Can a JMB Appoint a Committee Member’s Company as a Service Provider?

Can a JMB Appoint a Committee Member's Company as a Service Provider?

(A governance-safe explanation, not legal advice)

In strata management, questions often arise when committee members possess professional expertise that could benefit the building. One of the most sensitive scenarios is this:

If a JMC chairman owns a legal firm and is willing to provide services at a discounted rate, can the JMB appoint that firm?

The short answer is: Yes, it may be permissible — but only under strict governance conditions. The issue is not pricing or goodwill. The issue is conflict of interest and fiduciary process.

The Real Legal Question Is Not "Can We Save Money?"

Strata law does not prohibit a JMB from engaging a service provider simply because it is linked to a committee member.

What the law regulates is:

conflicts of interest
decision-making integrity
use of collective funds
fiduciary responsibility

A discounted fee does not automatically make an arrangement acceptable. Only transparent and independent process does.

The Governing Principle: Disclosure and Independence

Under general fiduciary principles and the Strata Management Act 2013, committee members must act in the best interests of all parcel proprietors and avoid situations where personal interest influences decision-making.

A related-party appointment may be considered acceptable only if the committee member does not participate in the decision and the benefit to the JMB is demonstrably clear and properly approved.

Conditions That Must Be Met for the Arrangement to Be Defensible

1. Full Disclosure Is Mandatory

The committee member must formally declare:

ownership or interest in the service provider
the nature of the proposed engagement

This declaration should be:

recorded in committee meeting minutes
disclosed to the committee and, where appropriate, to the AGM

Undisclosed interests expose the JMB to challenge regardless of outcome.

2. The Interested Member Must Be Recused

The committee member must:

abstain from discussion
abstain from voting
avoid influencing the decision in any form

Best practice is physical absence during deliberation. Governance must be visibly independent.

3. Independent Benchmarking Is Required

The JMB should:

obtain comparable quotations from independent firms, or
document prevailing market rates

This establishes that:

the pricing is genuinely favourable
the appointment is commercially justified, not preferential

Without benchmarking, "discount" is not objectively provable.

4. Proper Approval Should Be Obtained

Depending on value and duration:

minor, one-off matters may be approved by the committee
significant, recurring, or long-term engagements should be approved at an AGM or EGM

Higher transparency protects both the JMB and the committee members.

5. All Engagements Must Be Arm's Length

The contract must:

be in writing
define scope, fees, and deliverables
reflect normal commercial terms

Payment must be made to the service provider entity — not to the individual committee member.

What the Law Does Not Allow

Even if fees are discounted, the following remain prohibited:

undisclosed related-party transactions
committee members benefiting personally from their position
informal or undocumented arrangements
justification based solely on goodwill or "helping the building"

A discount does not neutralise a conflict. Only governance does.

Safer Alternatives That Avoid Conflict Entirely

Where possible, JMBs often choose lower-risk options:

pro bono assistance with no payment
appointment of an independent firm with informal guidance from the committee member
short-term advisory input without a commercial contract