Ideally, these costs should be borne by the retail owners only, as those who use the space are their customers.
Some retail owners have protested that it is unfair to use a single rate for maintenance charges as they would need to contribute towards the costs of maintaining the ECPs of the other components. A typical example would be the gym, sauna, and swimming pool in an apartment.
On the other hand, the other component owners dispute that not only do they have to bear the maintenance costs of their respective ECPs but they also need to pay for the maintenance of lifts, escalators, and other shared common property of the retail components under the different rate model.
Under the one-rate model, the expenses to maintain all SCPs and ECPs, including the ECPs for self-managed components, are combined and divided by the total number of share units in the development.
The “Pay for what you use” mentality can lead to endless bickering on the allocation of expenses and management of resources and requires both a skilled property manager and a fair Joint Management Committee (JMC) to ensure that there is no impropriety.
One school of thought is to “give and take” as a mixed development is meant to be integrated as one – with the various components complementing each other, instead of creating camps to protect respective interests.
Is the problem solved?
The controversy will continue as long as there is dissatisfaction among groups in some mixed developments.
Supporters of the usage of different rates have claimed that this decision would cause many problems.
To my knowledge, there are many mixed developments that are using one rate with the understanding that different rates can only be used when Subsidiary Management Corporations exist after the Management Corporation is formed. As this case could proceed to the Federal Court, the future is uncertain.
Where there are distinctly variable components in mixed developments such as shopping malls, low-cost flats, high-end hotels, and serviced residences, depending on the mix, it could be more expensive for lower-end component owners to agree to one rate.
The need to assist low-cost owners
If the development is on the same rate model as ours, using different rates, the low-cost component owners would still be required to contribute towards the maintenance costs of the shared common areas and facilities of retail components that are open to the public as well. They would not need to pay for the ECPs of the other components.
However, consideration should be given to low-cost owners so that they do not end up paying higher charges if a single rate is used.
The authorities would need to work out solutions to help them not just during the JMB but during the developer-managed and MC periods as well.
The Road Ahead
In light of the Court of Appeal decision in the case of Muhamad Nazri Bin Muhamad v JMB Menara Rajawali and Denflow Sdn Bhd, I understand from the authorities that different rates are also not allowed during the developer’s period, nor are they allowed during the MC period without Sub MCs. It is better to have this consistency.
I believe the Court of Appeal has made a good decision. At the end of my presentation during the Rehda event, I concluded that it is not the best practice to use different rates for maintenance charges during the JMB period unless there can be measures in place that do not force owners to seek legal recourse.
During the second panel discussion, where I was on the panel, it was mentioned that proposals have been submitted for the amendment of the SMA for Sub MCs to be automatically created when MCs are formed.
For mixed developments that need to use different rates from the JMB period, the legislation would need to be amended to provide for Subsidiary Joint Management Bodies (Sub JMBs).
I understand that the National House Buyers Association has submitted proposals for the amendment of the SMA to include the formation of Sub JMBs.
Currently, in Malaysia, only one mixed development (One Mont Kiara) has this two-tier management.
Due to the stringent requirements set by legislation, it can be a costly and lengthy process.
The automatic creation of Sub MCs would be practical and hopefully the same can be done for the proposed Sub JMBs.
Under the STA (as amended in 2013), amendments to the subdivision procedures have enabled strata titles to be issued before the delivery of vacant possession.
This would do away with the need for JMBs and expedite the usage of different rates, where needed, through the formation of Sub MCs after the MC is formed.