Purchasers who acquire strata properties through court-ordered auctions cannot automatically be held responsible for unpaid maintenance charges and sinking fund contributions left behind by previous owners, the High Court has ruled in a decision expected to provide greater clarity for auction property buyers.

Judicial commissioner Moh Kok Wai said the law does not permit innocent purchasers to inherit the financial obligations of former owners simply because they acquired the property through a judicial sale.

The case involved the management corporation (MC) of Megan Avenue 1 in Kuala Lumpur and Rajinder Singh, who successfully purchased an office unit through a High Court e-auction in January 2024 after the previous owner defaulted on its bank loan.

The office unit was previously owned by Forward Wind Sdn Bhd, which had accumulated more than RM126,000 in unpaid maintenance charges, sinking fund contributions and related fees before becoming insolvent and being wound up.

Rajinder bought the property for RM1.62 million and was later registered as the new owner. Following the transfer, the MC sought payment of more than RM182,000 in outstanding charges incurred by the previous owner, arguing that Rajinder was a “successor-in-title” under the Strata Management Act 2013 and therefore liable for the arrears.

Rajinder disputed the claim, maintaining that as the property was acquired through a court-ordered foreclosure sale, he should only be responsible for charges incurred after he became the registered owner.

In dismissing the MC’s application, the court held that a purchaser in a judicial sale does not fall within the Act’s definition of a “successor-in-title”, which applies to voluntary transfers rather than court-ordered sales.

Moh said requiring auction buyers to settle undisclosed historical debts would undermine confidence in court-supervised auctions, where purchasers expect certainty and finality upon acquiring a property.

He added that imposing such liabilities would unfairly burden buyers who had no contractual relationship with the previous owner and no realistic means of discovering or avoiding the outstanding debts.

While acknowledging that the MC and other parcel owners may ultimately bear the financial impact of the previous owner’s insolvency, the judge said such losses cannot simply be shifted to an unrelated third party.

Describing the purpose of the Strata Management Act, Moh said the legislation was intended to facilitate orderly communal living rather than trap innocent purchasers in the financial failures of others.

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

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