Lien-Holder Caveat: The Lender Holds A Lien

By Chloe Lim & Tanushaa Dewi

The Meaning

The word lien in French, means band or tie. This French word is derived from the Latin word, ligamen which means bond, and the verb ligare means to bind or secure something. In legal terms, it means the right of one man to retain what is in his possession belonging to another man until the certain demands of the person in possession are satisfied [Palaniappa Chetty v. Dupire Brothers & Another [1919] FMSLR 370].

A caveat is defined as a formal notice or warning given by a party interested in an immovable property. Under the land law, a caveat must be duly registered on a title of the property. There are various types of caveats in Malaysia: private caveat, registrar caveat, lien-holder caveat, and trust caveat. In this article, we talk about the lien-holder caveat.

Lien-Holder Caveat

A Lien-Holder Caveat is a form of security dealing whereby the registered owner of a property, who intends to raise money using loan facility or friendly loan, can deposit the original title deed of his property to a lender. It is an alternative means to register a legal charge over the Property.

The lender become Lien-Holder. The lien-holder shall secure his loan given to the borrower by registering a lien-holder caveat on the title deed of the Property under s281 of the National Land Code in Form 19D together with the original title deed, agreement, relevant application forms and the prescribed fee at the relevant land registry.

A lien holder caveat becomes effective upon registration and remains valid until and unless it is removed or withdrawn by the lien-holder caveat or upon registration of certificate of sale pursuant to a court order for sale.

If the borrower defaults in the loan, the lien-holder may proceed to apply for a court order for sale to sell the property and recover the outstanding debt due and payable by the borrower. A lien caveat holder like any caveat has a specific purpose and it is not a cause of action but a quick relief to protect interest in the property in the form of statutory injunction. Once a lien-holder caveat is entered and registered, it will protect the interest of the lien holder as it acts as a restraint and freezes the property from any dealings, tenancy exempt from registration or subsequent lien holder caveat. It prevents the debtor from selling, transferring or mortgaging the property without the consent of the lender.

If you are interested in entering a lien holder caveat, it would be advisable to consult a professional lawyer. Please contact us for further enquiry.

Disclaimer: The contents of this article do not constitute legal or other professional advice or an opinion of any kind. It is provided for general information purposes only.