Who Is Responsible For Outstanding Charges Of Strata Parcels – Original Or Subsequent Purchaser?

1. This article deals with the Management Corporation’s (hereinafter referred to as MC) power to recover and/or claim the outstanding maintenance and sinking fund charges (hereinafter referred to as Charges) from original purchasers and/or subsequent purchasers in respect of their strata parcels.
2. The present law governing the management of strata properties in Malaysia is the Strata Management Act 2013 (hereinafter referred to as SMA). In brief the SMA stipulates that:-
   • The MC is empowered to levy Charges from parcel owners.¹
   • The Charges shall become due and payable to the MC whena resolution to the effect is passed at the general meeting of the MC.²
3. However, the crucial provision of the SMA to be noted by the MC and parcel owners of strata properties in Malaysia is the provision which empowers the MC to recover any outstanding Charges ‘from the proprietors of or his successor in title to the parcel’ via legal proceedings.³
4. When the SMA enables the MC to recover any outstanding Charges ‘from the proprietors of or his successor in title to the parcel’, this simply means:-
   1. The original purchaser is liable for any outstanding Charges in respect of his strata parcel;
   2. If the original purchaser sells his strata parcel to any subsequent purchaser without settling the outstanding Chargers in respect of his said parcel, the subsequent purchaser can be liable for the said outstanding Charges.
5. It is important to bear in mind that this law is not new in Malaysia and was readily available in the previous Strata Titles Act.⁴ Although this provision lends good assistance to MC to solve the problems of defaulter in strata properties, many MCs have not optimized this formidable power to recover Charges.
6. The application of this formidable power bestowed upon the MC, can be better understood by observing the following litigation outcome involving MCs and purchasers which were decided by our Malaysian Courts:-
   1. When an original purchaser sells his unit to a subsequent purchaser, but have not effectuated the change of name to the subsequent purchaser in the strata title register, the original purchaser can still be liable for the outstanding Charges of strata parcel incurred after his sale.⁵
   2. When a new purchaser inherits a strata parcel with outstanding Charges from the original purchaser, the new purchaser is liable to settle the said Charges to the MC. However, the new purchaser has the option to recover the said Charges from the original purchaser.⁶
   3. In a scenario where the MC has sued and obtained a paper judgement against the original proprietor but unable to receive the actual outstanding Charges from the original purchaser due to the fact that the original proprietor has been bankrupt or wound up, the MC can still sue the new purchaser to recover the same outstanding charges caused by the original purchaser.
7. The rationale for the imposition of this broad liability on the part of the original purchaser and the subsequent purchaser is that the outstanding Charges of a strata parcel is viewed as one debt incurred for the said strata parcel and not divisible between the original purchaser and subsequent purchaser. Furthermore, the SMA already presents the opportunity to all prospective purchasers of strata parcels to verify any outstanding Charges in respect of the strata parcel to be purchased by them, by affording them the right to apply for a certificate from the MC confirming the arrears of Charges for the said parcel.⁷ Finally, having this option to recover outstanding Charges from the original purchaser or subsequent purchaser will enable the MCs in Malaysia to disentangle themselves from knots of uncollectible Charges.

WRITTEN BY:

L.S LEONARD
PARTNER
CHAMBERS OF FIRDAUS