Landmark ruling restricts developers from charging admin fees
KUALA LUMPUR, Dec 18 – In a landmark ruling recently, the Court of Appeal said that developers or subsequent holders of a Master Title for lands cannot unilaterally impose excessive and exorbitant fees where their consent is required for any resale, transfer or assignment of rights for property purchased pending the issuance of a separate strata title.
It has always been the practice by developers to impose administrative fee to purchasers where the separate title to the respective properties has yet to be issued in the name of buyers such as shop lots, office premises and condominiums.
The appeal was filed by KAB Corporation Sdn Bhd (KAB) and its related company Impiana Sdn Bhd, against developer Master Platform Sdn Bhd.
According to the facts of the case, in 2015 the owner of the property concerned, KAB had sought consent from Master Platform, being the Master Title holder to the said land, to assign the property to a bank for additional revolving credit facility for the benefit of the Impiana.
Master Platform then had only agreed to provide their consent if KAB paid them a sum of 1% equivalent to the facility sum, that being RM65,000, even though there was no stipulation for such a rate in the agreement.
Exorbitant and excessive fee for consent
Both KAB and Impiana then filed a suit which, among others, sought a declaration that the imposition of RM65,000 was exorbitant and excessive, and further for a declaration that any administrative fee imposed by Master Platform should be nominal.
Dato’ Seri Rajan Navaratnam, who represented KAB and Impiana, had argued that when a purchaser has paid the purchase price in full, the purchaser becomes the absolute beneficial owner and the developer is merely a bare trustee pending the issuance of the separate strata title in which a developer is contractually and statutorily bound to apply and obtain the said separate strata title for the benefit of a purchaser concerned.
He added that a purchaser therefore, owes no further obligation to a developer and accordingly should not be liable for any administrative fee pending the issuance of a separate strata title.
Developers cannot gain from their own neglect, says lawyer
Rajan also argued that the only reason such consent was required in the first place was because a developer has either failed or delayed in applying for the issuance of a separate strata title and therefore a developer should not be allowed to reap a benefit or profit from its wrong or neglect.
According to Rajan, even if a developer has a discretion to impose an administrative fee in the absence of any stipulation at the rate of 1%, then such discretion must be exercised in good faith, rationally and not arbitrarily or even it being abused, because the purchasers would then be at the mercy of developers through no fault of theirs.
He urged the Court of Appeal to follow the recent UK Supreme Court decision of Berganza v BP Shiiping Limited and Another where the Supreme Court held that any contractual discretion must be exercised in good faith and not arbitrarily so that such a discretion would not be abused. It must be exercised consistently with its contractual purpose by concepts of honesty, good faith and genuineness and the need for the absence of arbitrariness, capriciousness, perversity and irrationally.
The Appellate Court agreed with Rajan’s arguments and had ruled that the imposition of RM65,000 for administrative fee was exorbitant and excessive and instead held that KAB and Impiana were only required to pay a nominal sum of RM500 to the Master Platform for their consent.
The unanimous decision by the Appeals Court also stated that while developers may retain a discretion to impose such a fee, nevertheless such fee imposed should only be nominal.
Datuk Vernon Ong led the panel of judges, which also comprised Datuk Harmindar Singh Dhaliwal and Datuk Has Zanah Mehat.