Introduction
In property developments, there may be car parks which despite being part of the development are not bundled with any specific parcel of property. A dispute may arise when both the developer (or their successors-in-title) and the joint management body or management corporation of the development claims the right over these car parks.
This was the exact issue deliberated by the Court of Appeal recently in Sri Keladi Sdn. Bhd. (in liquidation) v. Bukit OUG Condominium Joint Management Body [2022] MLJU 1512.
Material Facts
The developer ("Developer") developed 6 blocks of condominiums known as Bukit OUG Condominium, comprising residential and commercial parcels ("Development"). The Developer was subsequently wound-up and when the liquidators of the Developer, after conducting an audit exercise and discovering 149 surplus and unaccounted car parks ("Surplus Car Parks"), advertised the Surplus Car Parks for sale.
The joint management body entrusted to manage the common property of the Development ("JMB") filed an action in court seeking a declaration that the Surplus Car Parks are part of the common property of the Development.
The Developer’s position is that as no strata titles had been issued, the Surplus Car Parks are not part of the Development’s common property and the Developer has the right to deal with the Surplus Car Parks.
High Court Findings
The High Court decided that the parcel owners’ rights were governed by their respective Sale and Purchase Agreements ("SPA") because the SPA(s) were signed prior to the coming into force of the Building and Common Property (Maintenance and Management) Act 2007 ("BCPA")[1] and not applicable. The SPA(s) should be looked at according to the HC to decide the rights of all parcel owners.
In construing the SPA(s) and the definitions of the words "common property", "parcels" and "accessory parcels" therein, the High Court found that the Surplus Car Parks were intended for the exclusive use and enjoyment of the parcel owners and formed part of the Development. Therefore, the Surplus Car Parks do not belong to the Developer and the Developer has no right to sell them.
Court of Appeal’s Decision
The Court of Appeal agreed with the High Court’s approach that the BCPA is not applicable and therefore that the SPA is the decisive instrument or document governing the ownership of the Surplus Car Parks.
However, when construing the terms of the SPA, the Court of Appeal disagreed that the definition of "common property" in the SPA includes the Surplus Car Parks for, inter alia, the following reasons:
(a) the submission that the SPA(s) defined common property by way of exclusion was rejected. The Court of Appeal stated unequivocally that:
"the novel construction as suggested by the Respondent that what is not stated as “common property” should by default nonetheless be included as the same, is with respect misconceived. This construction is not supported by any authorities and would mean that everything else not defined as common property would have to be included. This with respect, would the very least be absurd. It would mean everything that is not stated as “common property” could be enjoyed by every unit purchaser, tenant or visitor of the condominiums. This is too wide a definition of “common property”. In common parlance, this is “anything under the sun"
(b) the meaning of common property as defined in specific clauses of the SPA(s) should be read together with the schedule of the SPA(s) listing the common facilities and services for the Development which does not include car parks.
(c) the High Court erred in not considering that the SPA(s) for commercial parcels had different provisions which stated additionally that:
"Notwithstanding the sale of the Premises to the Purchaser and any subsequent application made for the issuance of separate strata title in accordance with the Strata Titles Act 1985 any car park to be provided and constructed in at or forming part of the Building or the Project shall not be deemed to be part of the Common Property but shall at all times be and remain the property of the Vendor."
In essence, the Court of Appeal found that the Surplus Car Parks belong to the Developer.
Takeaways
It is to be noted that the Court of Appeal’s decision in Sri Keladi Sdn Bhd (in liquidation) (supra) appears to adopt a different approach than that previously taken by the High Court in 3 Two Square Sdn. Bhd. v. Perbadanan Pengurusan 3 Two Square & Ors; Yong Shang Ming (Third Party) [2018] 4 CLJ 458. In this earlier case, the High Court took a less restrictive approach in determining what is to be deemed “common property” by applying the exclusion method (i.e. “common property is simply that which is not a parcel”).
Although not bound by the decision in 3 Two Square Sdn. Bhd. (supra) per se, it ought to be emphasised that a plain reading of the Grounds of Judgment of the Court of Appeal in Sri Keladi Sdn. Bhd. (supra) and the Grounds of Judgment of the High Court (as reported in Bukit OUG Condominium Joint Management Body v. Sri Keladi Sdn. Bhd. [2021] 1 LNS 1883) indicates that this earlier decision was not considered by either Court in arriving at their decisions.
In our view, this position may present practical problems because the list of assets intended to be common property may inadvertently exclude assets which are easily overlooked (such as unallotted car parks which are not accessorized to any specific parcel) and thereby, these will remain the property of the developer.
Just like for Bukit OUG Condominium, such issues may only emerge many years later and the joint management body / management corporation will have to reconsider whether to repurchase such assets which have been in its management and for communal use from the developer (or their successors-in-title).
[1] The BCPA has since been repealed by the Strata Management Act 2013
This article is contributed by Alden Yeoh of the Corporate and Commercial practice group and Soh Lip Shan of the Dispute Resolution practice group. For more information, please feel free to visit the Firm’s website at www.kyblegal.com or contact Alden Yeoh at alden@kyblegal.com and/or Soh Lip Shan at lipshan@kyblegal.com.
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Hi, i would like to ask if JMB has any rights to sell car park that they build additionally in the land which have yet to be subdivided to the purchasers? will it be deemed as common property if they build additionally. Thank you.