How to Protect the Purchaser’s Interests in a Land Transaction (Part I)

For the vast majority of Malaysians, buying land is a commitment, and an expensive one at that. Prior to the effective transfer of the land title from the vendor to the purchaser, it is vital that the rights of the purchaser are preserved.

One of the ways that a purchaser may protect their interest is by lodging a private caveat on the land. A private caveat acts as a notice to protect their claim on the land. While there is a private caveat lodged over a piece of land, it cannot be dealt with until the private caveat is removed or, the consent of the person who had lodged the private caveat has been obtained. 

The only parties that are authorized to lodge a private caveat are those who can effect dealings on the particular interests on the land – in other words, persons with a “caveatable interest”. A common example are purchasers in a Sale and Purchase Agreement (“SPA”). The private caveat can be lodged by the purchaser after the execution of the SPA and the payment of deposit to the vendor.

A mere debt cannot give rise to a caveatable interest. Instances where there are non-caveatable interests even in a conveyancing transaction are as follows: 

1. In the event that the SPA is terminated and the purchaser is claiming a refund of their deposit; and 
2. In the case of a recovery for the balance purchase price in a transaction. 

The purchaser may lodge a private caveat by filing an application under Form 19B of the National Land Code and paying the prescribed fees together with a duly affirmed statutory declaration. 

A private caveat will last for 6 years from its lodgment date and will automatically lapse if it is not renewed. 

While there is no statutory requirement for a purchaser to lodge a private caveat, it is advisable to do so to avoid issues that may arise when delinquent vendors deal with multiple purchasers at the same time.