AirBnB operators going to court
Published on: Friday, September 14, 2018

Kota Kinabalu: Ninety eight owners of The Loft Residences who are operating AirBnB in their serviced apartments have filed a civil suit against the developer, Syarikat Kapasi Sdn Bhd and its management company, WTW Property Services (Sabah) Sdn Bhd in the Sabah and Sarawak High Court.They are suing both for issuing a notice on Aug. 3, this year to cease AirBnB activities and to discontinue all commercial activities related to short-term lodging/rental within 90 days that will end on Nov. 3.

The case will be heard in the High Court here on Oct 8, this year. This may be the first case in Malaysia that will have a far-reaching impact on the AirBnB industry which is emerging in the country, especially in Sabah, following the emphasis by the Government to promote a shared economy.

Among the 631 units in the Loft Residences, at least 200 units are engaged in AirBnB but only 98 owners agreed to sue the developer and its management company.

It was reported on August 11, that a notice was issued by the developer to all owners or tenants of Block A, B, C, D and E to cease all its commercial short-term rental activities within 90 days.

The reasons given are that the "Kota Kinabalu City Hall has declared all such commercial activities in respect of short-term lodging by way of license and not by proper tenancy as illegal" as reported in a local-based online article dated Oct 15, 2017.

Failing to comply with the notice, the developer also stated that it reserves the right to fine offenders after the 90-day period under the House Rules for RM2,000 and RM500 per day if they continue with the AirBnB business and their key access cars will be deactivated.

In the originating summons filed by the 98 plaintiffs, they named Syarikat Kapasi Sdn Bhd as first defendant and the management company, WTW Property Services Sdn Bhd as the second defendant of the case.

The plaintiffs who engaged Norbert Yapp & Associates sought to declare that 'The Loft' is for all intent and purposes a commercial development as well as seeking a declaration that the 631 units at Blocks A,B,C,D,and E of The Loft have been approved by City Hall to be used and occupied as "Service Apartment".

They filed an injunction to restrain both defendants or their agents and/or servants or otherwise howsoever from changing, amending or altering the status of the 631 units of Service Apartment and to seek a declaration that the notice issued to them to cease and discontinue all commercial activities related to short term lodging/rental dated Aug 3 as null and void and no legal effect.

They also filed another injunction requiring both defendants to remove all notices, publications, leaftlets, messages and warnings issued by them or their agents/servants relating to the said notice to cease and discontinue dated on Aug 3, this year.

Based on Affidavit In Support, Alex Chang Yun Fook who is the first plaintiff among the 98 has affirmed that his property cum one of the 631 units in The Loft at Blocks A,B, C, D and E were marketed and sold by the developer as a Service Apartment.

He also stated that it is an undisputed fact that when the developer (1st Defendant) submitted the development plan for the said project for approval by the relevant authorities, the developer had intended the five blocks of apartment (A,B,C, D and E) to be classified as 'Service Apartment'.

The developer has also appointed the second defendant as managing agents to operate and to be in charge of the management of the five blocks of Service Apartment. A 'House Rules' was introduced to govern the occupation and use of the units and the common properties.

On the notice issued by the developer on Aug 3, Chang stated that the developer has attached an online article in the Borneo Post dated Oct 15, 2017 and this is evident that the developer is relying on an online article to justify their purported action.

On the notice that stated the Loft Residences is strictly for residential use and does not qualify for commercial short term lodging as it was not designed and approved for commercial use under the approved development plan, Chang said such statement as bizarre as it is undeniable fact that the developer had submitted the development plan to the local authorities in respect to the five blocks of apartment for approval as Service Apartment.

Furthermore, the plaintiffs verily believed that City Hall would not have issued the two Occupation Certificates if the building plans for the 631 units of service apartment have not been endorsed by the Fire Department. Furthermore, they said it is a commercial development and if the building is classified as a service apartment in a commercial development, then it can also be used or occupied for short term stay purposes.

On imposing fines of RM2,000 and RM500 per day for each of continuation of the breach, the plaintiffs verily believed that the alleged rule under House Rules is against short-term lodging which was implemented by second defendant on Aug 28, 2017 that is contrary to and inconsistent with the status of the 631 units as a Service Apartment and hence is null and void and have no legal effect.

Chang said the plaintiffs also believed that the defendants have no right to deactivate their key access cards to enter their units. - Hayati Dzulkifli


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