Management corporations can enact rules to regulate property use, prioritizing community safety, and short-term rentals are classified as licenses, not tenancies under the applicable strata laws.

Tengku Maimun Tuan Mat CJ:

Introduction

[1] This appeal relates to the appellants'/defendants' use of their apartment units for commercial purposes by letting them out for short-term rental. The dispute arose when the respondent/plaintiff took issue with the appellants/ defendants using their respective premises for such purposes.

[2] The respondent/plaintiff is a management corporation incorporated under the Strata Titles Act 1985 ('the STA 1985') to maintain and manage a development known as "Verve Suits" ('Verve Suites') located at No 8, Jalan Kiara 5, Mont Kiara, 50480 Kuala Lumpur. Verve Suites was built on a plot of land held under GM 8661, Lot 67344, Mukim of Batu, District of Kuala Lumpur ('Land'). The category of land use is 'Building' with the express condition that the Land shall be used for commercial building with the purpose of service apartments and commercial only.

[3] The 1st appellant/1st defendant is a Swedish national and a tenant in Verve Suites. He owns 999,900 shares in the 2nd appellant/2nd defendant. The 3rd and the 4th appellants are the 8th and the 14th defendants respectively in the High Court. The other defendants are parcel owners in Verve Suites who leased out their units to the 2nd appellant/2nd defendant for short and long-term rentals. The other defendants either settled the suit at the High Court or chose not to appeal to this Court. The 1st and 2nd appellants/1st and 2nd defendants, in addition to leasing some units, managed the enterprise either for some or all of the other defendants as they originally were in the High Court.

[4] For ease of reference, in this judgment, parties will be referred to as they were in the High Court.

The Background Facts

[5] On 18 November 2015, the Commissioner of Building Kuala Lumpur ('COBKL') issued COBKL Circular 2015/2016 ('Circular'), instructing all joint management bodies or management corporations to curb the prevailing issue of the use of buildings in and around Kuala Lumpur for short-term rental.

[6] Following the Circular, the plaintiff held an Extraordinary General Meeting on 25 March 2017 proposing a resolution to enact 'House Rule No 3', which reads:

"3.0 OCCUPANCY

3.1 Approved use of the Units

The unit shall be used only for the purpose of service suites and shall not be used for business or any other purpose (Illegal or otherwise) which may be detrimental to the credibility of Verve Suites Mont Kiara.

The use of any unit for short-term rentals is prohibited. For the purpose of these rules, a short-term rentals agreement shall be deemed unless proven otherwise if they fall within the following:

i. Any stay for which a booking was made through services/applications/ websites etc such as AirBnb, booking.com, agoda.com, klsuites.com and other similar services;

ii. Any stay for which a signed and stamped tenancy agreement has not been filed with VSMO and tenants registered and issued with access cards;

iii. Any unit rented out with a tenancy agreement that permits the tenant from subleasing the property. Any breach of the above shall attract a penalty RM200 for each day the infringement continues. The Management reserves the rights to deactivate the access cards and barred [sic] the unit from facilities booking.

Any infringement found shall be deemed to be at minimum an overnight stay thus deemed as 2 days unless proven otherwise. A unit owner shall be liable for the penalties incurred by his tenant if his tenant carries such activities as prohibited under these rules and shall be deemed notified of such charges if an email or SMS has been sent to the address/number maintained in VSMO register. All fines collected under this section shall be used for the effort to combat the prohibited practice of short-term rentals."

[7] House Rule No 3 was passed with an overwhelming majority of 964 votes. The plaintiff asserted that the House Rule was passed for the purposes of regulating, controlling, managing and administering the use and enjoyment of Verve Suites'