BSC (HONS) Quantity Surveying UEBE 2623 - CONSTRUCTION LAW An Introduction to Law of Property and Land Law

1 An Introduction to Law of Property and Land Law................................................................ 1 1.1 What is Property? ............................................................................................................. 1 1.2 Possession and Ownership of Property..................................................................... 1 1.3 Land Law in Malaysia ...................................................................................................... 1 1.4 Definition of Land ............................................................................................................. 2 1.4.1 Degree of Annexation Test ........................................................................................... 3 1.4.2 Purpose or Object of Annexation Test.......................................................................... 3 1.5 Land Registration ............................................................................................................. 4 1.5.1 The Effect and Importance of Registration................................................................... 4 1.5.2 Exceptions to Indefeasibility......................................................................................... 4 1.5.3 The Effect of Non-Registration .................................................................................... 6 1.5.4 Procedure for Registration ............................................................................................ 7 1.6 Alienation of Land and How They are Called ............................................................ 7 1.6.1 Freehold Land ............................................................................................................... 7 1.6.2 Leasehold land .............................................................................................................. 7 1.6.3 Tenancies ...................................................................................................................... 7 1.7 Forms of Title and Its Significance .............................................................................. 8 1.7.1 Final Title and Qualified Title Definitions ................................................................ 8 1.7.2 Register Document of Title and Issue Document of Title .......................................... 10 1.7.3 What are the conditions and restrictions that may be attached to titles? .................... 10 1.8 Subdivision, Partitioning and Amalgamation ......................................................... 11 1.9 Dealings in Land Related to Construction Industry. ............................................. 12 1.9.1 Transfers ..................................................................................................................... 12 1.9.2 Leases.......................................................................................................................... 13 1.9.3 Tenancies .................................................................................................................... 14 1.9.4 Charges ....................................................................................................................... 15 1.9.5 Liens ........................................................................................................................... 16 1.9.6 Easements ................................................................................................................... 17 1.10 Restraint on Dealings................................................................................................ 18 1.10.1 Caveats ................................................................................................................... 18 1.10.2 Prohibitory Order.................................................................................................... 20

1 An Introduction to Law of Property and Land Law

1.1 What is Property? Property in law is anything capable of ownership. It can be categorized as: Tangible property (i.e. it can be touched or is physical) and intangible property (such as copyright, patents, goodwill or shares in a company); or Real and Personal property a. Real property Freehold interest in land (e.g. freehold land) b. Personal property Leasehold interest in land, and anything other than REAL property (e.g. car, watch, mobile phone)

1.2 Possession and Ownership of Property Property can be possessed or owned. A person in possession of property has a better right to it than anyone else except for the true owner. Ownership is the concept covering all the legal rights that can attach to property, so that the owner can do with the property he wishes, including giving up possession. Ownership is therefore better than mere possession as the owner is entitled to possession as well and can claim any property back that has been wrongly taken out of his possession. Generally, it is common that the owner may not be in possession of the property as he may have lease it to another party or part possession temporarily. 1.3 Land Law in Malaysia For the purpose of this module, property is divided into two areas, land and all other property. We shall concentrate on land and related laws of Malaysia affecting it.

The land laws of Malaysia are contained in four main legislation, namely: The National Land Code 1965 applicable to Peninsula Malaysia; The National Land Code (Penang and Malacca) Act 1963 applicable only to Penang and Malacca, The Sarawak Land Code, and The Sabah Land Ordinance applicable to Sarawak and Sabah respectively.

National Land Code and Other State Land Laws In the absence of any express provision to the contrary, if any provision in the NLC 1965 is inconsistent with any provision of any of the following laws, the NLC 1965 provisions shall to the extent of the inconsistency be void: 1. Any law for the time being in force relating to customary tenure, Malay reservations or Malay holdings, mining, sultanate lands, wakaf or baitul-mal; 2. The Trengganu Settlement Enactment 1356; 3. The Padi Cultivators (Control of Rent and Security of Tenure) Ordinance 1955; 4. The Kelantan Land Settlement Ordinance 1955; 5. The Land (Group Settlement Areas) Act 1960 or 6. Any law for the time being in force relating to exemptions from the payment of land revenue.

Land in Malaysia is vested in the ruler or governor of the state (Under the Constitution legislative List II). Although land is a State matter upon only the State Legislation may make laws in respect thereto, the Federal Government may make laws in respect of land matters in a State if such laws are enacted to ensure uniformity of laws and policy in respect of land matters in all the States of Peninsula Malaysia except Sarawak and Sabah. 1.4 Definition of Land According to the NLC 1965, Land includes: a) The surface of the earth and all substances forming that surface; b) The earth below the surface and all substances therein; c) All vegetation and other natural products, whether or not requiring the periodic application of labour to their production, and whether on or below the surface; d) All things attached to the earth or permanently fastened to anything attached to the earth, whether on or below the surface; and e) Land covered by water.

Issues with the Definition of Land It is easy to determine whether a particular item forms part of the land under item (a), (b), (c) and (e) above but it is difficult to do so in relation to item d) as it depends on ownership of a particular item. If the item is a fixture (real property), then it will form part of the land under NLC 1965. If it is a personal property (chattel) then it is not. Unfortunately, NLC 1965 does

not provide any definition of the word fixture, reference must be made to English law on this subject, see Goh Chong Hin & Anor v. The consolidated Malay Rubber Estates Ltd.

The English law on fixtures provides two tests for establishing whether an item is a fixture or a chattel Holland v. Hodgson (1872): i) ii) Degree of annexation test; and Purpose or object of annexation test.

1.4.1 Degree of Annexation Test Under the degree of annexation test, an article which is affixed to land even slightly gives rise to a rebuttal presumption that it is part to a land. An article attached to the land by its own weight is not to be considered part of the land but remains a chattel. If an article is affixed to land, whether it becomes a fixture and forms part of the land depends on the intention of the person who affixes the item. (Continue to the Purpose or Object of Annexation Test) 1.4.2 Purpose or Object of Annexation Test If the purpose or object of the annexation is for the better enjoyment of the land as a whole, this would strengthen the finding that the item is a fixture. If the purpose or object of annexation is merely for the more complete enjoyment and use of the item as a chattel itself, then the item would remain a chattel not forming part of the land. The object or purpose of annexation is to be inferred not from the motive or intention of the person who affixed the item but from consideration of the circumstances of the case Re De Falbe (1901). In Goh Chong Hin & Anor v. The Consolidated Malay Rubber Estates Ltd., it was held that the machinery affixed to earth becomes a fixture and part of the land even if the machinery was set up after the date of the charge. In The Shell Company v. Commissioner of the Federal Capital of Kuala Lumpur (1964), it was held that underground tanks are land. In Socfin Co. Ltd v. Chairman, Klang Town Council (1964), the storage tanks were buildings and not machinery used for industrial purposes.

Both tests are important and both have to be applied when determining whether an item is a fixture or a chattel. In Malaysia, these approaches were applied to local cases.

GOH CHONG HIN & ANOR. v. THE CONSOLIDATED MALAY RUBBER ESTATES LTD. 5 F.M.S.L.R. 86

(Court of AppeaL Negeri Sembilan) Facts: On 26 April 1921 Goh Chong Hin executed a charge in favour of S.R.M.S. Lechmanan Chetty (the chargee) secured by a few pieces of rubber estate land. Then on 25 June 1921, Goh Chong Hin executed a bill of sale assigning to the respondent certain machinery in one of Mr Goh's factories which was charged. On 25 October 1923, the chargee took possession of the rubber estate. On 31 December 1923, the respondent applied for an order to seize and sell the machinery by virtue of his bill of sale. The chargee in possession opposed the application. Reay J. (the trial judge) decided in the respondent's favour and the chargee appealed. Held: 1. The ordinary English law of fixtures applies in this country. It is well settled by that law that prima facie machinery affixed to earth becomes a fixture and part of the land. Even if the machinery was set up after the date of the charge, it nevertheless accrued to the land and became part of the chargee's security.

1.5 Land Registration Definition: Under NLC 1965, registration of an instrument of dealing (land) is effected by making of a memorial of dealing on the register document of title under the hand and seal of the registering authority (i.e. the Registrar or Land Administrator) concerned. In short, it means making a statement on copy of Grant (geran) kept in land Office to confirm the owner i.e. the official copy. 1.5.1 The Effect and Importance of Registration The effect of registration of a dealing in land is to establish an *indefeasible* title to or interest in land, i.e. a title or interest which is free of all adverse claims or encumbrances not noted on the register. In other words, the effect of registration is to defeat all prior unregistered claims. 1.5.2 Exceptions to Indefeasibility Unfortunately, indefeasibility is not absolute. There are specific circumstances where a registered title or interest may be set aside or defeated by one with a better claim. These circumstances are spelt out under NLC 1965 and also by case law.

A) Fraud A title or interest in land, once registered, is indefeasible except if there is fraud or misrepresentation or forgery or interest was unlawfully acquired.

Fraud means actual fraud, dishonesty of some sort, not what is called constructive or equitable fraud (mere knowledge of the existence of an unregistered interest shall not of itself be imputed as fraud). See Lian Keow Sdn. Bhd. v. Overseas Credit Finance (M) Sdn. Bhd., (1988).

Fraud may be established if the designed object of a transaction is to cheat a man of a known existing right or where by a deliberate and dishonest act a person loses an existing right. However, negligence or bona fide mistake is not fraud. (See Loi Hieng Chiong v. Kon Tek Shin (1983))

LOI HIENG CHIONGv. KONTEK SHIN [1983] 1 M.L.I. 31 (Federal Court) Facts: The appellant appealed against the decision of the High Court that the exchange of lands between the parties was void by reason of fraud. The lands originally comprised a piece held by the respondent at Kuching, measuring 8.56 acres and which he had wanted to sell for RM115 000, and the other at Sibu, measuring 9.40 acres and claimed to have been bought by the appellant for RM55 000. The appellant exchanged his Sibu land for the respondent's Kuching land. It was found that the Kuching land was of course more valuable than the Sibu land. The learned trial judge found that the appellant had perpetrated fraud in the exchange of the land titles. The appellant appealed. Held: The evidence clearly showed that the appellant was not honest as to the true value of the Sibu land when he persuaded the respondent to exchange the lands. Even if his evidence, which purported to show that the value of the Kuching land was RM55 000 and not RM115 000 as stated by the respondent, could be accepted, the exchange was still not fair, just and reasonable, having regard to the accepted value of the Sibu land.

B) Misrepresentation Misrepresentation would mean fraudulent misrepresentation and instances of fraudulent misrepresentation include the following: i) The suggestion as to a fact of that which is not true by one who does not believe it to be true; ii) iii) iv) v) The active concealment of a fact by one having knowledge or belief of the fact; A promise made without any intention of performing it; Any act fitted to deceive; and Any such act or omission as the law specifically declares to be fraudulent.

C) Forgery When registration was obtained by forgery, the registered title or interest of that person or body having that title or interest is defeasible. Even where such person or body is not a party or privy to the forgery, his title or interest is still defeasible. In other words, it affects the immediate proprietor even if he is an innocent purchaser for value. However, subsequent purchasers are protected by NLC 1965 and Doshi v. Yeoh Tiong Lay (1975) which states that indefeasibility will attach to the title or interest once it is acquired by a subsequent purchaser in good faith and for value or by any person or body claiming through or under such purchase.

Please take note that in Sarawak, where Sarawak Land Code provides that a purchaser in good faith and for value, provided that he is not guilty of any fraud, will acquire an indefeasible title or interest upon registration even if the registration has been obtained by way of forgery or a void instrument.

D) Insufficient or void instrument Where registration was obtained by means of an insufficient or void instrument, the title or interest of that person or body having the title or interest is defeasible. For example, an instrument of dealing may be considered to be insufficient if the instrument of dealing has failed to comply with certain procedures or formalities as laid down by the NLC or an instrument of dealing signed by an attorney pursuant to an invalid or insufficient power of attorney. Examples of void instrument would include one which is forged or which is contrary to any restriction in interest to which the land is subject or to any prohibition imposed by the Code or any written law such as dealing effected in favour of or by minor, transaction made in contravention of the Moneylender Ordinance 1951 and transaction made in contravention of Malay Reservation Enactments.

1.5.3 The Effect of Non-Registration The effect of non-registration of a title or interest in land are ineffective in vesting title or interest but it is still good as a contract so long as it does not purport to attempt to transfer, charge or otherwise deal with the land itself Haji Abdul Rahman v. Mohamed Hassan (1917). Put simply, an agreement to deal in land alone is insufficient to vest title to or an interest in land. To be effective, the dealing must be registered at the registry or land office.

1.5.4 Procedure for Registration Each instrument presented for registration must be executed by each of the parties and the parties consenting, and must also be duly attested. This document may then be presented for registration at the Registry or Land Office accompanied by payment of the prescribed registration fees in the Presentation Book first. Upon registration, the dealing is recorded on the register document of title (RDT) and the issue document of title (IDT). Register or Collector will sign and seal against such indorsement. Then a duplicate copy of the instrument of dealing will be returned together with the issue document of title. The date of registration will be the date of presentation. Any instrument of dealing presented for registration which stamp duty must be duly stamped so as to be fit for registration.

1.6

Alienation of Land and How They are Called

Definition: All State land belongs to the State. Any person interested in acquiring and owning land may apply to the State Authority for State land in compliance with certain formalities and regulations. The State Authority may grant to the successful applicant the land applied for. This is commonly referred to as alienation of land. The state land alienated may be disposed to individuals in perpetuity (freehold) or for a term not exceeding 99 years (leasehold). 1.6.1 Freehold Land Freehold land is State land disposed of by the State Authority to an individual in perpetuity. The land vests in such individual and his successors in title for an indefinite period. This is commonly referred to as a freehold title. 1.6.2 Leasehold land Leasehold land is disposed by the State Authority to an individual for a term of years. The land vests in such individual and its successors in title for that period of years as originally granted. This is commonly called a leasehold title. The duration of the lease cannot exceed 99 years and upon its expiry of the lease, the land should revert to the State. 1.6.3 Tenancies A tenancy cannot exceed 3 years unless renewed. A tenancy need not be registered and it may be created by word of mouth or in writing. A tenancy is not a right capable of registration and therefore is not a title as such. It may only be indorsed on a title.

1.7 Forms of Title and Its Significance (Draw classification of land, Forms of title and RDT &IDT Pages 277,278 & 279) State land can be classified as town, village or country and those state lands that have been alienated to individual or body is called private lands and can be in the form of freehold or leasehold. Those unalienated state land can still be given to individual or body for mining, temporary occupation licence and the rest are kept by the state as forest, reserved land and squatter rights under adverse possession. 1.7.1 Final Title and Qualified Title Definitions There are two forms of title available in this country and they are called Final Title and Qualified Title. Final Titles are the final forms under which lands are alienated after they have been surveyed and Qualified Title are land that are alienated but not yet surveyed.

Final Titles Final Titles can be further be grouped under metropolitan administration or local administration. Those under metropolitan control are called Registry titles and may take the form of Grants (Perpetuity) or of State Leases (for a term of years). They are registered in two series of books kept in the Land Registry and known as Register of Grants and Register of State Leases. Land Office titles may take the form of Mukim grant (perpetuity) or Mukim leases (for a term of years) under local administration. They are registered at the Mukim within the district in two series of books known collectively as Mukim Register. One of them is used for registration of Mukim Grant and another for Mukim Leases. After coming into force of the NLC (Amendment) Act 1984, the titles under which State land may be alienated will confined to Land Office title (being the only form of final title) and qualified title.

Qualified Titles The NLC 1965 permit alienation of land under Qualified Titles (QT). The purposes of a QT are to enable land to be alienated and enable titles to be issued in the case of subdivision, partition or amalgamation of alienated lands in advance of completion of survey on the land in question.

A QT confers upon its holder similar rights in every respect as those conferred by a final title, save and except that: i) The boundaries of the land shown on the document of title shall be provisional only except in so far as any of them have been established by any earlier survey; ii) The land shall not be capable of being subdivided, partitioned or included in any amalgamation nor any building thereon be capable of subdivision. Qualified Titles are referred to as Hakmilik Sementara in Malay. The abbreviations QT or HS in Malay are commonly used to identify qualified titles.

The forms of QT correspond to those of FT and are also divided into two classes, one corresponding to Registry titles and the other to Land Office titles. They are subject to the same administrative division but for them a separate register is used in the Registry in respect of each district within the State and in the case of Land Office title, a separate register is used in the Land Office in respect of each Mukim within its district. When any land held under a QT has been surveyed, a final title will then be issued in continuation of the QT.

1.7.2 Register Document of Title and Issue Document of Title What is the Main Purpose of Register Document of Title and Issue Document of Title Irrespective of whether the title is a Land Registry title or a Land Office title, the original copy of the grant or lease constitutes a separate folio in the appropriate book or register in the Land Registry or the Land Office respectively. It is not taken out or removed from the Land Registry of the Land Office and this is known as the Register Document of Title (RDT). A duplicated copy of the original grant or lease kept in the Land Registry or Land Office is issued to the alienee or the landowner. The duplicated copy is referred to as the Issue Document of Title (IDT).

NLC 1965 provides that every duly registered register document of title (RDT) shall be conclusive evidence that the title to the land described therein is vested in the person or body for the time being named therein as proprietor. This does not extent to issue document of title (IDT). But IDT are important and indispensable for purposes of carrying out dealings in land. They are documents of title which may be deposited for the purpose of (i) creation of statutory liens, (ii) registration of any registrable dealing by a proprietor of the land. The IDT must accompany the instrument of dealing when the latter is presented for registration.

1.7.3 What are the conditions and restrictions that may be attached to titles? The NLC 1965 contained elaborate provisions which prescribe the main terms or conditions to be attached to a grant of land by the state.

The state may impose certain restrictions on the registered owners right to enjoy the land upon alienation. These are referred to as restrictions in interest such as (i) prohibition against landowners transfer or charge or lease the land alienated save and except with the consent of the Ruler in council, the Collector or the relevant State Authority, (ii) designation of land as Malay Reservation Land, such land cannot be transferred or charged to any person other than a Malay and is subject to the provision of the Malay Reservation Enactment.

Any Instrument of dealing registered in contravention of the restriction in interest would be a void instrument. By virtue of NLC 1965, the title or interest of any person or body shall not be indefeasible where registration was obtained by an insufficient or void document.

Alienated land whether in perpetuity or for a term of years is subject to (i) payment of a premium except when specially exempted by the State in particular cases and (ii) payment of

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an annual rent which is normally a nominal sum and is referred to as quit rent. Quit rents payable in respect of alienated lands are subject to periodic revision by the State. In the event that quit rent is in arrears, the State may serve a notice on the landowner and if applicable to any person having a registrable interest, lien holders, tenants or claimant-caveators and demand for payment of the arrears within a specified period of time and failing which, the land may be forfeited to the State. The landowner may appeal to the court against the order for forfeiture or may petition to the State Authority for an annulment of the forfeiture. In the event the land is forfeited by the State, any charge registered against it will extinguish.

Note: A breach of a restriction in interest does not result in the land liable to forfeiture by the State but failure to pay quit rent may result in the forfeiture of the land to the State.

Conditions of Use - When land is alienated by State, it will specify Conditions of use ie1) agriculture, 2) building or 3) industry and will generally follow zoning areas defined by the State Planning Department. In urban areas there is frequent change of land usage and when owners want to upgrade from say agriculture to building, they will need to apply for Planning permission and change also the conditions of land use on their titles i.e. conversion of land use.

1.8 Subdivision, Partitioning and Amalgamation Private or Alienated Land to be developed may need to undergo changes at request of owner: 1) Subdivision- divide land into several parcels for sale or transfer to others with proceeds from each parcel going to original owner. Involves some surrender for public use. 2) Partitioning-Several joint owners ask Land Office to separate land into independent pieces/lots proportionate to the % of shares of joint owners. 3) Amalgamation- Owner combines several adjoining small parcels into one e.g. to reduce set-back requirements. In process of subdivision or conversion some parts of land may need to be surrendered back to State for public use.

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1.9

Dealings in Land Related to Construction Industry.

There are six forms of dealings with land under the NLC that can be effected: (i) (ii) (iii) (iv) (v) (vi) Transfers Leases Tenancies Charges Liens, and Easements

Only tenancies and liens do not require registration under NLC as they are short term.

Who can benefit from the dealings in land? (i) (ii) (iii) (iv) Natural persons other than minors; Corporations having power under their constitutions to hold land; Sovereigns, governments and organizations; and Other persons authorized to hold land under diplomatic and consular privileges ordinance 1957 or any other written law. 1.9.1 Transfers Only the whole of any alienated land, the whole of any undivided share in alienated land, any lease of alienated land, any charge and any tenancy exempt from registration, are transferable.

Every transfer (except tenancies) must be effected by an instrument which complies with the requirements of NLC. Failure to register a transfer will not affect the contractual operation of the transaction between the buyer and seller of the land. The aggrieved party may still be allowed to sue for damages or specific performance.

The transferee takes the land subject to any registered lease, charge, easement or tenancies protected by indorsements. The transferee will take the land subject to all conditions and restrictions in interest and encumbrances then existing in respect of the land such as caveats, prohibitory orders and any expressed or implied conditions as indorsed in the title or as provided under the NLC 1965. Where any land is transferred subject to any lease, charge or tenancy exempt from registration, it shall be enforceable by or against the transferee as if he were a party to that lease, charge or tenancy.

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1.9.2 Leases Definition: A lease is the letting of land for a term exceeding 3 years. It is a registrable interest. In Sabah and Sarawak, a lease, which is referred to a sublease, is one exceeding one year. Only registrable sublease are valid. A lease is also defined as an interest in land granted by the lessor whether he is the owner of the land or not to a lessee for a certain period.

The three main characteristics of a lease are as follows: (i) The lessee is given right to exclusive possession of the demised premises. - I.e. the lessee can stop everyone including the lessor from entering the leased property (ii) (iii) The parties must have intended to create a lease and not a licence. A lease must be granted for a definite period or for a period which is capable of being ascertained.

How a Lease can be Granted? A lease may be granted by way of an oral or a written agreement and only has legal effect upon registration of an instrument (i.e. in Form 15A and in the case of a sublease, Form 15B). Where a land is subject to a charge, the written consent of the chargee must be obtained before the lease can be granted.

A lease in perpetuity cannot be granted and the maximum is 99 years for whole of the land and 30 years for part of the land.

Differences between a Lease and a Licence a. The difference between a licence and a lease is that the lease is a form of "ownership" of the property for a period of time, and the lessee is entitled to remain in occupation for the period of the lease. The licence, on the other hand, can be revoked at any time. If the licence is revoked, the occupier must leave the property and rely on whatever remedies are provided for in the licence. (http://www.australianrealestateblog.com.au/reference.asp)

b. Lease can be transferred but a licence/permit to use land is different in that it is only a right based on a contract, not registerable interest. A licence cannot be transmitted and only binding on parties to the agreement only.

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How to End a Lease? A lease is determined in any of the following circumstances: (i) (ii) (iii) (iv) The term of the lease has expired; The lease is surrendered; A valid notice to quit is served; The lease is forfeited by the lessor where there has been a breach of any provision of the lease, or where the lessee is bankrupt, or in the case of a company it has gone into liquidation. 1.9.3 Tenancies Definition: A tenancy may be defined as letting of land for a term not exceeding 3 years. A tenancy is not a registrable interest and is called a tenancy exempt from registration in the NLC 1965. In Sabah and Sarawak, a tenancy is a sublease not exceeding 1 year which need not be registered in order to be valid.

The Three Main Characteristics of a Tenancy are as follows: (i) (ii) (iii) The tenant is given right to exclusive possession of the demised premises. The parties must have intended to create a tenancy and not a licence. A tenancy must be granted for a definite period or for a period which is capable of being ascertained.

How to End a Tenancy? (Note: Similar to that of a Lease) A tenancy is determined in any of the following circumstances: (i) (ii) (iii) (iv) The term of the tenancy has expired; The tenancy is surrendered; A valid notice to quit is served; The tenancy is forfeited by the landlord where there has been a breach of any provision of the tenancy or where the tenant has been adjudicated a bankrupt or in the case of company gone into liquidation.

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1.9.4 Charges Definition: When developers need to raise bridging finance for their projects they may borrow from a bank and allow bank to register an interest in the land (with title) called charge until debt repaid.

The charge is a statutory creation and under the NLC 1965 it does not require the transfer of the land to the chargee to create security over it. This distinguishes it from the concept of mortgages where the legal estate is transferred subject to mortgagees (note: mortgagee is the lender or the finance company) equity of redemption. In a charge, the legal estate in the land and ownership continues to be vested in the chargor who continues to be the registered proprietor of the land or the holder of a lease subject to the interest of the chargee. Furthermore, the chargor is also entitled to possession of the property under charge. The chargor has the power to deal with the land or the lease. The chargor also retains the right of possession subject to certain qualifications (such as payment of loan and interest, rent, taxes, etc.).

Security for loans is secured either by register-able charges or liens by depositing titles and entering lien holders caveat. (See page 292 and 293).

A charge is not a transfer; it only gives chargee a power of foreclosure on loan default. Once a charge is registered further transfer of land cannot be made without chargees consent. A charge must be executed in accordance to the NLC and stamped for registration in order to be effective. If property without title e.g. subdivided property is sold before land titles are ready, banks lending end finance to home purchasers can create a charge using a document called a deed or contract of assignment together with a loan agreement, and Sales and Purchase Agreement and caveat on Main Title (register-able restraint on dealings in main title).

Rights and duties of chargor /chargee i) ii) Rights of chargor Express rights as contained in the charge annexure. Implied rights under NLC 1965 such as right to sell and transfer land (purchaser bound by charge), to grant lease, sublease or tenancy (with consent of chargee) and to create second and subsequent charges. iii) Entitled to a discharge if all sums secured under the charge have been repaid.

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 i) ii)

Duties of chargor Express duties as contained in the charge annexure. Implied duties under NLC 1965 such as payment of loan and interest, pay rents, rates, taxes, etc., observe all conditions of land use, observe provisions of lease (if leasehold) + pay rent, keep building in proper repair, insure buildings and give chargee right of entry for inspection and remedy any breach.

(i)

Rights of chargee To sell land when: a) Default in payment and b) Breach of agreements, express or implied.

(ii) (iii) (iv) (v)

To take possession, To transfer charge, To have custody of I.D.T. or duplicate lease (creates a lien), Right to consolidate.

(i)

Duties of chargee. To discharge the charge after full payment of the loan, interest and all other monies secured by the charge.

1.9.5 Liens Definition: A lien is created when the IDT to the land is deposited with the lender as a security for a loan and for no other purpose.

The Main Purposes of a Lien A lien is suitable to act as security for short term borrowing or where the lender required additional security despite having a first legal charge on a piece of land. A lien is not registered in the IDT but it is indorsed in the registered document of title (RDT) at the Land Office or Registry by entry of a lien holders caveat. This is a further restraint on the dealings with the land. The mere possession of the title gives the holder a strong right to keep it when money has been lent and he has an interest in that lien. Alternatively, the deposit of issue document of title is accompanied by a Memorandum of Deposit of Title to create a lien. The main advantage of this security is that, it is easy and quick to create and discharge. The only remedy given to lien-holder is that of a judicial sale even when the debt is statutebarred.

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How a Lien can be Terminated? A lien is terminated by a written withdrawal of the caveat and the return of the IDT on payment of the debt and interest of under NLC 1965, the Registrar may cancel the caveat upon proof of satisfaction of the debt (settlement of debt) secured by the lien. 1.9.6 Easements Definition: An easement is a legal interest which one landowner has over anothers land, such as right of way, a right of light, a right to take water or a right of support. These are very important because without easements some land would be virtually useless and has no value (Owen, 1998, p.97). An easement is also defined as a right granted by a proprietor of the servient land to the proprietor of the dominant land for the beneficial enjoyment of the servients land. An easement can only arise by way of express grant under NLC 1965.

The essential characteristics of an easement at common law as laid down in Re Ellenborough Park (1955) are as follows: (i) (ii) (iii) (iv) There must be a dominant and a servient tenement; An easement must accommodate the dominant tenement; Dominant and servient owners must be different persons ; and A right over land cannot amount to an easement unless it is capable of forming the subject-matter of a grant. The above characteristics were reiterated in the Malaysian case. Tan Kam Cheong v. Stephen Leong Kon Sang (1980).

The Examples of Easements The rights capable of being granted as easement may be negative (e.g. not to build on a certain part of the land or to preserve the right of access) or positive (e.g. to allow proprietor of the dominant land to do something such as lay pipes or the right to advertise over servients land) in nature. Easements do not require acquisition or transfers, only creates a registered right over part of another persons land (legal interest in land).

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1.10 Restraint on Dealings The NLC 1965 provides for two kinds of restraints on dealings: Caveats, and Prohibitory orders

Generally all dealings and interests in lands should be registered. However, there may some interests in land which are not capable of being registered. These non-registrable interests are protected under the NLC 1965 which allows them to be noted on the register in some manner short of registration. This is illustrated by the caveat system.

1.10.1 Caveats Definition: Caveat is a statement in Land Title that prohibits further dealings in the land until caveat removed or with written consent of person lodging caveat.

Four Types of Caveats There are four types of caveats, namely: a. Private caveats b. Trust caveats c. Lien-holders caveats d. Registrars caveats

How to Lodge a Caveat? The NLC permit a person who claims he is entitled to a caveatable interest (private, trust, lien-holders or Registrars caveats) in the land to lodge a caveat against the land in question (allow them to be noted on the register in some manner short of registration). The right to lodge a caveat is not dependent on the validity of the particular interest (e.g. a person claiming title to the land registrable interest) claimed. It is the claim of an interest (right) within the category of caveatable interests per se which matters. The issue of the validity of the interest (registrable interest) sought to be protected will only be relevant if and when some other person challenges the caveat and seeks to have it removed.

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A) Private Caveats The Purpose of Private Caveat The purpose of the caveat is to prevent any other person from subsequently acquiring a registrable title or interest adverse to the interest or right claimed by a caveator. A private caveat also prohibits the creation of a subsequent lien and the subsequent indorsement of a tenancy exempt from registration. The effect of a private caveat is merely prohibitive. Private caveat does not give the caveator the power to apply for an order of sale to sell the land.

Who Can Lodge a Private Caveat? Any person claiming title to the land or a registrable interest or a claim to such registrable interest may apply to lodge a private caveat against the land. It must be related to the particular land to be caveated.
(See Niffira Pertama Sdn. Bhd. v. Lembaga Kemajuan Johor Tenggara & 2 Ors (1990)).

How to Withdraw a Private Caveat? A private caveat may be withdrawn by the caveator by an application to the Registrar for its removal. Alternatively, by any person aggrieved by its existence to the court for its removal. Private caveat expires in 6 years unless renewed. It is done by submitting relevant form and accompanied by a statutory declaration. It is normally handled by legal firms.

B) Lien holders caveat It is lodged by a person with whom the document of title has been deposit as security for a loan. The continuance of the lien-holder caveat will not be possible if the lien ceases to exist, e.g. caveator ceases to have the custody of the title.

A lien-holder caveat may be withdrawn by the caveator or cancelled by the Registrar when all sums are paid or by courts action if its entry or continuance is not authorized. A lienholders caveat subsists until it is withdrawn.

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C) Registrars caveat It may be entered by the Registrar on any land based upon the following instances: (i) (ii) For the prevention of fraud or improper dealing; For protecting the interests of: Federation or state authority, or Any person who is in his opinion under the disability of minority, mental disorder or unsoundness of mind or is shown to his satisfaction to be absent from the federation; or (iii) 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 to it.

D) Trust caveats Another means of protecting the interest of beneficiaries under a trust. Not a form of security acceptable to lenders.

1.10.2 Prohibitory Order Definition: It is a court order preventing the person whose land is under forced sale on order of court to effect further dealings. A prohibitory order has a life span of 6 months from the date the order was granted by the court.

Some of the effects of the prohibitory orders are: (i) They prohibit the registration, indorsement or entry thereon of any instrument of dealing except the certificates of sales. (ii) (iii) Any claim to the benefit of any tenancy exempt from registration. Any lien-holders caveat.

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Appendices

TEH BEE v. K. MARUTHAMUTHU (1977] 2 M.L.J. 727 (Federal Court) Facts: Teh Bee (the appellant) applied for alienation of a piece of land which was then under temporary occupation licence. Her application was approved by the State Authority subject to payment of a premium and land revenue to be made by her within three months. She failed to pay on time. However, she was later registered as proprietress of the land and the register document of title was in her name. The respondent had been in occupation of the land. Teh Bee claimed possession of the land alleging trespass. The respondent resisted the claim, the principal ground being that the qualified title registered in the name of the appellant was null and void. The Magistrate entered judgment in favour of the appellant. When the respondent appealed to the High Court, Ajaib Singh J. allowed the appeal and held that when the appellant was registered as proprietress, the approval of alienation of the land to her had already lapsed and therefore it was ultra vires of the State Authority to alienate the land to her. The appellant appealed to the Federal Court. Held: Allowing the appeal: the fact that the appellant was registered as proprietress necessarily raised the inference that the State Authority on payment of the premium had given fresh approval for the alienation of the land to her; the fact that the register document of title was in the name of the appellant was conclusive evidence that the title to the land was vested in the appellant; Under the Torrens system, the register is everything and it would be wrong to allow an investigation as to the right of the person to appear upon the register when he holds the certificate of title.

IN NIFFIRA PERTAMA SDN. BHD. V. LEMBAGA KEMAJUAN LAHAR TENGGARA The High Court allowed an application for the removal of private caveats as the plaintiffs (the caveators) no longer had caveatable interests in the subject lands. In this case, the plaintiffs and the first defendant entered into a Sale and Purchase Agreement of oil palm and rubber plantations belonging to the other defendants. This agreement was contingent upon the defendants obtaining the approval of the Johore State Government. The State Government refused to approve the same and the agreement was therefore held to be put to an end. The court held that since the agreement was put to an end, the plaintiffs can no longer claim any right to such title or interest in the said land; and therefore, the plaintiffs did not have any caveatable interest in the lands any longer.