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NAVIGATING THE FORMATION OF SUB-MANAGEMENT CORPORATIONS IN MIXED-USE STRATA PROPERTIES



Stratified properties, with their shared amenities and common areas, have become a hallmark of modern urban living. Managing these properties efficiently is paramount to maintaining their functionality and ensuring the well-being of all unit owners. In many instances, Management Corporations (“MC”) are established to oversee these properties, but there are scenarios where a more specialized approach is needed. In mixed-use stratified properties, Sub-Management Corporation (“sub-MC”) is necessary as it helps address the unique complexities and challenges that arise in such developments.


Understanding the Strata Property Landscape


Before delving into the intricacies of sub-MCs, it's important to grasp the basics of strata property management. An MC automatically comes into being upon the opening of a book of the strata register in respect of a subdivided building[1]. Upon the issuance of the strata titles, the management responsibilities fall on the MC, and the Joint Management Body (“JMB”) is dissolved. The MC is responsible for managing the common areas and facilities of the strata property.


According to the Strata Management Act 2013, in Malaysia, a sub-MC comprises all proprietors of parcels within the development area for whose exclusive benefit the limited common property is designated. The establishment of the sub-MC is contingent on passing a comprehensive resolution, which requires consent from at least two-thirds of the aggregate share units owned by all proprietors.[2]


When the Need Arises for Sub-Management Corporations


The need for a sub-MC typically arises when there are limited common properties designated for the exclusive benefit of specific parcel owners within a strata development. These limited common properties are inclusive of but not limited to, parking spaces or garden areas assigned to particular units. As mixed-unit stratified development has several components and is too large to be handled by a single MC, there is a need for a separate management body. A common example is a tiered mixed-use complex, which has many components under one master title, such as residential, commercial, retail, office, and hotel.


In the case of the Sodalite Sdn Bhd & Ors v 1 Mont’ Kiara and Kiara 2 Management Corp & Ors (2021)[3]; the High Court held as follows:-


The MC is not empowered to sub categorise the common property. If it wishes to do so, to ensure that each common property is maintained by those who utilise them, then this can only be undertaken by incorporating a subsidiary management corporation under s 17A of the Strata Titles Act.


The sub-MC operates autonomously when it comes to gathering maintenance fees, overseeing the sinking fund account, enforcing by-laws, and maintaining limited common property. In contrast to common property within a single-use stratified project, limited common property in a mixed-use stratified development is common property set aside for the exclusive use of one or more components. The mixed-use development now has three sub-MCs to manage the en-bloc office called Wisma Mont’Kiara; the 4-storey mall and basement car park called 1 Mont’Kiara; and the serviced apartment tower called i-Zen Kiara II.


The Formalities of Sub-MC Establishment


The establishment of a sub-MC follows a structured process to ensure clarity and compliance. Key steps in this process include:


Certificate Issuance: The establishment of the sub-MC is upon the issuance of the certificate of the sub-MC by the Director of Land and Mines (“PTG”).[4] The designation of the limited common property by the MC shall clearly describe, identify or define the boundaries or area of the limited common property in the special plan to be prepared by a licensed land surveyor. The special plan shall specify each parcel whose proprietors are entitled to the exclusive benefit of the limited common property. Then, the special plan shall be approved by the Director of Survey of the Department of Survey and Mapping Malaysia. The MC shall further make an application to get the approval from the PTG for the issue of certificate of the sub-MC to manage the designated limited common property.


Inaugural Meeting: Once the sub-MC is constituted, all proprietors forming the sub-MC must convene the inaugural meeting within one month of its establishment. If MC fails to convene the 1st meeting, the Commissioner of Building (“COB”) may appoint any person to convene the meeting paid by the MC. Failing to hold this meeting can result in penalties of fine not exceeding RM50,000.00 or 3 years prison or both[5].


The Developer's Role in MC Meetings


In the broader context of strata property management, the developer plays a pivotal role in initiating the first MC meeting. The responsibility lies with the original proprietor or developer to convene the first annual general meeting (“AGM”) of the MC within one month after the expiration of the initial period. This initial period encompasses the time between the formation of the MC and the moment when there are parcel proprietors other than the developer, collectively holding at least one-quarter of the aggregate share units.[6]


The developer must provide written notice of the first MC meeting to all proprietors at least 14 days in advance. This notice should also be displayed conspicuously within the development area. Failure to comply with this notice requirement can result in legal penalties of a fine not exceeding RM250,000.00 or 3 years prison or to both.[7]


In the event that the developer fails to convene the first AGM within the specified timeframe, the COB may step in and appoint a person to convene the meeting.[8]


Conclusion


Strata property management is a multifaceted endeavor, with nuances that vary depending on the type of property, its amenities, and the specific needs of the parcel owners. In mixed-unit strata properties, sub-MCs can offer a tailored solution for managing limited common properties.


Property developers and parcel proprietors must adhere to the legal requirements and timelines outlined in the Strata Titles Act 1985, Strata Management Act 2013, and Strata Management (Maintenance & Management) Regulations 2015 to ensure the establishment and proper functioning of MCs and sub-MCs. By navigating this process diligently, stakeholders can contribute to the smooth operation and compliance of mixed-unit strata properties in Malaysia.


[1] Section 17 of Strata Titles Act 1985 [2] Section 63(2) of Strata Management Act 1985 [3] [2021] 12 MLJ 116 [4] Section 17A Strata Titles Act 1985 [5] Regulation 25 of Strata Management (Maintenance & Management) Regulations 2015 [6] Section 57(1) of Strata Management Act 2013 [7] Section 57(2) of Strata Management Act 2013 [8] Section 57(5) of Strata Management Act 2013


Authored by Khairul Nur Afiqah Binti Khairul Ariffin


Kindly note that this legal article does not, and is not intended to, constitute formal legal advice by the Firm, instead all information, content and materials available on this site are for general informational purposes only. If readers require further clarification or legal advice, please email office@kevinwuassociates.com

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