This article first appeared in City & Country, The Edge Malaysia Weekly on July 11, 2022 - July 17, 2022

If you have bought or sold a piece of property, you would probably have heard of the word “caveat”. However, many people do not know what a caveat means in the legal context, often leaving their lawyers to sort out what they consider to be legal issues in a property transaction.

So, what is a caveat? PPC International Sdn Bhd managing director Datuk Siders Sittampalam explains that a caveat is a notice entered onto the title at the land office or registry that prevents the registration of dealings and gives the caveator the opportunity to protect his or her interest in the property. This is to restrain the registered owner from dealings on the property. A dealing refers to any interest in the property that would affect the land, which will be recorded on the certificate of title.

“This is where a caveat, such as a private caveat, acts as a formal legal notice to the world that you have an interest over the land or property. This is to prevent subsequent dealings over the land, hence securing the caveator’s interest, given that the caveator’s consent must be obtained before any dealing can be executed on the subject land,” says Chur Associates founder and managing partner Chris Tan.

Private caveats are recognised under the National Land Code 1965, and a caveat can be created for as long as a proper document of title is issued. “In a secondary sale transaction, a private caveat is commonly lodged to prevent the vendor, who has received a deposit from the purchaser, from entering into another transaction with a third party. Given that the caveat has been lodged after payment of the deposit, subsequent dealings or registration in respect of the land cannot be done. Thus, the purchaser’s interest is protected,” explains Tan.

According to Siders, anyone can enter a private caveat, even without proper legal basis, such as for reasons like debt recovery or as a security when there is an ongoing civil suit. If the owner, however, decides to remove the caveat and take legal action, the caveator has to be aware that he or she may be liable for compensation for any loss or damage sustained.

“One can enter a private caveat under three circumstances — any person/body who is claiming title to or interest in the land, any person/body who is claiming beneficial title to the land and any person/body claiming on behalf of a minor for the beneficial title of the land.”

Tan explains that the application for a private caveat is lodged using Form 19B of the National Land Code, which should state the nature and particulars of the claim. “The Registrar shall, as soon as possible, give effect by entering the caveat applied for. This is done by the endorsement on the register document of title, and the Registrar shall seal the words ‘private caveat’ on the register document of title for the endorsement purpose, together with a statement specifying whether the caveat binds the land itself or an undivided share in the land or a particular interest, person whose application it was entered and the effective date of the private caveat.”

Following the lodgement of a private caveat, Tan states that the Registrar shall serve notice in Form 19A on the proprietor. “Other legal documentations required include a statutory declaration by the applicant or his or her solicitor, description or land plan, as well as registration fee, which is usually capped at RM320 for individual lodgement of caveat in Kuala Lumpur and Selangor.”

The validity of a private caveat is six years from the date it takes effect, says Siders. “However, it can be removed by the registered landowner by submitting Form 19H together with the prescribed fee. The Registrar thereafter shall serve the caveator notice that the caveat shall be removed in Form 19C.”

Siders notes that caveats can be removed if the caveator willingly withdraws the private caveat by submitting Form 19G, which is a notice to withdraw the private caveat, and this may be undertaken through a solicitor. The Registrar may also remove the private caveat with the application by any person whose land or interest is bound by a private caveat.

“One may apply to the High Court under Section 327 [of the National Land Code] for an order to remove the caveat. In this case, the plaintiff will file an originating summons that is accompanied by an affidavit in support to the court. After an exchange of the affidavits, both parties will be heard by the judge and a decision will be pronounced once closing submissions have been made.”

Consequently, in a sub-sale case where the purchaser is a cash buyer and the land is free from encumbrances, Tan strongly encourages the purchaser to lodge a private caveat to protect his or her interest over the land concerned. “This is because after the deposit has been paid to the vendor, there is a gap in time to get the land transferred and registered under the purchaser’s name. As such, a private caveat shall be lodged to prevent any further dealings on the land pending transfer,” says Tan.

Siders adds that a private caveat is important for a buyer who has already signed the sale and purchase agreement and paid a 10% deposit to purchase the property as it does not automatically make the buyer the legal owner. Hence, it is advisable to lodge a private caveat to ensure that the buyer has protection against the owner selling it to another party, says Siders.

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