If you have bought or sold a property, you would have heard of the word “caveat”. However, many people do not know what the word “caveat” means in a legal context, often leaving their lawyers to sort out what they consider to be procedural or legal issues in a property transaction. We’ve set out some important information you should know about caveats, especially if you own property or are intending to buy / sell property.
What is a Caveat?
There are 2 types of caveats: a registrar’s caveat and a private caveat. The registrar’s caveat and private caveat do the same thing, which is, prevent the land from being sold or transferred by the proprietor of the land.
A caveat even trumps a subsequent charge but does not prevent a prior registered chargor (that is, the party who registered the charge over the land, typically banks) from foreclosing and selling the land by auction.
What is the difference between a registrar’s caveat and a private caveat?
The main difference between a registrar’s caveat and a private caveat is that a registrar’s caveat is only entered by the Registrar of Titles or Land Administrator whereas a private caveat can be entered by anyone who claims title over the land or claim to have an interest over the title of the land.
A registrar’s caveat is entered when the Registrar of Titles or Land Administrator deems that it is necessary or desirable to prevent fraud or improper dealing, to protect the interest of the State or if there is an error on the title document.
Another notable difference is that a registrar’s caveat once entered continues to be in force until it is removed whereas a private caveat has a maximum lifespan of 6 years, if it is not earlier withdrawn or removed.
Who can enter a private caveat?
Anyone who claims title over the land or claims to have an interest over the title of the land can enter a private caveat. In other words, if you are saying “hey, that land belongs to me”, then you may enter a private caveat.
The most common scenarios where a private caveat is entered are:
- when someone has entered into a sale and purchase agreement to buy the land and all requisite monies has been paid but the vendor has refused to complete the sale;
- a beneficiary under a trust to prevent dealings by the trustee; and
- when a person or company has taken a charge over the land but the charge is pending registration
What happens if you enter a caveat without proper legal basis?
Private caveats do get entered even though there is no proper legal basis to do so, for example, for the recovery of a debt or as security when there is an on-going civil dispute.
In such instances, these caveats can be removed and a claim for compensation can be made against the party entering the private caveat for any loss or damage sustained by reason of the wrongful entry of a caveat.
How do you remove a caveat?
In respect of a private caveat, if you cannot get the person entering the caveat to withdraw it, a private caveat can be removed by applying to the Registrar of Titles or the Land Administrator or by applying to Court.
The application to the Registrar involves filling and lodging a form to the Registrar or Land Administrator who will then serve a notice to the person who entered the caveat to inform him / her that the caveat will be removed, and after 2 months from such notice, the caveat will lapse unless the person who entered the caveat obtained an order or judgment from the Court to maintain the caveat.
The application to Court on the other hand begins with the filing of an originating summons and an affidavit in support. The party entering the caveat will have the chance to oppose and satisfy the Court as to why the caveat ought to be maintained.
As for a registrar’s caveat, it can be removed by making an application to the Registrar or by going to the Court. However, an application to the Registrar can only be made by the proprietor. Any other party wanting to remove a registrar’s caveat will have to commence proceedings in Court.
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About the Author: Th’ng Yan Nie is an associate in the dispute resolution practice group at Donovan & Ho. She has a wide range of experience in litigation matters including contractual and commercial disputes, compulsory land acquisition, debt recovery and strata and property management issues.
Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing. Have a query? Contact us.
