Rent unpaid. Which company must pay?
Can Property Buyers Recover Unpaid Rent from a Developer When Another Company Signed the Tenancy?
You buy a shop lot with a rental arrangement. One company sells the property and another promises to pay rent. When payments stop, can you recover the unpaid rent from the developer?
Facts and decision
In Capital City Property Sdn Bhd v. Teh Swee Neo & Anor [2026] 3 MLRA 493, purchasers of 97 mall units pursued unpaid rent. The High Court held both the tenant company and developer liable for RM9,970,692.81. The developer appealed.
On 9 February 2026, the Court of Appeal set aside the developer’s liability. The rent judgment against the tenant company remained intact because it had not appealed.
The court required proof of actual fraud or equitable/constructive fraud to transfer the tenant company’s liability to the developer by piercing the corporate veil. That means going beyond a company’s separate legal identity to impose its liability on another. Control and corporate connections alone did not satisfy the test.
The necessary fraud was not pleaded and proved. The agreements were genuine, the tenant conducted business, and there was no evidence that it was insolvent or that the judgment against it could not be enforced. The documents also did not establish a developer’s guarantee of the rent.
What should buyers and businesses take away?
1. Map the promises before signing.
Put the seller, tenant and any proposed guarantor on one page, using their full company names and registration numbers. Beside each name, record the payment or obligation it undertakes. Ask for any promised rental support to be identified clearly in the documents you will sign.
2. Check what happens when rent stops.
Before committing your savings, discuss the payment timetable, security, default process and available financial information about the proposed tenant. Ask who will answer a demand and what documents support the promised protection. Keep copies of the sales material alongside the signed agreements for review.
3. Build a claim from the records.
Prepare a schedule of rent due, payments received and the outstanding balance. Keep notices, correspondence and the full agreements together. If you believe another company should also answer for the debt, identify its particular promise or conduct and the evidence supporting your position.
In our view, the first practical step is to separate the commercial presentation of the deal from the obligations each company actually undertook. That makes both contract review and a later recovery strategy more focused.
A review of the sale documents, tenancy and payment records can help you assess the next step when promised rental income stops.
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