Introduction
Share units are one of the most important elements of a strata development. They determine how much each parcel owner pays for maintenance charges and sinking fund contributions. They also determine voting power at general meetings and each owner’s proportionate interest in the common property.
When disputes arise over allegedly “unfair” maintenance charges, the real issue is often the allocation of share units.
In recent years, some Joint Management Bodies (JMBs) and Management Corporations (MCs) have attempted to revisit or “recalculate” share units long after strata titles were issued. These attempts have taken several forms, including resolutions passed at general meetings, consent orders recorded in court, and applications relying on general land law provisions.
Recent decisions of the Malaysian High Court and Court of Appeal clarify an important principle: share units cannot simply be changed by agreement or resolution. Once strata titles are issued, share units form part of the statutory structure of the development under the Strata Titles Act 1985 (STA).
Share Units Are Determined During the Subdivision Process
Share units are determined during the subdivision process under the Strata Titles Act 1985. They are not created by the JMB or MC.
Under sections 9 and 10 STA, the developer must apply for the subdivision of the building and the issuance of strata titles. This application must be supported by relevant documents, including building plans, a proposed strata plan, professional certifications from surveyors or architects, and development approvals.
Importantly, the proposed strata plan must include the allocation of share units for each parcel and the total share units for the development.
The approval process involves multiple authorities. The Land Administrator, the Director of Survey, and the Director of Lands and Mines must all approve the subdivision before strata titles are issued.
Once approved, the share unit allocation is reflected on the strata roll and the strata titles. At that point, the allocation of share units is fixed and forms part of the legal structure of the development. As such, share units are determined during the subdivision process itself and cannot later be changed by the JMB or MC.
Share Units Can Only Be Changed Under the STA
Share units can only be changed through the provisions of the Strata Titles Act 1985. The Court of Appeal reinforced this principle in Huat Company Sdn Bhd v Perbadanan Pengurusan Sunny Ville (Court of Appeal Civil Appeal No.: P-02(NCvC)(A)-2352-12/2022
In that case, the High Court had granted orders directing the cancellation of certain strata titles and the removal of the share units allocated to those parcels from the total share units of the development.
The Court of Appeal set aside those orders. It held that the issuance and modification of strata titles are governed by a comprehensive statutory framework under the Strata Titles Act 1985. As the law has provided specific procedures for altering strata titles, those procedures must be followed.
The Court of Appeal emphasised that the courts cannot grant orders that effectively amend the strata scheme without following the framework established by the Strata Titles Act 1985.
The key takeaway from Sunny Ville is that the statutory scheme under the Strata Titles Act 1985 governs the allocation and modification of share units. It is not open to the courts or to the management bodies to bypass that scheme.
JMB Resolutions Cannot Change Share Units
Some JMBs have attempted to reallocate share units by passing resolutions at general meetings, often relying on the formula in the First Schedule of the Strata Management Act 2013 (SMA). These resolutions sometimes precede court sanctions for the recalculated allocation and may reflect the intention to adjust past billings.
The Shah Alam High Court in Sime Darby Property (Oasis Square) Sdn Bhd v Oasis Square (Oasis Damansara) Joint Management Body & Ors (Originating Summons No. BA-24NCvC-1711-08/2024) recently held that such resolutions cannot override the statutory allocation reflected in registered strata titles.
In that case, the JMB convened an Extraordinary General Meeting and passed resolutions to recalculate share units based on the statutory formula. A consent order was later recorded in court, providing that the revised allocation would apply retrospectively from the date the strata titles were issued.
The High Court, in subsequent proceedings, set aside the consent order. The court held that a JMB is a creature of statute and its powers must be interpreted strictly. The Strata Management Act 2013 does not confer any power on a JMB to retrospectively amend share units assigned to parcels in a development. A resolution passed at a general meeting cannot confer powers that are not expressly provided by statute.
The court also held that the consent order had the effect of circumventing the statutory framework under the Strata Titles Act 1985, and that section 417 of the National Land Code (NLC) could not be invoked to bypass that framework.
An appeal has been filed by the JMB against the High Court’s decision and remains pending. Nevertheless, the High Court’s reasoning is consistent with the approach adopted by the Court of Appeal in Sunny Ville and reflects the courts’ insistence on strict compliance with the statutory framework. For now, the decision reinforces that a JMB cannot use a general meeting resolution to reallocate share units assigned to registered strata titles.
Consent Orders and Section 417 NLC Cannot Bypass the STA
Attempts to legitimise recalculated share units through consent orders have also been rejected.
In Sunny Ville, the High Court had ordered the cancellation of strata titles, the redesignation of parcels as common property, and the removal of the corresponding share units from the development. The Court of Appeal overturned that decision and held that there was no legal basis for such orders. It observed that granting such orders would effectively allow the court to assume the statutory powers of the Director of Lands and Mines and other authorities responsible for approving and issuing strata titles.
The Court of Appeal also rejected reliance on section 417 NLC to effect these changes. Where the Strata Titles Act 1985 provides express provisions for modification of strata titles, such as the mechanisms for subdivision or amalgamation, those provisions must be followed. General land law provisions cannot be used to override the specific statutory framework governing strata developments.
Therefore, the courts have made it clear that neither consent orders nor section 417 NLC provide a shortcut for altering share unit allocations without following the statutory process.
The Courts’ Strict Approach Protects Proprietary Rights
The courts take a strict approach to any recalculation of share units because share units affect the substantive rights of parcel owners.
Share units determine financial obligations, voting rights, and the proportionate ownership of common property. Changes to share units may also affect the market value of parcels and the long-term financial expectations of owners.
Strata titles are part of the Torrens system of land registration. Certainty and finality are essential features of that system. The courts have therefore been cautious not to allow any alteration to the registered allocation of share units without strict compliance with the Strata Titles Act 1985.
When Can Share Units Be Altered?
Recent cases clarify what cannot be done, but they do not define situations in which share units may be altered.
The Strata Titles Act 1985 contains mechanisms for structural changes, including the division and amalgamation of parcels under Part V STA. Where such structural changes occur, and the statutory procedures are followed, including submission of revised certified strata plans and approval from the relevant land authorities, share units may be adjusted as part of that process.
What remains legally untested is whether the Strata Titles Act 1985 allows the correction of alleged share unit errors after strata titles have been issued, where there have been no structural changes to parcels. Any attempt to do so would need to rely strictly on the procedures provided under the Strata Titles Act 1985. A general meeting resolution under the SMA would not be sufficient.
Until further judicial guidance emerges, the current position remains that share units, once approved and reflected in strata titles, are final unless altered through the statutory procedures under the Strata Titles Act 1985.
Conclusion
Recent decisions confirm a consistent judicial approach. Share units are embedded in the certified strata plan and reflected in the registered strata titles.
They cannot be amended merely by a resolution passed at a general meeting. They cannot be revised simply by a consent order between the parties. Section 417 NLC cannot be used to bypass the Strata Titles Act 1985. Any modification must therefore take place strictly within that framework.
In strata law, as in land law more generally, certainty prevails over convenience. The courts have made clear that statutory compliance on the allocation of share units is mandatory.
By Raymond Mah and Aqil Nasharuddin
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
