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Can Management Corporations (MCST) fine owners?

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Author: Patrick Tan and Keyan Choo

This article aims to discuss the extent of powers granted to a strata title development’s Management Corporation (“MC”) and update the reader on developments in the law in relation to disputes between MCs and the owners, or subsidiary proprietors (“SPs”).

 

Introduction
Conflicts between MCs and SPs are commonplace. According to the General Household Survey 2015, 13.9% of households in Singapore reside in Condominiums and Apartments, which are invariably managed by MCs.[1] Further, as of June 2018, there are 3909 registered MCs managing various strata title developments in Singapore.[2] These numbers are far from insignificant, and disputes between the MCs and SPs would naturally arise due to their inherently opposed stance on their respective rights.
This article aims to update the reader on developments in the law in relation to such disputes by looking at two decisions, with a focus on the levying of fines, liquidated damages or any penalty fee by MCs on their SPs.

 

Case Study 1: STB No. 52/ 64/ 65/ 66 of 2011 – Toh Guan Centre (MCST No. 2746)

Background
In STB No. 52/ 64/ 65/ 66 of 2011, MCST No. 2746 filed an application with the Strata Titles Board (“STB”) seeking an order for the respondent SP to pay all outstanding fines imposed by the MC pursuant to the SP’s breaches of by-laws. It was alleged that the SP had since the passing of the by-laws, breached the said by-laws and the alleged amount due and payable was $30,000.00.
The SPs do not agree with the fine and have applied for the abovementioned by-laws to be repealed. The SPs submitted that the MC did not have the power to make the by-laws as the MC is “not entitled at law to impose or exact any fines for non observance” of bylaws because there are no express or implied provisions in the Act that allows for this and it “is clear that Parliament did not intendthat a management corporation should have such a power.
The main issue in contention is thus whether the MC has the power to enact the following by-laws (“the by-laws”):-
“11.1 Use of forklift within toh guan centre:-
a. Forklift is strictly for use at the loading and unloading area.
b. There should be strictly no driving of forklift along the driveway for transportation of goods between units.
c. The Management Corporation shall be empowered and entitled to impose a fee of $200.00 per incident for any violation of By Laws on the use of Forklift.
11.2 Servicing of vehicles at the driveway:-
a. There shall be strictly no servicing of vehicles along the driveway (including but not limited to the common area in front of the unit)
b. The Management Corporation shall be empowered and entitled to impose a fee of $200.00 per incident for any violation of By Laws on the “Servicing of Vehicles at the Driveway.”
The by-laws were passed pursuant to Section 32(3) of the Building Maintenance and Strata Management Act (“the Act”).
It is also relevant to note that Section 106 of the Act provides for STB to declare a by-law to be invalid where a MC does not have the power to make such a by-law.

 

Findings
The Board held the view that by-laws are subsidiary laws. Where the validity of such subsidiary laws made pursuant to powers delegated by Act of Parliament to a subordinate authority is challenged, the Court has a three-fold task: first to determine the meaning of the words used in the Act of Parliament itself to describe the subordinate legislation which that authority is authorised to make, secondly to determine the meaning of the subordinate legislation itself and finally to decide whether the subordinate legislation complies with that description.[3]
The Board considered the words in Section 32(3) of the Act, which allows MCs to make by-laws “…for the purpose of controlling and managing the use or enjoyment of the parcel of comprised in the strata title plan…” and Section 29(2)(b) of the Act which allows an MC to “…do all things reasonably necessary for the performance of its duties under this Part and the enforcement of the by laws…” The Board found that there is nothing in Section 32(3) of the Act to indicate that an MC can pass by-laws providing for a monetary penalty to be imposed when the by-laws are breached. In fact, whenever it was intended by Parliament that penalties could be imposed for breaches of the subsidiary legislation, this was always provided for in the enabling legislation and the extent i.e. maximum penalties would also be provided for. The Board took the view that a finding that the by-laws in this case are valid would be tantamount to a finding that Parliament had entrusted the MC with undefined and unlimited powers of imposing charges, penalties, fines and liquidated damages upon subsidiary proprietors for contravention of the by-laws.
It is also instructive to refer to Regulation 11 of the Building Maintenance (Strata Management) Regulations 2005 which expressly provides for fees payable to a MC for various services such as supplying the name and address of the chairperson, secretary and treasurer of the management corporation or subsidiary management corporation and of the managing agent under section 47(1)(a) of the Act and making available for inspection any document referred to in section 47(1)(b) of the Act etc.
The provision illustrates that when Parliament allowed for management corporations to levy fees, it is expressly spelt out and the maximum fees that can be charged is limited.

 

Conclusion
The Board found that Parliament could not have and did not entrust MCs with undefined and unlimited powers of imposing monetary payments upon SPs for breaches of by-laws made under Section 32(3) of the Act. Accordingly, the Board ordered that the by-laws be repealed and dismissed the MC’s claim.

 

Case Study 2: Management Corporation Strata Title Plan No 901 v Lian Tat Huat Trading Pte Ltd [2018] SGHC 270

Background
In November 2017, the MC of Hoa Nam Building lodged a claim in the High Court against one of the owners, Lian Tat Huat Trading Pte Ltd (“the SP”) for damages incurred, amounting to $344,018.57, pursuant to a by-law (“the by-law”).[4]
The by-law in contention is reproduced as follows:-
“Any subsidiary proprietor or occupier who or whose tenant or licensee is in respect of his lot, encroaches and continues to encroach upon the common property shall be liable to pay to the Management Corporation on demand damages calculated according to the following formula for the breach of By-law 9 of the First Schedule of the Act or any of these By-laws concerning encroachment:-
 
D = ((R x S) / 30) x 2     where,
 
D” is damage payable per day
R” is the marked rental determined by the Management Council per month per square metre for the lot(s) immediately adjacent to the space occupied;
S” is the space in square metres occupied by the objects fixtures, goods or things. …”
Since August 2016, the SP had leased its ground-floor premises to a coffee shop operator and the operator had placed tables, chairs and other items, including television sets, in the walkway outside the unit, which were encroachments on common property. The SP sued the tenant in 2017 for failing to remove the items when warned, and also repossessed the unit in July this year.
Be that as it may, the MC sought, inter alia, damages of $344,018.57 from the SP. It arrived at the sum from the coffee shop operator’s encroachments for nine months from 1 November 2016, and a further $1,131.64 per day from 1 September 2017 until the operator ceased encroachment. The sum was derived based on a prescribed formula contained in the by-law.

 

Findings
The Court struck out the claim as the judge said there was no provision under the Act for the MC to make such a by-law.
Instead, the Court found that the Act only provides for MCs to recover damages arising from breaches of by-laws by applying to Court. Should the Court find that there was indeed a breach, the assessment of the quantum of damages payable falls under its ambit.
In this case, the Court determined that the by-law was an “on-demand provision” in which the MC computed the damages payable by the SP without establishing loss and this was clearly a “mechanism inconsistent with the scheme contemplated in the Act”. In the circumstances, the Court concluded that an MC was a creature of statute and it could only wield such powers that were expressly or impliedly granted under the Act. As the contents of the by-law exceeds the jurisdiction of the MC, it is void and the claim was accordingly struck out.

 

Conclusion
Finally, the Court made a distinction between by-laws that provides for calculation of liquidated damages according to a prescribed formula and by-laws which imposed a fine on breach. As this case concerns the former, the learned Judge restricted his finding as such and made no finding as to whether an MC has the power to make by-laws which impose fines or fees for the breaches of its by-laws.

 

Update and Opinion
Both rulings above seem to suggest, prima facie, that the relevant adjudicators will adopt a narrow interpretation of the Act with respect to the extent of an MC’s power to enact penalty by-laws. The Court and STB have ruled that the powers of MCs are enshrined in legislation and they would be very reluctant to allow MCs to overstep their authority.

 

Advantages of narrow interpretation
Essentially, case law would suggest that MCs are not allowed to elicit any payment from their SPs should there be no express provision in the Act justifying or envisioning such payment. As the above rulings have shown, adjudication on the extent of a MC’s powers, which are conferred on it by statute, should be a question for Parliament rather that the judiciary or the relevant statutory bodies. This is a sensible approach to take, as it provides certainty in the law. SPs, both current and future, would understand clearly both their rights and that of their MC.
Granting MCs liberal authority to enact by-laws may also inundate SPs with onerous by-laws. For example, an MC for a condominium along Upper Bukit Timah Road imposed a hefty fee of S$500 for residents seeking to replace their parking decal to prevent residents from passing the decals to their acquaintances.[5] It is trite that the Act was enacted to ensure the fair and efficient management of strata-titled developments. Therefore, MCs should not be allowed to refer to Section 32(3) as a catch-all provision granting them exceedingly wide powers to enact by-laws. This would also prevent cavalier MCs from adopting draconian by-laws that may be detrimental to the development.

 

Disadvantages
On the other hand, a strict interpretation of an MC’s power to enact by-laws may hinder them should they be dealing with SPs who habitually break by-laws. This would indirectly afford uncooperative SPs preferential treatment. Using the examples above, it is undeniable that the two defendant SPs had enjoyed the use of common areas and deprived the other SPs usage of the same. In fact, the SPs had actually generated income from the unauthorised usage of these common areas. Clearly, this would put SPs who abide by-laws at a disadvantage, and this cannot be the intention of the Act.
To compound matters, SPs who are not party to the dispute may still have to bear legal fees, by virtue of their position as an SP. For example, a former managing agent at a condominium at Bishan erroneously approved an SP’s application to install floor-to-ceiling glass windows at his balcony even though this was in breach of the estate’s by-law, resulting in the MC taking the SP to court. Although the MC won the case, the other owners in the condominium had to fork out money to cover their legal fees.[6] Once again, this consequence cannot have been contemplated by the Act.

 

Potential solutions and conclusion
It would be asinine to assume that there could be an all-encompassing law that would satisfy both camps with inherently divergent viewpoints. The relationship between MCs and SPs should be delicately balanced, and perhaps a reasonable solution could be to introduce a more efficient model of dispute resolution with respect to conflicts between MCs and SPs.
A recent example of an efficient model would be the simplified civil process in Magistrate Court claims,[7] where parties are required to disclose documents from the outset and proceed for a simplified and expedited trial, with interlocutory applications kept to a minimum, if even allowed at all. This could be applied to MC disputes to keep legal costs low and to facilitate an expeditious resolution.
In conclusion, the current position taken by the Court favours a strict interpretation of the Act. MCs are generally unable to impose fines or penalties, in particular liquidated damages, on SPs who breach by-laws should there be no express provision in the Act. The Court has shown no hesitation in invalidating such by-laws.
This provides clarity as well as protection of the rights of the SPs. Even though there may be instances where their rights may be compromised by a dissenting SP, more often than not, the SPs can take comfort in the fact that their MC are unable to unilaterally levy penalty fees on them.

 

[1] Department of Statistics Singapore, Key indicators of resident population and resident households, General Household Survey 2015, 2015

[2] Data.gov.sg, “Data on Management Corporation Strata Title”, https://data.gov.sg/dataset/management-corporation-strata-title?view_id=a3006397-e3a9-40b6-9dbf-4d1cc66f28e5&resource_id=21b15082-ea01-40f8-ad2b-679f011d6764

[3] McEldowney v Forde [1971] AC 632

[4] Singapore Law Watch, “Condo management has no power to make by-law: Judge”, https://www.singaporelawwatch.sg/Headlines/condo-management-has-no-power-to-make-by-law-judge

[5] Today Online, “The Big Read: New laws could bring relief, but condo residents’ apathy a bigger problem”, https://www.todayonline.com/singapore/big-read-new-laws-could-bring-relief-condo-residents-apathy-bigger-problem

[6] Ibid.

[7] Order 108, Rules of Court

 

Written by: Patrick Tan and Keyan Choo