that the developer’s sale of the car parks violated Sections 34(2) and 69 of the Strata Titles Act 1985 (“STA 1985”), which prevent accessory parcels from being independently “dealt with” apart from their associated main parcels.
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Court of Appeal’s Analysis of Key Issues
The COA examined various legal precedents to resolve whether Target Term’s ownership and intended use of the car parks conflicted with the STA 1985 and whether the MC could reclassify these parcels as common property.
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Car Parks Reverted to Common Property
In its analysis, the COA referenced the case of Ideal Advantage Sdn Bhd v. Perbadanan Pengurusan Palm Spring @ Damansara [2020] 4 MLJ 93, where the accessory car park parcels could be classified as common property. In Ideal Advantage, the developer’s sale of car parks separately from their primary residential parcels was held to have violated sections 34(2) and 69 of the STA 1985. Additionally, the development order required that these car parks serve the residential property rather than being independently sold. The Court determined that by violating the development order and the STA 1985, the accessory car parks in Ideal Advantage should revert to common property, thus falling under the MC’s authority.
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The Innab Salil Case: “Dealing” and the Licensing of Accessory Parcels
The COA also referred to the case of Innab Salil v. Verve Suites Mont’ Kiara Management Corporation [2020] 10 CLJ 285, where the Federal Court discussed the concept of “dealing” under Sections 34(2) and 69 of STA 1985. The Innab Salil case clarified that “dealing” does not extend to short-term rental licenses, which are considered licenses to use rather than tenancies. The COA highlighted that Innab Salil established a precedent that licensing for short-term use did not constitute prohibited “dealing” and was therefore within the rights of the proprietor to grant licenses for temporary occupation of the commercial carparks on the accessory parcels to carpark customers.
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Validity of the Sales and Purchase Agreement (SPA) and Proprietor’s Rights
Taking into account these precedents, the COA found that Target Term’s SPA with the developer was legally compliant. Since there was no breach of the development order in Target Term’s case, the COA concluded that the SPA was neither illegal nor void, affirming that Target Term’s ownership of the car parks. By safeguarding Target Term’s title, the COA reinforced that private ownership rights under strata title law must be respected unless there is clear evidence of statutory contravention.
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Importance of Formal Maintenance Fee Resolutions
An additional point raised by the COA was the importance of procedural compliance in determining maintenance fees. The COA underscored that the Management Corporation should pass a formal resolution in a general meeting to determine the maintenance fees in proportion to the share units held by the respective proprietors, ensuring transparency and accountability. By passing such resolutions, the Management Corporation can fairly distribute maintenance obligations among all parcel owners, including those who own accessory parcels. This ruling serves as a reminder for management corporations to adopt organized procedures in imposing fees, rather than relying on informal or arbitrary practices that may lead to disputes.
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Key Takeaways
The Target Term case offers a clearer understanding of the application of “dealing” under STA 1985 as it pertains to accessory parcels like car parks within residential strata developments. While the COA upheld the private ownership rights of accessory parcel owners, it is essential to recognize that management corporations retain significant regulatory authority as they may enact by-laws that protect community welfare, potentially including by-laws regulating the commercial use of car parks within a residential property.
In conclusion, the decision in Target Term reinforces that accessory parcels in strata developments are protected as private property under Malaysian law, even when a large number of accessory parcels are attached to a single parcel. At the same time, it highlights that management corporations can play an active role in managing the residential environment through well-considered by-laws. While proprietors have rights over accessory parcels, these rights are balanced against the community’s collective interests, ensuring a harmonious environment for all residents in a strata development.
About the authors
Lum Man Chan
Partner
Dispute Resolution
Halim Hong & Quek
manchan@hhq.com.my
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Goh Li Fei
Partner
Real Estate
Halim Hong & Quek
lfgoh@hhq.com.my
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