What is Caveat?
Let’s begin this guide with a word of caveat. What is that, you may ask? Well, let’s start with the meaning of ‘caveat’ from the Cambridge Dictionary:
“It is a warning to consider something before taking any further action, or a statement that limits a more general statement.”
So, what action are we warning against here? And how does this legal concept relate to property?
It’s time to delve into the meaning of a caveat (or a private caveat), and its significance in terms of property ownership.
What is a Caveat or a Private Caveat?
In simple terms, a caveat is a legally recognized intention to purchase. It’s an official record of interest lodged against the ownership of a property.
More formally, it’s a legal restriction outlined in the National Land Code (NLC) that states:
“The caveat is a mechanism that prevents the registration of a transaction under the National Land Code (NLC) to protect the interests of certain parties.”
A private caveat is intended to ensure that a property purchaser is protected against the owner selling the property to another party. It’s essentially a mechanism to secure your intention to purchase. If a caveat is lodged against a property, the owner is prevented from selling it until that caveat is settled.
There are two important types of caveats recognized under the National Land Code. The first is a registrar caveat, which is used for official government or administrative purposes. We’ll explore this further later. The private caveat is 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 the 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.”
Imagine you’ve purchased a property, but the deal won’t be completed for several months. You become concerned about the deal falling through because the seller might back out (cancel the agreement) or accept a better offer from another party.
By lodging a private caveat in Malaysia, you’re imposing an official restriction against the sale of the property elsewhere, essentially stating your right to purchase.
A caveat on a property will be clearly registered and visible to any other parties who conduct a title search for that property. That means others will be able to see your notice of interest.
It’s also important to note that once you’ve lodged a caveat of interest, other parties are not only prevented from purchasing the property, but they’re also prevented from registering interest after you.