Do auction buyers inherit sellers’ strata arrears?

This article appeared in the Aug 13, 2026 issue of the monthly print edition. Subscribe now.

A recent High Court ruling has just drawn a sharp new line around a question that has long unsettled auction buyers and management corporations alike: When a bank forecloses on a defaulting owner’s unit and sells it off at auction, does he also, along with the keys, inherit the baggage of years of unpaid maintenance bills?

In a case involving more than RM268,000 in disputed arrears, the Court came down firmly on the side of the purchaser. But as this article explains, the relief the decision offers is narrower than the headlines might suggest.

An auction property may be attractive because the price is typically lower than market value. However, a buyer must also consider hidden risks, including unpaid maintenance charges and sinking fund contributions left behind by the previous owner.

In the Kuala Lumpur High Court decision, Perbadanan Pengurusan Megan Avenue 1 vs Harjinder Singh a/l Kuldip Singh (Originating Summons No. WA-24NCVC-5198-10/2025), the Court held that the purchaser who acquired a strata property through a High Court e-Auction was not liable for the historical strata arrears incurred by the previous proprietor.

In my view, the decision is important, but it does not mean that every auction purchaser is automatically free from the previous owner’s debts.

What happened?

The property was an office unit at Megan Avenue 1, Jalan Tun Razak, Kuala Lumpur. Its previous proprietor, Oryx Energy Consultants Sdn Bhd, had accumulated maintenance charges, sinking fund contributions, water charges and late payment interest.

On Jan 17, 2019, the Management Corporation (MC) obtained a Strata Management Tribunal award of RM95,957.97, together with costs of RM250, against Oryx Energy. However, Oryx Energy was later wound up on Oct 13, 2020, and at the time of the proceedings, the MC had received no dividend or recovery from the liquidation.

RHB Islamic Bank Bhd then commenced foreclosure proceedings and obtained an order for sale from the High Court.

On Aug 8, 2024, the defendant successfully bid for the property through the High Court e-Auction system. He subsequently became the registered proprietor on June 23, 2025.

The MC later demanded RM268,571.54 from him. This comprised RM174,047.15 in accrued charges and RM94,524.39 in interest, substantially relating to the period before he became the registered proprietor.

Why did the MC pursue the buyer?

The MC relied on Sections 60(4) and 61(4) of the Strata Management Act 2013 (SMA).

These provisions allow maintenance charges and sinking fund contributions to be recovered from the proprietor of a parcel or the proprietor’s “successor-in-title”.

The MC argued that once the purchaser became the registered proprietor, he became Oryx Energy’s successor-in-title and was responsible for the old arrears.

The argument was not without legal basis. In Brightvite Sdn Bhd vs Pantai Towers MC & Another Appeal [2019] 2 CLJ 439, the Court of Appeal held that outstanding management charges could be recovered from either the previous proprietor or the successor-in-title.

The debt was treated as one debt and was not divided according to each person’s period of ownership.

The real issue was, therefore, whether this particular court-auction purchaser was legally Oryx Energy’s “successor-in-title”.

Why was this case different?

The SMA does not define “successor-in-title”.

The High Court therefore examined how the purchaser obtained the property.

In an ordinary sale, a buyer typically deals directly with the previous owner. The buyer may require the seller to settle the outstanding charges, adjust the purchase price or provide an indemnity.

That did not happen here. Oryx Energy was already in liquidation and was not acting as a willing seller. Instead, the property was sold through a foreclosure process conducted under the authority and supervision of the High Court.

The purchaser was also a complete stranger to Oryx Energy. There was no allegation of collusion, family relationship or corporate connection, and no evidence that he had actual knowledge of the historical arrears.

This was different from the Brightvite-Pantai Towers MC case, where the Court of Appeal noted a corporate connection between one of the purchasers and the previous proprietor.

In my view, however, the more important distinction was the legal nature of the judicial sale itself.

A judicial sale is not an ordinary sale

The High Court relied on the Federal Court decision in AmBank (M) Bhd vs AIM Edition Sdn Bhd [2022] 1 CLJ 831.

The Federal Court explained that a judicial sale under the National Land Code 1965 (NLC) is not an ordinary contract between the chargee bank and the successful bidder. It is a sale carried out under the authority of the Court through a process created by statute.

The purchaser therefore obtained the property through the judicial process, rather than through a voluntary transfer negotiated with the previous owner.

The High Court held that the purchaser did not voluntarily step into Oryx Energy’s position.

His title passed by operation of law following the enforcement of the bank’s registered charge.

Accordingly, the High Court held that he was not Oryx Energy’s successor-in-title for the historical maintenance charges and sinking fund contributions.

Balancing both sides

The Court recognised that an MC depends on maintenance charges and sinking fund contributions to maintain the development. When one proprietor fails to pay, the financial shortfall may affect the other proprietors.

At the same time, a person who buys through a court-supervised process should not unexpectedly be required to pay a substantial historical debt incurred by someone with whom he had no relationship.

The Court considered that imposing undisclosed historical liabilities on such a purchaser, in the absence of clear statutory wording, could undermine the certainty, finality and commercial reliability of judicial sales.

Does the decision apply to every auction?

No.

But it is worth being precise about why the purchaser escaped liability, because the same reasoning does not travel automatically to every other route by which a strata parcel changes hands at auction.

The Court’s decision turned on the unique legal character of a true judicial sale — a sale by a chargee bank, conducted pursuant to an order for sale granted by the High Court under the NLC. As the Federal Court explained in the AmBank-AIM Edition case, such a sale does not arise from any contract between the bank and the successful bidder. It is a creature of statute, carried out under the Court’s own authority. Because of that, the purchaser could not be said to have voluntarily stepped into the previous proprietor’s shoes, and so could not be treated as a “successor-in-title” for the purposes of Sections 60(4) and 61(4) of the SMA.

In cases involving voluntary succession in title arising from a private commercial transfer, the previous legal position established by the Court of Appeal in the Brightvite-Pantai Towers MC case continues to apply. Under that position, Sections 60(4) and 61(4) of the SMA treat the arrears as a single, undivided statutory debt that may be recovered from either the defaulting proprietor or his successor-in-title.

Liability is not apportioned according to when the arrears accrued or when the successor acquired the property.

However, the threshold question remains whether the particular purchaser is legally a successor-in-title.

The present judgment did not determine the legal position for every other form of auction or transfer. Brightvite remains applicable to voluntary succession in title arising from a private commercial transfer. However, the position of other non-judicial sales or auctions will depend on the legal nature of the transaction and whether the purchaser is legally a successor-in-title.

(For clarity, “LACA” refers to a Loan Agreement Cum Assignment. A LACA sale should not be described as a public auction conducted by the Land Administrator. The position relating to LACA sales was not considered or determined in this judgment.)

The Court also noted that the purchaser had no corporate or familial connection with the previous proprietor and no actual knowledge of the historical arrears. However, the Court regarded the legal nature of the judicial sale as the more fundamental distinction. The judgment did not decide that connection or knowledge alone would automatically make a purchaser at a genuine judicial sale a successor-in-title.

For purchasers, due diligence remains essential

Before bidding, a purchaser should identify the type of auction, review the Proclamation of Sale and Conditions of Sale, and check the latest maintenance account, sinking fund contributions, quit rent, assessment, utilities and other liabilities.

In the Megan Avenue 1-Harjinder Singh case, the MC did bring up the purchaser’s alleged failure to obtain a certificate under Section 73 of the SMA, which would have delineated the outstanding dues.

However, the Court did not decide the case on that alleged omission. It resolved the dispute based on the meaning of “successor-in-title” under Sections 60(4) and 61(4) of the SMA.

Conclusion

The following key points arise from the decision: 1. A true judicial sale — where a chargee bank sells under an order for sale granted by the Court pursuant to the NLC — is legally different from an ordinary sale between a willing seller and a purchaser. The title passes by operation of law, under the authority of the Court, rather than through a voluntary transfer or contract with the previous proprietor.

2. On the specific facts of this case, the purchaser acquired the property through such a judicial sale, had no connection with the previous proprietor, and had no knowledge of the arrears. He was therefore held not to be Oryx Energy’s successor-in-title for the purposes of Sections 60(4) and 61(4) of the SMA, and was not liable for the historical arrears.

3. This is a fact-sensitive decision concerning a court-supervised judicial sale, not a general rule applicable to every auction. The judgment did not determine the position relating to LACA sales, other non-judicial auctions or sales by liquidators. Although the purchaser’s lack of connection with the previous proprietor and lack of actual knowledge formed part of the factual matrix, the legal nature of the judicial sale was the more fundamental distinction.

4. The previous legal position in the Brightvite-Pantai Towers MC remains binding, where the purchaser is legally a successor-in-title, particularly in cases involving voluntary succession arising from a private commercial transfer. Once the purchaser is established to be a successor-in-title, the outstanding maintenance charges and sinking fund contributions constitute a single, undivided statutory debt irrespective of when the arrears accrued.

5. Auction purchasers should still conduct full due diligence — identifying the type of auction, reviewing the Proclamation of Sale and Conditions of Sale, and checking outstanding charges — before bidding. MCs, for their part, should identify the correct party against whom arrears may be recovered, bearing in mind that this decision protects only a narrow category of judicial-sale purchasers.

Disclaimer: The views expressed are the writer’s and do not necessarily reflect EdgeProp’s. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, it is for general information only, and should not be relied upon to make any financial, investment, real estate or legal decisions. The information should not substitute advice from trained professionals, and EdgeProp accepts no liability from decisions made using the information.

This article is written by Datuk George Miranda, a partner at Miranda & Samuel, with over 30 years of experience in property law. He is the author of Property Law (Sweet & Maxwell). His practice covers the full spectrum of property law, acting mainly for property developers, purchasers, landowners and corporate entities in both contentious and non-contentious matters. He can be contacted at [email protected].

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