What Is Caveat, And Why Is It So Important?

There are 2 types of caveats: private and registrar. Find out the difference between both and which one applies to you, as well as how it works and who can enter into one.
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Let us start this guide with a caveat. A what, we hear you ask? Well okay, let’s start with the definition of 'caveat' from the Cambridge dictionary:

"It is a warning to consider something before taking any more action, or a statement that limits a more general statement."

So, what warning against action are we talking about here? And how does this legal thing apply to property?

It’s time to explore what a caveat (or even a private caveat) is, and what it means in the sense of property ownership!

 

What Is Caveat, Or Private Caveat?

To define caveat, it's essentially a legally recognised intention to purchase. It’s an official record of interest lodged against ownership of property.

That is to say (more officially) that it’s actually a legal restriction which is outlined under the National Land Code (NLC), that states: 

“The caveat is a mechanism that prevents the registration of the transaction under the National Land Code (NLC) to protect the interests of certain parties.”

A private caveat is designed to ensure that a purchaser of property has protection against the owner selling it to another party.

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It’s basically a mechanism to secure your intention for purchase. If you have a caveat lodged against a property, the owner is prevented from selling, until that caveat is settled.

There are two important types of caveat recognised under the National Land Code. The first is a registrar caveat, which is used for official government or administrative purposes.

We’ll go into that a bit more later. It’s the private caveat that’s potentially relevant to your journey as a private property owner or buyer. As defined under the NLC:

2.1 Private caveat may be entered by the Registrar for application of the following:
2.1.1 Any person or entity claiming rights to land owned or registered interests.
2.1.2 Any person or entity entitled to the benefits under any trust affecting the land or interest.
2.1.3 Guardian or person representing any of the teenagers who claim to be entitled to benefits under any trust.

Take a scenario where you purchase a property, but the deal isn’t set to be complete until many months later.

You become worried about the deal falling through, because the seller may back out (cancel the agreement), or take a better deal elsewhere.

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By lodging a private caveat in Malaysia, you’re making an official restriction against a sale elsewhere, essentially stating your right to purchase. 

A caveat on property will be clearly registered, and visible to any other parties who conduct a title search for that propertyThat means others will be able to see your notice of interest.

What’s also important is once you’ve lodged a caveat of interest, other parties are not only prevented from purchasing the property, they’re also prevented from registering interest after you.

 

Who Can Enter Into A Caveat?

You shouldn’t just rush around Malaysia choosing nice places and putting a caveat on all the land! You need to have something called a ‘caveatable interest’ for one to be valid.

It’s worth pointing out the official National Land Code definition of this first, although it’s not as specific as you might hope!

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).”

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In simpler terms, a caveatable interest for property would include scenarios such as having agreed and signed a Sales and Purchase Agreement (SPA), paid an amount such as an earnest deposit, or where funds or legal agreements have otherwise been lodged against a property.

If you paid your way, you can lodge a desire to stay! The person who applies for a caveat is known as the caveator. The person who owns the property it is lodged against is known as a caveatee.

The law in Malaysia does include provision for wrongfully lodged caveats, and can penalise (PUNISH) individuals for this.

That means if you lodge a caveat that isn’t deemed to be legitimate, you would have to pay compensation to the landowner for any damage or loss they've suffered.

That’s why you shouldn’t rush around lodging any old property caveat you like.

 

How Does A Caveat Work?

You might have guessed by now that lawyers are an important part of this process.

Lodging a caveat is an official statutory instrument, and should include proper legal overseeing to ensure that your caveat is valid, and that it's lodged correctly.

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A caveat is lodged using form 19B of the National Land Code – Application For Entry Of A Private Caveat. This form requires you to complete 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

Once form 19B has been received by the Registrar of Titles or Land Administration, they note the application and time at which the caveat was received.

This is then lodged against the registered document of title for the property. That means a private caveat comes into force from the date of registration.

A Registrar will not investigate the claim behind a caveat, and instead take it on face value that it has been lodged in good faith and with appropriate cause. 

Once this has been received, the Registrar then issues a form 19A to the registered land owner, informing them that a caveat has been lodged against the property. 

 

How Long Does A Caveat Hold For?

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A private caveat may be withdrawn at any time by the caveator by filling in form 19G of the National Land Code. There’s a lot of forms in this whole caveat system, as you can see!

Any individual who owns land which a caveat is lodged against, may apply for the removal of the caveat using form 19H.

This will lead to a review of the caveat and its removal if it's deemed invalid. A removal of caveat following this route comes into force two months after a notice is issued.

A private caveat will lapse after a period of six years, unless it is extended by way of a court order. In applying for a court order for extension, the application must meet the following tests:

  • Show that the caveator has a caveatable interest.
  • Query whether the caveator’s claim has a serious question to be tried in court.
  • Ascertain whether on the balance of convenience, it would be better to allow a caveat to remain in force until a trial.

A private caveat may also be removed by order of a court, if challenged by a caveatee under section 327 of the National Land Code.

Through this process, the caveatee must prove to the court that the caveat lodged against the property is invalid.

If this is successful, the caveator must prove that there is a valid and actionable reason for the caveat if it is to remain in force.

 

The Differences Between Registrar Caveat vs Private Caveat

You might hear the term registrar caveat sometimes being used. This can get a bit confusing when you’re trying to work out which caveat is the one for you!

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A registrar caveat in Malaysia relates to official caveats entered into by the Registrar of Titles or Land Administrator; these are for official state or governmental business.

A private caveat can be entered into by private individuals, who wish to note their interest of claim of title over a land.

The registrar caveat is essentially an official mechanism used to prevent fraud, improper land deals, or protect the interest of the state due to errors in land documents or administration.

Unlike a private caveat, a registrar caveat does not expire, and remains in force for as long as the registrar property caveat is lodged. 

A registrar's caveat can be removed through application by the proprietor of the property, or via application to proceed through the courts by the proprietor or relevant third-party.

The question of caveats is a complex legal issue, and if you get it wrong you could be liable to pay out compensation. Don’t go claiming houses that you have no right to claim!

But the madness of that idea aside, it’s always important to get professional legal advice when it comes to something as complex as this.

Speak to a lawyer, and make sure you follow the rules when it comes to lodging a property caveat.

 

Looking for the kind of property that gets your caveat going? Then come explore thousands of amazing properties on PropertyGuru today!

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