Caveats

A caveat is a formal notice endorsed on a land title of an unregisterable interest in land and it is in the nature of a statutory injunction which has the effect of prohibiting registration endorsement or entry of any instrument or dealing executed by or on behalf of the registered proprietor.

The effect of the caveat is to give notice to the world that the person entering the caveat, the caveator, has a claim to an interest in the land or title.

It should be noted that the entry of a caveat does not enhance the caveator’s claim or interest on the said land. It only shows that the caveator has an interest in the land and prohibits any further dealings on the land until the caveat is removed.

Under the National Land Code 1965, there are four different types of caveats namely:

Private caveat:

The National Land Code pursuant to section 323 provides that a private caveat may be entered at the instance of a person who:

1. (b)Claims title, or has any registrable interest in, any alienated land or undivided share in any alienated land or any right to such right or interest;
2. (c) Claims to be beneficially entitled under any trust affecting any such land or interest; and
3. (d) Is the guardian or next friend of any minor who claims to be entitled to paragraph (b) above.

Once a private caveat is lodged to bind the land itself or an undivided share, it shall prohibit any endorsement or entry on the register document of title thereto of:

1. (a) Any instrument of dealing executed by or on behalf of the proprietor thereof, and any certificate of sale relating to the land;
2. (b) Any claim to the benefit of any tenancy exempt from registration granted by the said proprietor;
3. (c) Any lien-holder’s caveat in respect thereof.

It should be noted that so long as there is a claim in respect to part of the land, the caveat binds the whole land and where the claim is in respect of an undivided share in the land, the caveat binds the whole of the undivided share in the land.

A caveat is a temporary measure to protect the rights with regards to the land and it is not a remedy by itself. As an illustration, under the law, so long as there is a valid agreement in existence for the sale of land, the purchaser is entitled to lodge a private caveat to protect his rights under the agreement and later sue for specific performance in the event there is a breach of the agreement by the landowner.

Since no consent of any person or body is necessary for the lodgement of a private caveat there exists a possibility that it can be lodged on illegitimate grounds. As such the law provides that a caveat entered wrongfully or without reasonable grounds can be removed and if the caveator fails to withdraw accordingly, the person who lodged the caveat shall be liable to pay compensation to the landowner or any person or body who suffers as a result o the lodgement of the caveat.

The private caveat continues to be in force for a period of six years after which it automatically lapses.

Registrar’s caveat:

A registrar’s caveat may be entered in respect of any land wherever such action appears to the registrar to be necessary or desirable, as in the flowing instances:

1. (a) For the prevention of fraud or improper dealing;
2. (b) For the protection or interest of:
   1. (i) The federation or the state authority
   2. (ii) Any person who in his opinion under the disability of being a minor, mental disorder or unsoundness of mind, or is shown to his satisfaction to be absent from the federation; or
3. (c) By reason of some error appearing to him to have been made in the register or issue document of title to the land or any other instrument relating thereto.

Lien holder’s caveat:

Any person or body may enter a lien holder’s caveat if there is an issued document of title which has been deposited as security for a loan as provided for by sec 281 and sec 330(1) of the National Land Code.

A lien holder’s caveat shall prohibit the registration of:

1. (a) Any other lien holder’s caveat;
2. (b) Any instrument or dealing executed by or on behalf of the proprietor thereof and a certificate of sale relating thereto; and
3. (c) Any claim to the benefit of any tenancy exempt from registration granted by the said proprietor.

The entry of the lien holder’s caveat will not be authorized if the document of title has not been deposited as security for a loan or where there is no statutory lien. Similarly the continuance of a lien holder’s caveat will not be possible if the lien ceases to exist e.g. when the caveator ceases to have custody of the title.

In order to enter a lien holder’s caveat, it is important to prove the deposit of the title deed and also to prove that it was deposited with the intention that it be security for a loan. Where there is no such intention, as seen in Perwira Affin Bank Bhd v. Selangor Properties Sdn. Bhd. & Ors [2003] 5 CLJ 310, the lien is not valid.

Trust caveat:

Under sec 332(1) of the National Land Code 1965, a trust caveat may be entered by the registrar in respect of any land or interest which, pursuant to sec 244 or any corresponding provision is expressed to be held by any persons or bodies as trustees.

The trust caveat prohibits any registration, endorsement or entry of or any of the following:

1. (a) Any instrument of dealing, or class or description of instrument of dealing, directly affecting the trust property;
2. (b) Any claim to the benefit of any tenancy exempt from registration granted directly thereof; and
3. (c) Any lien holder’s caveat in respect thereof.

The trust caveat is perpetual until it is cancelled by the Registrar.

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