The High Court Ruled Unpaid Maintenance Charges Do Not Justify Property Caveats Lodged by Management Corporation

In Ridzuan Sulaiman v Perbadanan Pengurusan Subang Square [2025] CLJU 225, the Shah Alam High Court declared that a management corporation’s caveat lodged based solely on unpaid maintenance charges was wrongful and without reasonable cause. The court held that contractual debt for maintenance charges does not constitute a caveatable interest under the National Land Code 1965, and ordered damages to be assessed for losses suffered by the property owner, including the collapse of an over a million-sale transaction. This decision reinforces that management corporations cannot use private caveats as leverage to secure payment of maintenance arrears, as such debts do not give rise to any registrable interest in the property itself.

This decision serves as a crucial reminder that not all interests in property qualify as caveatable interests under section 323(1) of the National Land Code. Property stakeholders—whether creditors, management corporations, or service providers—must carefully assess whether their claim constitutes a registrable interest or claim to title before lodging a caveat. The court’s ruling reinforces the principle established in Dubon Bhd v Wisma Cosway Management Corporation that allegedly owed monetary debts, even those arising from statutory obligations like maintenance charges under the Strata Management Act 2013, do not simply constitute caveatable interests. A debt is fundamentally a contractual or personal claim that does not confer any proprietary right in the land itself. Parties who lodge caveats based solely on debt—without any underlying security interest, charge, or other registrable encumbrance—risk not only having the caveat removed but also facing liability for substantial damages under section 329(1) of the NLC. This includes compensation for collapsed transactions, loss of sale opportunities, and diminution in property value, as demonstrated by the Plaintiff’s loss of a RM1.6 million sale and subsequent disposal at RM945,000. The assessment of such damages follows tort principles, where foreseeability is judged by constructive rather than actual knowledge, and the tortfeasor must take their victim as they find them (talem qualem). Management corporations and other potential caveators should therefore pursue proper debt recovery channels—such as tribunal claims, court judgments, and enforcement proceedings—rather than attempting to use the caveat system as an improper debt collection mechanism or bargaining chip.

Background of the Case

The Plaintiff purchased a strata unit at East Wing, Subang Square in 1999. In February 2022, he initiated proceedings to transfer the strata title from MBPJ to his name. On 4 January 2022, Perbadanan Pengurusan Subang Square (“The Management Corporation”) lodged a private caveat based on alleged unpaid maintenance charges totaling RM61,546.15. The Defendant explicitly acknowledged the caveat was entered to prevent any transaction on the property until the debt was settled.

On 13 April 2022, the Plaintiff secured a purchaser willing to buy the property for RM1.6 million. However, after a title search on 14 April 2022 revealed the caveat, the purchaser allegedly withdrew from the transaction by 29 April 2022. The caveat remained on the property for over 18 months before being removed on 21 August 2023, after the Plaintiff paid RM29,385.83 as determined by the Housing and Strata Management Tribunal. The Plaintiff eventually sold the property to another purchaser for RM945,000 on 22 August 2024—significantly less than the earlier offer.

Court Rulings

High Court: Ordered removal of the caveat, with damages to be assessed. The court found that

1. No Caveatable Interest

The court found that The Management Corporation never had a caveatable interest in the property. Relying on Dubon Bhd v Wisma Cosway Management Corporation [2020] 6 CLJ 589, the court held that:

• A debt arising from unpaid maintenance charges is purely a contractual claim
• Section 77 of the Strata Management Act 2013 does not elevate maintenance fees to a secured debt or registrable interest
• Under section 323(1) of the National Land Code, only persons claiming title, registrable interest, or rights to such interests may lodge caveats
• The defendant could claim neither title nor any registrable interest based on a debt

2. Wrongful Entry Without Reasonable Cause

The court declared that the caveat was lodged wrongfully and without reasonable cause, as the management corporation had no legal basis to enter it.

3. Damages to be Assessed

The court ordered damages to be assessed in a separate damages assessment proeedings under section 329(1) of the National Land Code, finding:

• Sufficient evidence existed that the plaintiff suffered damage from the cancelled RM1.6 million transaction
• Proof of damages in tort involves causation, foreseeability, and mitigation—not matters readily resolved by summary determination
• Foreseeability does not require actual knowledge of specific loss; constructive knowledge suffices
• It is reasonably foreseeable that a wrongfully entered caveat would cause loss of interest by a prospective purchaser
• No requirement exists for specific notice of a pending sale when demanding caveat removal
• The court distinguished Antonina Marleen Yarendra v Chai Wei Chung [2017] CLJU 536, noting that proof of damages can be determined during assessment proceedings if damages cannot be summarily ruled out when liability is established

4. Injunction Request Denied

The court declined to grant a permanent injunction restraining future caveats, as the Plaintiff had subsequently sold the property and no longer had an interest requiring protection.

Key Takeaways

1. For Property Owners: If a wrongful caveat is lodged, you may be entitled to compensation for losses including failed sale transactions.
2. For Management Corporations: Unpaid maintenance charges do not create a caveatable interest under the National Land Code. Lodging caveats without proper caveatable interest exposes the corporation to significant liability for damages under section 329(1) NLC.
3. Caveatable Interest Must Be Registrable: Only persons claiming title to land, registrable interest in land, or rights to such title or interest may lodge caveats under section 323(1) of the National Land Code. Purely contractual claims and monetary debts—even those arising from statutory obligations—do not constitute caveatable interests.