Who bears the financial burden of unpaid strata fees now?

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The management corporation and other parcel owners may bear the losses from unpaid strata fees after a court-auction sale

The High Court ruled that a buyer who purchases a strata unit at a court-ordered auction is not automatically required to pay maintenance charges and sinking fund arrears incurred by the previous owner. In the case involving Rajinder Singh’s RM1.62 million purchase of an office unit at Megan Avenue 1, the court indicated that losses from the former owner’s insolvency could fall on the management corporation and other parcel owners. The court also said those liabilities cannot be transferred to an unrelated purchaser.
The court’s ruling excluded the auction buyer from “successor-in-title”
Judicial commissioner Moh Kok Wai held that Rajinder was not a “successor-in-title” under the Strata Management Act 2013. The court reasoned that the unit was acquired through a court-ordered foreclosure sale rather than a voluntary transfer from the previous owner, Forward Wind Sdn Bhd. As a result, Rajinder was not liable for the arrears accumulated before he became the registered owner.
The unpaid arrears were tied to the previous owner’s period
Forward Wind Sdn Bhd had accumulated more than RM126,000 in unpaid maintenance charges, sinking fund contributions, and other fees before it was wound up. After Rajinder became the registered owner, the management corporation demanded he pay more than RM182,000 in arrears incurred by the company. The dispute centred on whether those charges “followed the property” and could be claimed from the new owner.
Insolvency losses may shift to the management corporation and other owners
The court acknowledged that because the former owner was insolvent, the management corporation and other parcel owners might bear the losses. This point addressed the practical effect of the ruling: if the unpaid strata fees cannot be imposed on the unrelated auction purchaser, the financial gap is left within the strata’s stakeholders. The court’s stance was that liabilities cannot be shifted to a buyer who did not incur them and may not have known about them.
The management corporation lost its claim and was ordered to pay costs
The High Court dismissed the management corporation’s originating summons seeking to impose the arrears on Rajinder. The court ordered the management corporation to pay Rajinder RM10,000 in costs. That outcome reinforced that the auction buyer would not inherit the previous owner’s unpaid obligations under the Act’s definition used by the court.

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Who bears the financial burden of unpaid strata fees now?

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