Caveat: A Quick Guide

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Are you finding it difficult to keep up with all the new insights you need to gain in order to make your property transaction a smooth one? People usually buy property for two main reasons, either for their own stay or as an investment. Whichever the purpose is, understanding the basics of property knowledge will simplify your decision-making abilities.

You might come across the word “caveat” when deciding to buy a property, and you might wonder what it means and how it applies. When a person lodges a private caveat in Malaysia, he or she is making an official restriction against a sale elsewhere, essentially stating your right to purchase, on the said property. A caveat on property will be clearly registered and visible to any other parties who conduct a title search for that property at the Land Office. 

In addition, if you lodge a caveat of interest, other parties will not only be prohibited from purchasing the property, but from acquiring an interest in it after you.

Private Caveats are generally entered as follows:

• Preserve the land/property in its existing state until the dispute on the title or interest in the said property between parties is settled in court.
• Protect an individual’s claim over the land/property.
• Provide a heads up to potential land/property buyers of one’s interest on the land.

There are two important types of caveats that are recognized under the National Land Code:

1. 本网站 Registrar Caveat, intended to be utilized in both government and administrative affairs. 
2. The second is the Private Caveat, that is mostly relevant to you as a property owner or buyer. 

In layman’s terms, a caveat is a mechanism to secure your intention to purchase a property. Therefore, if you have a caveat lodged against a property, the owner is prevented from selling to another party. 

Lodging a Private Caveat

Upon lodging a caveat, what happens?

Once a private caveat is successfully lodged, the property 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 property is affected by such a caveat is called a Caveatee.

The National Land Code (NLC) states that: 

The persons and bodies at whose instance a private caveat may be entered are—

(a) any person or body claiming title to, or any registrable interest in, any alienated land or undivided share in any alienated land or any right to such title or interest;

(b) any person or body claiming to be beneficially entitled under any trust affecting any such land or interest; and

(c) the guardian or next friend of any minor claiming to be entitled as mentioned in paragraph (b).

Property Caveat

• This document serves as notice of a legal claim to a piece of property.
• By lodging a caveat, both parties have the chance to assert their interests in court.
• It is not possible to register any other transactions against the title pending the resolution of the caveat.
• In order to lodge another caveat, you must obtain the court’s permission.

Buying or selling a property can be prolonged by this, which acts as a notice to the public that an interest exists in the property.

Caveats can be Entered by Whom?

Entering into a caveat is a major undertaking, since the legal implications are so great and hence, much thought should go into it. You must have a good caveatable interest, for one to be valid in the eyes of the law.

In simpler terms, a caveat interest for property would include scenarios such as having agreed and signed a Sale & Purchase Agreement (SPA), paid an amount such as earnest deposit or had other funds or legal agreements lodged against the property.

Important to also bear in mind is, if you lodge a caveat that is not deemed to be legitimate, you would have to pay compensation to the landowner for any damage or loss they have suffered. This is why you should not rush to lodge caveats on any property you like!

How to Remove a Private Caveat?

It is necessary to follow proper legal procedures in order to erase a caveat from a property. One way to remove a caveat is to apply to the Registrar of Titles in writing and this application requires a supporting certificate signed by a legal practitioner.

Anyone affected by a property caveat can resolve the matter with legal aid. During the court proceedings, it is up to the caveator to provide proof of caveat’s validity. If the court deems the caveat to be invalid, then it will be removed from the property title.

Here’s how to remove a private caveat before its expiration:

1. The Caveator himself, by completing and submitting form 19G. Then the registrar will cancel the entry and notify the caveatee;
2. A person with the registered title or interest to the property in question by using form 19H. Then the caveatee will be reviewed and removed, if it deemed invalid. The effect of which would be two months after notice; 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, National Land Code). 

The onus of responsibility is on the Caveator to justify why a private caveat should be lodged or renewed. Caveators who have wrongly or without valid justification lodged and fail to withdraw a private caveat, will be liable to pay compensation to the Caveatee or any person adversely affected by the lodging of such a private caveat (Section 329, National Land Code).

What can a Property Caveat do?

Delaying a property transaction can be achieved with a property caveat. Lodging one allows time for both parties to apply in court for their interest in the property. Occasionally, a caveat is simply lodged to notify a third party of a claim.

In the event of a breakdown of a relationship, property caveats are often used. A partner may want to claim an interest in a property because they have spent years financially contributing to it. But if the contributing partner’s name is not on the property title, they stand to gain nothing financially out of the property’s sale. In some cases, one partner may want to claim their interest in a property because it is only registered under the name of the other partner. A property caveat can cause a substantial delay in settlement when you add one to your property before or during a real estate transaction.

What is the Duration of a Caveat?

Route of caveat removal takes effect two months following the notice.

Unless extended by a court order, a private caveat expires after six years. Under section 327 of the National Land Code, a caveatee can also challenge a private caveat and have it removed by a court.

How does a Caveat work?

You might have guessed by now that lawyers are an important part of the process. Lodging a caveat is an official statutory instrument, and should include proper legal oversight, to ensure that your caveat is valid and lodged correctly.

To lodge a caveat, use 形式 19B of the National Land Code – Application For Entry Of A Private Caveat. This form requires the following details:

• Name of relevant registrar or land register
• Your own name
• Grounds of your claim to the land or property
• Relevant fee
• Known address of proprietor
• Date and signature
• Witness and signature
• Details of land and property caveat to be lodged against

An application and time at which the caveat was received are recorded by the Registrar of Titles or Land Administration once they have received form 19B.

The document is then lodged against the property’s registered title. The private caveat becomes effective upon registration.

总结

Thus, it has been said that lodging a caveat on a piece of property or land, may seem like a simple thing to do. Nevertheless, it has many legal implications that we must be mindful of. Your lawyer is the right person to advise you in such matters. If you discover there is a caveat associated with your property transaction, seek legal advice. 

It is worth noting that a private caveat will be in force for a period of six years unless it is withdrawn by the caveator, lapses or removed by the Registrar pursuant to an order of the court. Therefore, enlisting the services of a conveyancing lawyer can also safeguard you against the effects of a caveat being used during a property transaction. If the caveat needs to be settled in court, you will have the advantage of receiving legal representation from a professional who is already familiar with the property. Also, ensure all rules of law are followed and that you are well protected in your property purchase.