Private Caveats 101

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What happens when you decide to sell piece of land and found out that the sale cannot proceed due to a private caveat lodged over your land? Read on to find out more about private caveats.

A private caveat is a legal notice entered by an individual to protect their claim on a piece of land.

Generally, a private caveat is entered to:

  1. Preserve the land in its existing state until the dispute on the title or interest in land between competing parties is settled in court;
  2. Protect an individual’s claim over the land;
  3. Provide a heads up to potential land buyer(s) of one’s interest on the land.

So what happens when you lodge a private caveat on a piece of land?

Once a private caveat is successfully lodged, the land in question cannot be dealt with in any way until and unless the caveat is removed. In legal terms, the person who lodges a private caveat is called a Caveator and the person whose land is affected by such a caveat is called a Caveatee.

Who can enter a Private Caveat?

Under Section 323(1) National Land Code, there are only three instances whereby a person can lodge a private caveat:

  1. A person who is claiming title or interest to the land;
  2. A person who is claiming beneficial title to the land; and
  3. A person claiming on behalf of a minor for the beneficial title of the land.

Persons who are eligible to lodge a private caveat, in short, have a “caveatable interest” in the said piece of land (Luggage Distributors (M) Sdn Bhd v Tan Hor Teng @ Tan Tien Chi & Anor [1995] 3 CLJ 520).

For better understanding of what constitutes caveatable interests, here’s some simple examples to help you:

Caveatable Interests

  1. You have purchased a property via a valid SPA and you have paid the prerequisite deposit for the property (Macon Engineers Bhd v Goh Hooi Yin [1976] 2 MLJ 53).
  2. You have beneficial interest in a property that has been registered under a name other than yours (Chin Cheng Hong v Hameed & Ors [1954] 1 MLJ 169).
  3. You are a chargor of a property pending registration of the charge (mostly applicable to banks and financial institutions) (Standard Chartered Bank v Yap Sing Yoke & Ors [1989] 2 MLJ 49).
  4. You have initiated legal action under the National Land Code for a declaratory decree affecting your rights over the property (J Raju v Kwong Yik Bank & Ors [1994] 2 MLJ 408).

Non Caveatable Interests

  1. As the registered proprietor of a property, you will no longer have a caveatable interest unless you can establish a set of circumstances over and above that of his status as a registered proprietor (Affin Bank Bhd v Dato Mohamed Bin Embong [2002] 1 MLJ 475).
  2. A claim for return of forfeited deposit after the termination of an SPA or before the conclusion of an SPA will not give rise to any caveatable interest (EM Buxton & Anor v Packaging Specialist Sdn Bhd [1987] 1 MLJ 342).
  3. Where the loan sum for the charged property has been fully serviced, the chargor will no longer have a caveatable interest in the property.
  4. Judgment creditors  whose claim against the proprietor is one of recovery of debt do not have caveatable interests in properties (Standard Chartered Bank v Yap Sing Yoke & Ors [1989] 2 MLJ 49).
  5. Registration of caveatable interests cannot be taken as a recourse to recover the balance purchase price due and owing under an SPA (Chai Kim Chong v Barnwood Sdn Bhd [1994] 2 MLJ 56).

Those who are entitled to a caveatable interest can lodge his/her caveatable interest by  filing an application under Form 19B of the National Land Code and paying the prescribed fees together with a statutory declaration affirming the claim at the District Land Office where the property is located.

However, do note that section 328 of the National Land Code provides that private caveats will automatically lapse after 6 years from the lodgment date unless it is renewed. Private caveats can only be renewed if (Luggage Distributors (M) Sdn Bhd v Tan Hor Teng @ Tan Tien Chi & Anor [1995] 3 CLJ 520):

  1. there is a subsisting caveatable interest over the property in question;
  2. there is a triable issue relating to the interest in the property; or
  3. there is an ongoing legal dispute regarding the rights to the property in question.

How to remove a Private Caveat?

Prior to its expiry, a private caveat can also be removed by:

  1. the Caveator himself (Section 325 NLC);
  2. a person with registered title or interest to the property in question (section 326 NLC); or
  3. a person who has been authorized by the Court to remove such caveat, more often than not on grounds that the private caveat lodged has adversely affected his/her rights or interest to the said property in question (Section 327 NLC).

The onus is on the Caveator to justify why a private caveat should be lodged or renewed.

Caveators who have wrongly or without valid justification lodged or fail to withdraw a private caveat will be liable to pay compensation to the Caveatee or any person adversely affected by the lodgment of such private caveat (section 329 NLC).

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