Developer’s Failure to Pay First-Year Maintenance & Transfer Strata Funds: Legal Implications of ‘Free Maintenance Fee’ Promises in Strata Projects

BY MESSRS LUI BHULLAR

Lessons in Developer Breaches & Strata Fund Mismanagement

In the landmark case of Zen Estates Sdn Bhd v. Badan Pengurusan Bersama Subang Parkhomes, the Malaysian courts addressed serious lapses in statutory duties committed by a developer during the Developer Management Period (DMP). Two pivotal breaches stood out—failures that strata lawyers across Malaysia now reference in advising Joint Management Bodies (JMBs) and Management Corporations (MCs).

This article focuses on two critical points:

• The developer’s failure to absorb and settle the first year’s maintenance and sinking fund charges, despite promising to do so;

  
  

• And its failure to remit the relevant accounts to the JMB one month before the JMB was formally established, as required by law.

⚠️ Issue 1: Developer’s Promise to Absorb Charges—Then Failing to Pay

Under the Strata Management Act 2013 (SMA), it is a developer’s legal duty to collect maintenance fees and sinking fund contributions from both purchasers and the developer itself (in relation to unsold units). However, in this case, Zen Estates publicly pledged to waive these charges for the first year to incentivize sales.

The legal problem? After delivering vacant possession, the developer did not account for or pay the full amount that should have been contributed for the first year.

This created a shortfall in funds necessary for maintenance, security, repairs, and common utilities—a burden that unfairly fell on the JMB once established.

As any experienced strata management lawyer in Malaysia would caution, such promotional offers do not nullify statutory obligations. The Court found this waiver to be a serious breach. The developer had no legal right to simply omit the collection or internal accounting of these funds.

✅ Legal Insight:

If you're a JMB dealing with similar promises from developers, you have a strong basis to claim these unpaid contributions—especially if they were used as a marketing tactic.

🧾 Issue 2: Failure to Transfer Accounts to JMB Before Handover

Equally troubling was Zen Estates’ failure to transfer audited accounts and receivables to the JMB at least one month prior to the first Annual General Meeting (AGM), as mandated by the Strata Management Act.

📅 Timeline of Breach:

• JMB established: 25 June 2016

• Developer transferred accounts: 8 January 2018 (over 18 months later)

This 18-month delay created legal and operational chaos for the JMB. Without official records, the JMB could not properly budget, enforce maintenance collection, or carry out repairs.

Even more telling, the developer’s own audited financial report—prepared and verified by its directors—outlined the sums due to the JMB. Despite these admissions, Zen Estates refused to transfer the amounts or respond to multiple letters of demand.

This contradiction seriously undermined the developer’s credibility and led to the High Court ruling in the JMB’s favour.

👨‍⚖️ Legal Takeaways for JMBs and MCs

If you are part of a JMB or MC facing similar issues, you may be entitled to:

• Legal recovery of unaccounted or unpaid maintenance funds

• Damages for financial losses caused by delays

• Tribunal or civil action against the developer

A qualified strata property dispute lawyer can help assess the extent of your loss and initiate recovery proceedings—whether via the Tribunal for Strata Management in Malaysia or civil court.

💼 How a Strata Lawyer Can Help

A professional strata law firm in Malaysia offers strategic support in such scenarios:

• Auditing developer accounts

• Issuing formal letters of demand

• Initiating claims before the Housing Tribunal

• Pursuing civil litigation for breach of statutory duty

If you’re unsure about your JMB’s next steps, consult a JMB legal advice Malaysia expert who understands the statutory framework and can build a strong case.

✅ Final Thoughts

This case is a crucial reminder that developers have non-negotiable obligations during and after the Developer Management Period. The decision in Zen Estates v. Subang Parkhomes JMB sets a powerful precedent for all JMBs and MCs in Malaysia.

If your developer has:

• Failed to pay or account for maintenance charges,

• Delayed transfer of financial records, or

• Ignored your legal notices…

You have the legal right to take action.

Get in touch with a trusted strata lawyer Malaysia or Strata management lawyer in Malaysia today to protect your community’s finances, rights, and future.

👉 Get a free consultation with our experienced team and take legal action with confidence.

📞 Contact Messrs Lui & Bhullar today for a Free consultation.

• 📧 Email: general@luibhullar.com

• 📞 WhatsApp: +60143000970 / +60143000960