Can Your Management Corporation Legally Ban Airbnb?

Can your management corporation legally ban Airbnb in your strata unit? The Court of Appeal says no — not without a special resolution.

Wawasan Raya Sdn Bhd v MARC Service Residence Management Corporation [2025] 4 MLRA 1 (Court of Appeal)

Facts

The MARC Service Residence Management Corporation sought injunctions against approximately 203 parcel owners, alleging that short-term rental (STR) operations breached the development’s house rules, specifically Rule 2.1(a), which restricted units to “private residential purposes” only. The Management Corporation relied on a resolution passed at its sixth annual general meeting imposing a RM200 penalty for each breach.

Only two defendants contested the action: Wawasan Raya Sdn Bhd and Acappella Suite Hotel Sdn Bhd, both of whom operated STR units within the development.

Issues

The Court of Appeal considered two questions:

• Does STR breach any express or implied term of the statutory by-laws under the Strata Management Act 2013 (SMA)?
• Does a management corporation have the power to prohibit STR?

Decision / Court’s Findings

STR is not prohibited by statute

The Court examined the SMA and the Strata Management Regulations 2015 and found no explicit prohibition on STR. Applying the principle in YK Fung Securities Sdn Bhd v James Capel (Far East) Ltd [1997] 2 MLJ 621, that what the law does not forbid, it allows, the Court held that STR is lawful under the statutory scheme.

Management corporations cannot regulate how owners use their own units

Section 59 of the SMA defines the powers and duties of a management corporation. The Court held that these powers do not extend to controlling the use or occupation of individual parcels. Accordingly, the Management Corporation had no authority to impose a blanket ban on STR through house rules.

The land title prevails

The development was designated as a high-rise commercial building approved for serviced apartments. Even if STR were classified as commercial use, the land title expressly permitted such activity. House rules cannot restrict usage beyond what the title conditions allow.

Special resolutions govern

The Court noted that Resolution No. 3, passed by special resolution under Section 70(2) of the SMA, and Rule 2.1(e) of the House Rules expressly permitted STR in accordance with COB KL’s guidelines. As a later special-resolution provision, it superseded the earlier restriction in Rule 2.1(a).

Conflicting contractual clauses are void

Section 148 of the SMA renders void any contractual provision relating to building management or maintenance that conflicts with the Act. Any Deed of Mutual Covenant clause purporting to restrict STR must therefore comply with the statutory framework, or it will not be enforceable.

Decision Made

• The Court of Appeal allowed the appeal.
• The High Court’s injunction against STR was set aside.
• The Court confirmed that aggrieved parties retain recourse through the tort of private nuisance if STR operations cause disturbance, but a blanket contractual ban is not the proper remedy.

Key Takeaways

For unit owners: You are not prohibited by law from conducting short-term rentals in your strata unit. A management corporation cannot unilaterally ban STR through house rules or a Deed of Mutual Covenant. Any restriction must be passed by special resolution at a general meeting.

For management corporations: Your powers flow from the SMA, not from private covenants or self-drafted house rules. If you wish to regulate STR, follow the statutory process: table a special resolution, obtain the required support, and ensure the resolution does not conflict with the Act.

For developers: Clauses in Sale and Purchase Agreements and Deeds of Mutual Covenant that attempt to restrict land use beyond what the title permits are vulnerable to challenge under Section 148 of the SMA.

Practical significance: This decision brings long-awaited clarity to a space that has been shaped more by developer policies and informal building practices than by statute. The Court has reasserted the primacy of the SMA, and confirmed that where statute and private covenant conflict, statute wins.