Does the Law Allow JMB / MC to Make Money Other Than Collecting Management Fees?

A common assumption governs strata management in Malaysia: that a Joint Management Body (JMB) or Management Corporation (MC) is legally limited to collecting service charges and sinking fund contributions, and that any other income-generating activity is either prohibited or legally risky.

This assumption is not supported by the Strata Management Act 2013 (SMA).

Malaysian strata law does not prohibit JMBs or MCs from generating income. What it regulates are purpose, approval, governance, transparency, and avoidance of abuse.

Legislative Purpose: Financial Sustainability, Not Funding Exclusivity

The Strata Management Act 2013 is enacted to ensure the proper maintenance, management, and long-term financial sustainability of stratified developments.

It is an enabling framework for stewardship, not a statute that prescribes a single, exclusive funding mechanism.

The Act requires that:

buildings be properly maintained,
sufficient funds be available to meet obligations, and
management bodies act in the collective interest of proprietors.

It does not state that owner levies must be the only source of funding.

What the Law Explicitly Requires

Under the SMA, every strata development must maintain two statutory funds:

Maintenance Fund (Service Charges)

For management, maintenance, insurance, utilities, and day-to-day operations.

Sinking Fund

For major repairs, replacements, and long-term capital expenditure.

Parcel proprietors are legally obliged to contribute when levied. This obligation is statutory and enforceable.

What the Law Does Not State

The SMA does not state that:

service charges must be the sole funding source,
sinking funds must be funded only by owner contributions,
JMBs or MCs are prohibited from earning income,
commercial use of common property is inherently unlawful.

The law requires funding sufficiency, not funding exclusivity.

Implied Powers Under Malaysian Law

Malaysian administrative and corporate law recognises that statutory bodies possess implied powers reasonably necessary to discharge their statutory duties, provided such actions are:

connected to their statutory purpose,
not expressly prohibited, and
exercised for the collective benefit of those represented.

Sections 21 (JMB) and 59 (MC) of the SMA contain broad enabling language allowing management bodies to do all things reasonably necessary to perform their duties and enforce by-laws.

In Badan Pengurusan Tiara Duta v Timeout Resources Sdn Bhd [2015], the Court of Appeal confirmed that powers to lease, license, or otherwise utilise common property may be implied where reasonably connected to management and maintenance obligations.

While the case arose under earlier legislation, the relevant enabling provisions are substantively mirrored in the SMA.

Accordingly, income-generating arrangements that are incidental to maintenance funding and benefit proprietors collectively fall within the scope of lawful management powers, not outside them.

Approval Thresholds and Governance Safeguards

Monetisation is not unilateral.

Where common property is:

leased or licensed on a long-term basis, or
materially affected or restricted,

approval of not less than 75% of the share units present and voting at an AGM or EGM is generally required (SMA 2013, section 60(3)).

This safeguard exists to:

protect owners from permanent value loss,
constrain committee overreach,
legitimise material decisions.

Any monetisation implemented without required approval is not innovative—it is invalid.

Pre-JMB Implementation by Developers

Certain revenue mechanisms may be established before the JMB is constituted, during the period when the developer retains unified control. This is not a circumvention of the law.

During this phase, the developer—acting within its rights as:

the original landowner,
the holder of the Developer’s Licence under the Housing Development (Control and Licensing) Act 1966, and
the party structuring the project under the Sale and Purchase Agreement—

may lawfully design and implement revenue-generating infrastructure, contracts, and operating arrangements as part of the original development.

These arrangements become part of the common property and operating environment transferred to the JMB or MC upon handover.

Post-handover, the JMB’s role is to manage inherited assets, not to retroactively approve their existence.

Income Is Permitted — Private Enrichment Is Not

The legal boundary is not income generation. The boundary is conflict of interest and misuse.

Permitted:

income derived from common property or collective access,
arm’s-length commercial arrangements,
revenue credited into management or sinking funds,
income used to offset charges or stabilise long-term costs,
full disclosure, auditability, and compliance.

Prohibited:

committee members enriching themselves,
related-party or sweetheart deals,
undisclosed commissions or kickbacks,
diversion of funds outside MC/JMB accounts.

The law restricts abuse—not revenue.

Revenue-Sharing Arrangements

There is no statutory prohibition against revenue-sharing or profit-sharing arrangements between a JMB/MC and independent third-party operators, provided that:

the arrangement is arm’s length,
the operator is independent,
required approvals are obtained,
revenue flows into MC/JMB accounts,
benefits accrue collectively to proprietors.

From a risk perspective, revenue-linked arrangements often reduce financial exposure, as payment arises only from realised income.

Ancillary Benefit and Fiduciary Duty

Management actions that:

fulfil core maintenance and management duties, and
deliver ancillary benefits such as cost reduction, service efficiency, or improved access,

are a recognised and legitimate extension of a JMB or MC’s role, provided they are properly governed.

This aligns with fiduciary obligations to act in the best financial interest of proprietors, including mitigating avoidable costs and preserving long-term value.

PDPA: Regulation of Data Use, Not Prohibition of Communication

The Personal Data Protection Act 2010 regulates how personal data is used, not whether management bodies may communicate with residents.

PDPA prohibits:

sharing resident data with merchants,
selling contact lists,
unauthorised secondary use.

PDPA allows:

management-initiated communications,
internal announcements regarding services or benefits arranged by the JMB/MC,
communications where data remains under management control.

Compliance depends on data governance, not silence.

Tax Treatment

Income earned by a JMB or MC is not automatically tax-exempt.

The Inland Revenue Board treats income from non-parcel owners—such as advertising, licensing, or facility rentals—as taxable.

Taxability does not determine legality, but it confirms that such income is recognised as a normal incident of management activity, subject to compliance.