How are share units assigned pre-January 1, 2016 in Selangor?

Posted on 24 Nov 2019
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Contributed by Lai Chee Hoe

Since the decision involves a development area which falls within the Selangor jurisdiction, I thought it is good to draw a comparison to the pre-weightage era in Selangor.

In a circular issued by the PTG of Selangor, there are two different methods in assigning share units:

  1. One is by selling price; and
  2. The other being a weightage ratio of:
  • For strata scheme of single use:

   

                 Floor area of main parcel + floor area of accessorised parcel 

               -------------------------------------------------------------------------

                       100 or 1,000 (to derive a two-digit share units)

 

  • For strata scheme of two types of use a ratio of 1:1.5 
No. Type Factor
1. Residential 1
2. Industrial 1.5

 

  • For a strata scheme of more than two types of use a ratio of 1:4:5:5:5 (for a strata scheme of more than two types of use).
No. Type Factor
1. Residential 1
2. Office 4
3. Commercial 5
4. Car park area 5
5. Industrial 5


In many instances, share units were assigned by selling price by the developer and selling price formula may not reflect an equitable assignment of share units.

Selling price is not an ideal parameter when it comes to assigning of share units since:

  • There is absolutely no co-relationship between the selling price of a parcel and the cost of management and maintenance of common property; 
  • Selling price is a subjective and arbitrary parameter as –
  1. selling price can be determined unilaterally by a developer  (with lower share units) which may benefit the developer or its related parties in respect of any parcel that is held by the developer or its related company for investment;
  2. selling price can be adjusted in many ways including offering rebates for early birds;
  3. selling price is information which is not publicly available (also not in any of the plans filed with the authorities);
  4. selling price does not offer an equitable way of assigning share units.

This problem is more acute if the share units were assigned based on an artificial selling price.

I have a case where the share units were assigned (based on selling price) for three different components of carpark, office and retail at a value ratio of 1:16:33. 

That means a parcel of a similar floor area (eg, 1,000 sq ft), one component is assigned a share unit of 1, but the other two components (although share the similar floor area) is assigned a share unit of 16 and the 3rd component 33. The component with the lowest share unit was then disposed of to a related party. This has the net effect of the parcel owner / proprietor having the benefit of paying a minimal charges perpetually (unless share units were re-assigned)

JMB

If a Joint Management Body (JMB) is allowed to apply different rates, it may be a cure to the many development areas where share units were not equitably assigned.

How are share units assigned post January 1, 2016?

Post January 1, 2016, all applications for subdivision of building or land is required to apply the prescribed calculation for share unit formula provided in Schedule IV of the Strata Titles (Selangor) Rules 2015 given below.

Schedule A – Type of Parcel 

No.  Type of Parcel 

Without air conditioning 

centralized to the common property 

With air conditioning 

centralized to the common property 

Public elevator/ escalator provided  No Public elevator/ escalator provided  Public elevator/ escalator provided  No Public elevator/ escalator provided 
1. 

Apartment/ 

Small Office Home Office (SOHO) 

1.00  0.85  1.30  1.15 
2. 

Office complex/ 

Institutional (College) 

1.00  0.85  1.30  1.15 
3.  Retail Complex  2.00  1.70  3.20  2.90 
4.  Hotel complex/ Medical centre complex  2.20  1.90  2.80  2.45 
5.  Industrial complex  1.00  0.85  1.45  1.30 
6. 

Car park 

(whole floor parcel) 

0.75  0.65  0.85  0.75 
7. 

Shop-houses, shop-apartments, shop-offices (two storeys and more) 

(a) upper floor 

(b) ground floor 

1.00 

0.85 

0.85 

0.85 

1.30 

1.15 

1.15 

1.15 

8.  Land Parcel 

0.80 


Schedule B – Whole Floor Parcel 

No.  Parcel  F2  Basis 
1.  Whole floor parcel excluding area for vertical transportation core (elevators or escalators) or floor area which has a breadth of 1,000 to 3,000 kps  0.85  For the entire floor excluding the vertical transportation core 
2.  Whole floor parcel including area for vertical transportation core (elevators or escalators) or floor parcel which has a breadth of 3,000 kps and above  0.80  For the entire floor including the vertical transportation core 
3.  Not whole floor parcel which has a breadth less than 1,000 kps  Not applicable 


Schedule C – Accessory Parcel

Bil.  Accessory Parcel  F3  Basis 
Outside building  0.25  To reflect a non-habitable open or enclosed area outside the building 
Within building  0.50  To reflect a non-habitable open or enclosed area within the building 


Notes: 

  1. areas are specified in square metres. 
  2. Schedule A is distinguished by the provision of an elevator or escalator for the common use with centralised air-conditioning which is a common property. 

iii. Schedule B shall not apply to shop-houses, shop-apartments, shop-offices and duplexes (each parcel consists of two floors). 

iv share units shall be described as a whole numbers and any fractions or decimals shall be rounded to the nearest whole numbers (for example: 109.4 = 109, 146.8 = 147, 82.5 = 83).

The weightage factor will promote a more equitable share units be assigned.

Pay

Charges payable should be dependent on the common facilities enjoyed

In addition to the above, the charges payable into the maintenance account by a parcel owner should correspond with the cost of management and maintenance of common property.

The charges will always have a direct co-relation with the cost of maintaining the common property and facilities of a component. This is consistent with Sections 10, 11, 23, 24, 50 and  51 of the SMA 2013 (Strata Management Act 2013).

If exclusivity is given to a certain component, the parcel owners should pay charges in accordance to the “actual or expected general or regular expenditure necessary in maintaining the common property” pursuant to Section 50(3) SMA 2013. (Read ‘What about other different rates of charges?’ at: https://www.starproperty.my/news/115925/what-about-other-different-rates-of-charges-).

Letter of support from the Commissioner of Buildings

In the course of handling strata dispute resolution, I have also come across letters of support issued by the Commissioner of Buildings allowing a JMB to determine and impose charges based on different rates of charges. 

Conclusion

I think the Court of Appeal decision in Rajawali’s (In reference to: https://www.starproperty.my/news/115914/different-rates-of-charges-in-a-stratified-development-area-and-the-rajawali-s-case).

case is correct. In the absence of citing the correct provisions in the Originating Summons and failing to show that all necessary thresholds are fulfilled, the different rates of charges should not be allowed in that case. 

I however find that the decision ought to be confined to the facts of the case and not be taken as a blanket rejection applied to all other JMBs. A JMB should be allowed to deliberate and determine different rates of charges if it can satisfy the requirements of the law. 

______________________________________________________________________________

About the  Contributor

Chee_Hoe_1

Lai Chee Hoe, founding partner of Chee Hoe & Associates and a practising lawyer, is a CLP book-prize winner and author of the book "Strata Management Practice & Procedure". He specialises in Strata management matters and handles complicated Strata Management disputes.

_______________________________________________________________________________

Disclaimer

This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation.

Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.

Want to contribute articles to StarProperty.my? Email: editor@starproperty.my
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