In Yong Kein Sin v Perbadanan Pengurusan Springtide Residences [2025] CLJU 1141, the Court of Appeal ruled that a Management Corporation’s (MC) indemnity by-law, differential maintenance charges between apartments and villas, and a capital call later reclassified as a sinking fund contribution were all invalid under the Strata Management Act 2013 (SMA).
Background of the Case
Springtide Residences is a strata development with two apartment towers and villas, managed by Perbadanan Pengurusan Springtide Residences (the MC). The disputes arose from three originating summonses filed by proprietors to challenge the MC’s actions under the SMA.
In the first suit, two proprietors contested a by-law passed at the MC’s first Annual General Meeting (AGM) in 2013, which allowed the MC to recover costs on an indemnity basis from any proprietor breaching by-laws and initiating legal action. They had previously filed a claim in the Strata Management Tribunal (SMT), which was dismissed without merits consideration.
The second suit challenged the MC’s imposition of differential maintenance charges: RM3.567 per share unit for apartments versus RM1.861 for villas, justified by villas’ limited access to common facilities and their separate maintenance obligations.
The third suit disputed a RM1.45 million “Cash Call” resolution passed at the MC’s 9th AGM for capital expenditures (e.g., lift shaft protection, entrance modernization), later reclassified as a sinking fund contribution at an Extraordinary General Meeting (EGM).
The High Court dismissed all suits, upholding the MC’s actions. The proprietors appealed to the Court of Appeal.
Court of Appeal’s Ruling
COA overturned the High Court’s decisions:
- Invalidity of MC’s Indemnity By-Law: The by-law exceeded the MC’s powers under section 70(2) of the SMA, which exhaustively lists matters for which by-laws can be made (e.g., regulating control, management, and use of common property). The court held that section 70(2) is exhaustive, and the by-law, which imposed indemnity costs without statutory basis, was not necessary for strata regulation. The SMT’s prior award did not trigger res judicata, as it lacked merits determination, and no limitation period or laches applied to void by-laws. The Court emphasized that the by-law was not necessary for the management and regulation of common property, and thus fell outside the permissible scope of by-laws under section 70(2) of the SMA.
- Invalid Differential Maintenance Rates: Under section 60(3)(b) of the SMA, differential rates are permissible only for parcels used for “significantly different purposes”. The court rejected the MC’s justification based on facility usage differences within residential parcels. The “just and reasonable” test does not apply here, and a Commissioner of Buildings (COB) letter did not validate the rates.
- Invalid Sinking Fund Resolution: The RM1.45 million Cash Call and EGM reclassification violated sections 51(2), 52(1)(3), and 61(3) of the SMA, which require sinking fund contributions at a minimum of 10% of maintenance charges and proportionate to share units. Any increase or separate capital call must strictly follow statutory procedures and formalities; arbitrary decisions are not permitted. The MC lacked power to impose additional calls beyond the minimum 10% unless fully compliant with relevant processes. The Court made clear that the MC was not entitled to impose contributions beyond the 10% statutory minimum unless it complied strictly with all procedural safeguards.
- No Estoppel or Delay Defenses: The court emphasized that void MC actions are null ab initio, immune to equitable defenses like laches, and SMA as social legislation prioritizes community fairness over procedural bars.
Key Takeaways
- Strict Compliance in By-Law Drafting: While developers often draft initial by-laws during the preliminary management period under section 12 of the SMA, post-handover, it is the MC’s responsibility to ensure by-laws align precisely with section 70(2) of the SMA. Overreaching clauses such as indemnity provisions risk invalidation and exposing developers to disputes during handover to MCs. Developers should avoid inserting indemnity or overly punitive clauses during the developer-controlled period, as these may later be struck down.
- Uniform Maintenance Charges Unless Justified: When setting initial rates, MCs and developers should impose uniform rates based on share units, reserving differentials onlyfor truly distinct parcel uses, such as in mixed-use developments. Different charges may only apply to parcels with “significantly different purposes” (e.g., residential vs. commercial), not merely differing access to facilities. Mere variations in the use or availability of common amenities such as pools, gyms, or security, do not meet the statutory threshold under section 60(3)(b) of the SMA and risk invalidation if challenged.
- Limited Sinking Fund Powers: Sinking funds contributions must be structured within sections 51 to 61 of the SMA. While the minimum is 10%, any increase or special contribution required strict compliance with all procedures and must not be arbitrary. The Court’s decision highlights that MCs must not bypass these requirements, or risk having such resolutions declared invalid.
- Anticipate Judicial Scrutiny: As the SMA is social legislation favoring community interests, MCs should prioritize transparent, fair terms in sale-purchase agreements and management handbooks to mitigate risks of void clauses or proprietor suits.
- Engage COB Early and Appropriately: COB approvals or letters offer only limited protection. MCs and developers should seek formal reviews under section 52(7) of the SMA, to help validate rates and contributions, reducing exposure to challenge, but must always ensure full compliance with the SMA.
Conclusion
The Court of Appeal’s decision underscores the SMA’s role in promoting equitable stratamanagement, curbing MC overreach, and protecting proprietors from unfair practices. For MCs and developers alike, this judgment is a timely reminder to adhere strictly to statutory limits in by-law drafting, imposition of charges, and sinking fund management to avoid legal exposure and ensure sound governance in strata developments.
– 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.
