High Court says court auction buyers not automatically liable for previous owners' strata arrears

KUALA LUMPUR (July 20): Buyers of strata properties acquired through court-ordered auctions are not, in this case, automatically liable for maintenance charges and sinking fund arrears left by previous owners, the High Court ruled in a recent judgment, offering judicial guidance on the scope of liability under the Strata Management Act 2013.

In the judgment, Judicial Commissioner Moh Kok Wai held that the law does not permit innocent purchasers to inherit the financial liabilities of unrelated parties solely because they acquired a property through a court-supervised sale.

He said imposing undisclosed historical liabilities on auction purchasers would undermine the certainty and finality expected of court-ordered sales, reducing confidence in the judicial auction process.

The dispute arose between the management corporation (MC) of Megan Avenue 1 in Kuala Lumpur and Rajinder Singh, who purchased an office unit for RM1.62 million at a High Court e-auction in January 2024 after its owner, Forward Wind Sdn Bhd, defaulted on a bank loan.

Before it was wound up due to insolvency, Forward Wind had accumulated more than RM126,000 in unpaid maintenance charges, sinking fund contributions and other fees. After Rajinder became the registered owner, the MC demanded more than RM182,000 in arrears incurred by the former owner.

The MC argued that the outstanding sums ran with the property and were recoverable from Rajinder as a "successor-in-title" under the Strata Management Act 2013.

Rajinder argued that, because he acquired the unit through a court-ordered auction rather than a voluntary transfer, he should only be liable for maintenance charges incurred after he became the registered owner.

Moh agreed, holding that a purchaser at a court-ordered foreclosure sale does not fall within the Act's definition of a "successor-in-title".

He said interpreting the provision otherwise would unfairly burden purchasers with liabilities they neither incurred nor had any realistic opportunity to avoid, despite having no contractual relationship with the previous owner.

While acknowledging that the previous owner's insolvency meant the MC and other parcel owners would ultimately bear the financial consequences, Moh said those losses could not simply be transferred to an unrelated third party.

"The law, in my judgment, does not permit such a crossing," he said, adding that the Act "was enacted to bring order to communal living, not to ensnare innocent third parties in the financial wreckage of strangers."

The High Court dismissed the MC's originating summons and awarded RM10,000 in costs to Rajinder.

The MC was represented by N Vanaja and Tan Jee Sern, while Harjinder Singh, M Tanusha and Premjit Singh appeared for Rajinder.

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