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Dislodging your interest

31/05/2003 NST-PROP by Salleh Buang

I recently received a query via e-mail from a reader in Shah Alam, Selangor. Ahmad (not his real name), sold a piece of land to a distant relative, Borhan (also not his real name), over a year ago. Both parties signing a Sale and Purchase Agreement (SPA), and Borhan paid the customary 10 per cent downpayment. A couple of days later, Borhan lodged a private caveat on the land for the purpose of protecting his interest.

Completion of the purchase was agreed upon as being within six months from the date of the agreement, which was Nov 29, 2002. Unfortunately, Borhan found that he couldn’t finalise the purchase by the stipulated time and requested for a month’s extension.

This was agreed to, but even after expiry of the new date, Borhan still couldn’t raise the balance. Three weeks later, he and his family left for Mecca to perform the Haj. Before his departure, however, Ahmad’s solicitor formally informed Borhan that since his obligation wasn’t met, the SPA had been terminated by Ahmad.

I wasn’t told whether the deposit was also forfeited; what Ahmad wanted to know was the procedure to dislodge the caveat filed on his property.

His query raises three pertinent issues:
1) Was the private caveat properly lodged by Borhan?
2) Assuming the SPA had been properly terminated in view of Borhan’s breach, could Ahmad remove the caveat since Borhan failed to do it (as he should have done)?
3) Which is the proper venue for Ahmad to apply to have the caveat removed - the Land Office or High Court?

On the first point, the National Land Code 1965 (section 323(1)), as well as a several case laws, have clearly laid down the principle that a purchaser of land (with a valid and enforceable SPA) can lodge a private caveat on the property to protect his interest for as long as it subsists.

However, once the agreement has been lawfully terminated, this interest comes to an end and the buyer is required by law to withdraw it. Failure to do so which causes the landowner to suffer loss could see the purchaser becoming liable for damages.

This also settles the second point - Ahmad has the right to remove the caveat.

With regard to the third point, the NLC has two separate but parallel provisions. Section 326 provides for the removal of a private caveat by the Registrar (or Land Administrator), while section 327 provides for the removal of a private caveat by the High Court. The application of which provision depends on the circumstances of each case.

Section 326 is meant for the registered proprietor (owner), in the event that his land has been caveated by another party. Section 327 is meant for an “aggrieved” party, which (according to case law) is meant for non-owners, such as chargees or lessees.

In simple terms, this means the proper place for Ahmad to seek redress is the relevant Land Office.

The procedure for removal by the Registrar (or Land Administrator) under section 326 is not complicated. An application has to be made in the prescribed statutory form (Form 19H) and must be accompanied by the prescribed fee. Upon receiving the application, the Registrar is required to:

a) Serve upon the caveator (in this case, Borhan) a notice in Form 19C; and unless in the meanwhile the caveat has been extended by the High Court,

b) remove the caveat one month after the date specified in that notice.

This means that if Borhan does not make a counter-application to the High Court for an extension of the private caveat against Ahmad’s land after Form 19C has been served on him, the Registrar has the statutory power (and duty) to have the caveat removed.

This is done by canceling the entry from the register document of title, and noting thereon the reason for the cancellation and the date.

Ahmad may not be able to do all this on his own, in which case he might need the services of a lawyer and consequently incur legal costs.

In due course, however, he could recover his expenses from Borhan, because the latter did not voluntarily withdraw his private caveat as he should have when the SPA was terminated due to his own breach.


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