Court rules developer cannot turn common property into private assets
PUTRAJAYA: The Court of Appeal has ruled that a property developer cannot turn areas meant for residents’ common use into private property before selling them or using them as security for bank loans.
The Court of Appeal in Malaysia has ruled that a property developer cannot convert areas designated for residents common use into private assets before selling them or using them as collateral for bank loans. The decision, made unanimously by a three-member bench, upheld a High Court ruling in favor of the PJ Centrestage Joint Management Body (JMB).
The dispute arose when the JMB discovered certain areas, including 342 car park bays, seven basement levels, landscaped spaces, rooftops, a reception area, and external façade spaces, had been registered as private strata or accessory parcels. Cherish Springs Sdn Bhd, the developer, sold these areas to Leadmont Properties Sdn Bhd, who then used them as security for loans from Hong Leong Bank and Maybank.
The court found that the disputed areas were common property under the Building and Common Property (Maintenance and Management) Act 2007, and that the approved building plans originally did not show them as private parcels. The court also found evidence of fraud and false representation by the developer in registering the strata titles over the disputed areas.
The banks were criticized for not performing adequate due diligence before granting loans, making their security interests in the disputed property invalid.
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