This article first appeared in City & Country, The Edge Malaysia Weekly on August 31, 2026 - September 6, 2026

In collaboration with Henry Butcher Malaysia (Mont Kiara) Sdn Bhd (HBMK), City & Country is featuring a six-part series of articles that lay the groundwork for a deeper understanding of what it takes to maintain mixed-use developments. In this second part, we look at how costs are divided when residential, retail, office and hospitality components have very different needs; as well as what is common property (CP) and limited common property (LCP), and why it matters. 

Mixed-use and integrated developments have been popular in Malaysia for decades. However, many early projects often lacked comprehensive long-term management plans. This was partly because, back then, stratified mixed-use developments were uncommon, and the concepts of CP and LCP were unclear.

In essence, a mixed-use development combines multiple property components, such as residential, retail, commercial offices, hotels and car parks, all within a single master plan.

Within these complex stratified components, CP refers to facilities and spaces shared by two or more components, while LCP comprises areas designated exclusively for a specific group of parcel owners.

HBMK managing director Low Hon Keong explains the difference between the two: “There are two principal concepts that can help us to understand CP and LCP better. CP refers to properties that can be used by two [parties] or more, and most of the time for all, including the visitors to the development, such as the private access road leading to the development, or the security guard stations at the main drop-off/pick-up area.

“Meanwhile, LCP is more exclusive, but it can also be used by more than one party, but not for all. For instance, the swimming pool and gym in a hotel component that can be accessed by both the hotel guests and residents in the residential component, but are not open to the shoppers from the retail component or workers at the office block.” With a clearer understanding of CP and LCP, the next question is who should pay for these properties’ day-to-day operational cost and regular maintenance fees, particularly for parcel owners who do not get to use certain LCPs?

Historically, many older mixed-use developments applied a single, uniform maintenance rate across all components. Regardless of whether a parcel owner held a high-traffic retail lot or a quiet residential unit, every owner paid the same rate to maintain all CPs and LCPs.

However, as stratified properties expanded, mixed-use developments became a dominant market trend, and the Strata Management Act 2013 (SMA 2013) was enforced in 2015, owners in mixed-use developments became far more conscious of financial equity. They began questioning the fairness of flat rates and why their maintenance fees should subsidise facilities they did not use.

As a result, developers put greater care into the planning of such projects by bringing in land surveyors and professional property managers during the early design stage, ensuring that service charges are fair to all parcel owners and that long-term building management is equitable, transparent and sustainable.

Determining the precise service charge for distinct components in a mixed-use development relies on mathematical calculations tied to actual operational expenses and share unit allocations, according to HBMK associate director Paris Tian.

“Calculating the base rate requires a clear formula, which is taking the total budgeted expenses for a specific component and dividing it by the total aggregate share units assigned to that development or parcel group,” she explains. “The land surveyor assigns share units based on formulas established under the First Schedule of the SMA. Once these share units are locked, property managers design separate, itemised budgets for every distinct component, alongside a master budget reserved strictly for shared common property.”

To understand how this operates in practice, Tian gives an example of a mixed-use development that comprises a residential tower, a retail mall and a boutique hotel, where the residential component demands exclusive facilities such as a swimming pool, sauna, extra lifts and dedicated floor concierges, while the retail mall requires continuous high-traffic cleaning, multi-zone central air conditioning and high-volume security in commercial corridors.

“Assuming the total joint common expenses, such as perimeter lighting, external security and structural gondola maintenance, amount to RM100,000 per month, that cost is distributed across all components according to the aggregate share units of the entire project,” she explains. 

“However, the RM15,000 required monthly to service the residential swimming pool, gym and private lifts is strictly billed to the residential budget alone. Retail owners and hotel operators do not pay a single cent towards the pool.”

In simple terms, in order to come up with the service charge rate, total expenses are divided by the total aggregate share units for that development.

“When we prepare the budget, we won’t put the pool expenses into the retail budget. Residential will have one budget, retail will have one budget, and then overall, we’ll have one shared common property budget. In the budget, you will have very detailed line items to show exactly what expenses are related to each component,” Tian explains.

She adds that allocating localised expenses rather than lumping operational overheads into one pool ensures that specialised demands, such as extra security guards for residential floors, are accurately reflected in individual rates.

Meanwhile, the manpower and services for each component are determined by the allocation of maintenance costs.

“How we actually put that into the services usually comes down to the allocation of cost. For example, you need five security guards for your retail, but for residential, you probably need 10 to 20 security guards because you have more facilities involved. Therefore, all these maintenance costs will be put into the budget for the residential component and not in the retail component. Then we divide that across the board with the share units [to get the service charge rate],” HBMK senior area manager Kathrine Yong elaborates.

This systematic allocation dispels the notion that maintenance fees are arbitrarily set, rooting them instead in financial accounting and operational necessity, she adds.

“The basic principle is setting a rate that is justifiable. If we can justify the rate, then it is correct, and we are applying the correct charges,” Yong emphasises. “A condominium cannot pay for a hotel’s expenses, a hotel cannot pay for a retail mall’s expenses, and a mall cannot pay for car park operations, even if it’s only 10 sen. It’s not a matter of money, but whether it is correct or not. It’s a matter of principle and whether you can justify the rate.”

Establishing differential maintenance charge rates presents operational challenges in practice, often involving parcel owner ignorance regarding ownership boundaries. Residential owners, frequently the most vocal group in stratified mixed-use developments, often express anxiety that their maintenance fees are secretly subsidising commercial operations.

“Miscalculations in mixed-use developments usually go back to a conceptual misunderstanding of how maintenance fees are derived, because generally, people don’t read the details regarding what is CP and what is LCP,” Yong says. “People always misunderstand and think that everything will be lumped together and it is human nature to be calculative. Some owners will question the MO (management office), ‘Am I paying for your shopping mall air conditioning?’ But the fact is, if I took all of your residential component income, it wouldn’t even cover 20% of the mall’s expenses.”

Beyond owner perceptions, physical building engineering and mechanical and electrical (M&E) layouts present substantial operational hurdles, with a number of older developments having intertwined utility networks where electricity switch rooms, water sub-meters and air conditioning chillers were put in centralised locations without designated sub-metering.

“Today in newer mixed-use developments, the calculation can be as accurate as 100%, as property developers are more aware of the importance of having segregated M&E plans for different components, especially power and water supply,” Yong points out.

“Previously, they weren’t bothered so much. As long as the power supply came in, they were fine. It is why there were situations like the switch room for the residential component being located inside the hotel tower. This may be a small matter to the builder but to the property manager, it is a long-term operational hurdle that we need to deal with.”

Meanwhile, for older mixed-use developments that still have a single maintenance rate, transitioning to a differential rate structure demands careful preparation. While operating on a historical single rate may not directly breach legacy laws, it can harm long-term building upkeep and trigger friction among parcel owners, according to Low.

“A lot of the older mixed-use developments are still using a single rate, which was required under the law at the time when [they were] built,” he explains. “Lumping it together damages the harmony of the entire development in the long run, which goes against the spirit of the Act. For long-term fairness and harmony, they should make a change. Since they can’t do it on their own, they need to seek professional help to audit the accounts, clarify cost allocations and adjust the budgets.”

He stresses that achieving this shift in older buildings requires constant communication, structured town hall sessions and full financial transparency rather than relying solely on formal annual general meetings (AGMs).

“In older developments [that wish to have different charge rates], we need to explain line by line and engage residents through town halls and meetings, not just at the AGM. You need to be very patient in educating and communicating with them, giving them examples like ‘this security guard you pay for doesn’t serve your section, so why should you pay for it’,” says Low.

“It’s a challenging and long process, because all it takes is one strata owner who refuses to understand to derail the initiative. After all, it boils down to communication.”

Ultimately, the setting of service charge rates in mixed-use developments cannot be based on rigid formulas alone; it must be balanced with fairness, financial transparency and reasonable justification that reflect the spirit of the SMA, according to Low.

“The law was designed to foster community harmony and protect property values, outcomes that are difficult to achieve when financial allocations are perceived as inequitable.”

He adds that under this ecosystem, the property developer is responsible for the “hardware” — constructing physical facilities and routing M&E lines properly, while the property manager handles the “software” — executing daily operations, managing transparent budgets, enforcing by-laws and educating parcel owners.

“We need to work as a team to understand the product details and set accurate budgets. Anyone can build a mixed-use development by copying physical designs from project to project, but the software — the operational management — cannot be copied because every mixed-use development has its own unique DNA.”

He says a professional property manager must provide clear guidance, facilitate open negotiations and caution parcel owners against compromising management quality for lower rates.

“When a developer engages us, we establish the charges for all required services based on the built product, such as the number of lifts, swimming pools, power consumption and landscaping,” he explains. “Upholding the principle of a justifiable maintenance fee requires hard work. Sometimes, we have to stand our ground with professional owners, such as lawyers or teachers, to ensure the budget line items are realistic — neither underestimated nor overestimated. When fees are justifiable, owners accept them.”

Looking ahead, mixed-use developments will remain highly sought after in Malaysia due to their convenience and alignment with modern lifestyle preferences, according to Low. “Developers are demonstrating greater awareness by engaging operational experts during the planning stage to structure management frameworks early.”

Low highlights, however, that existing statutory frameworks require modernisation, as over a decade has passed since there has been any substantial statutory update to the SMA.

“As integrated real estate designs become more complex, the legislation must be updated to resolve remaining grey areas, eliminate legal ambiguities and better support the next generation of stratified developments,” he concludes.

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