The Court of Appeal’s ruling in Badan Pengurusan Bersama Avenue K dan K Residence v City Properties Sdn Bhd & 7 Ors [2025] 2 AMR 593 clarifies that under paragraph 21(2) of the Second Schedule of the Strata Management Act 2013 (SMA), parcel owners in arrears have no voting rights at the Annual General Meeting (AGM), even if they have a pending dispute.
Background of the Case
The developer of Avenue K and K Residence violated Section 17 of the SMA by delaying the formation of JMB. During this period, the developer managed maintenance charges and sinking fund contributions without proper audits, leading to financial disputes.
The Dispute
The developer entered into agreements with parcel owners holding 150,882 share units, resulting in “contra adjustments” — offsetting utility costs against maintenance charges and sinking fund contributions, leading to arrears.
First AGM and Voting Issues
During the first AGM, the Commissioner of Buildings barred the parcel owners from voting under paragraph 21(2) of the Second Schedule of the SMA, which prohibits voting if arrears remain unpaid seven days before an AGM. The JMB reversed the contra adjustments and filedSuit 310 to challenge their validity. The parcel owners responded with an originating summons (OS 510) and other related suits to invalidate the first and second AGMs and restore their voting rights for the third AGM. The High Court allowed the OS 510, citing a “valid dispute” over the arrears.
Court of Appeal’s (COA) ruling
The COA overturned the HC’s decision, citing:
- Misapplication of SMA Provisions: The HC relied solely on paragraph 21(1), which grants voting rights, while ignoring paragraph 21(2), which bars voting if arrears remain unpaid seven days before an AGM. The COA emphasised that both provisions must be read together.
- Improper Use of Affidavit Evidence: The HC wrongly granted final reliefs without a full trial.
The COA ordered the OS to be converted into a writ action under Order 28 rule 8 of the Rules of Court 2012, to be heard alongside other suits for a full trial to address overlapping disputes.
Key Takeaways for Developers
1. SMA Compliance is Critical
- Paragraph 21(2) of the Second Schedule to the SMA prohibits parcel owners in arrears from voting in AGM even when there is a pending dispute.
2. Proper Conduct of AGM
- Developers and JMBs must ensure that AGMs comply with the SMA. Mishandling processes risks invalidating resolutions passed at AGMs and exposing to legal challenges.
3. Financial Transparency
- Section 23(2) of the SMA mandates annual audited accounts for maintenance charges and sinking funds. Transparent financial records may prevent further disputes.
Practical Tips
1. Form JMB Promptly
- Comply with section 17 of the SMA by forming the JMB within 12 months of vacant possession to avoid management disputes.
2. Maintain Audited Accounts
- Keep detailed, audited records of maintenance charges and sinking fund contributions. Ensure annual audits are conducted in accordance with Section 23(2) SMA and are transparently presented at AGM.
3. Communicate Voting Eligibility Clearly
- Notify parcel owners in writing of the voting eligibility criteria under paragraph 21(2) of the Second Schedule to the SMA, including the requirement to clear arrears seven days before the AGM.
Voting Rights During Pending Disputes
The Court of Appeal ruled that under paragraph 21(2) of the Second Schedule to the SMA, parcel owners in arrears cannot vote at an AGM, even if a dispute over those arrears is pending, unless a court resolves the dispute in their favor.
– By George Miranda, Joy Sam Jia Qian, Nurafiqah ‘Izzati –
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.
