Land scams: Protection for land owners

09/04/2008 New Straits Times By M. Ganeshadeva, Kuala Lumpur

I REFER to the report, "Opportunists behind land scams?" (NST, April 5) in which the Selangor police chief said "investigations have revealed that individuals are responsible for these cases (of land fraud) and not syndicates".

It is possible for a person who has been given temporary custody of the land title by the owner (or one who has been able to lay his hands on one without the knowledge of the owner) to forge the owner's signature on the transfer documents (memorandum of transfer), sell the land and then flee to a country without extradition arrangements with Malay-sia, such as Australia.

The original owner who lost his house through no fault of his own has no legal remedy to recover it from the buyer.

The buyer's title to the property is protected by law and cannot be defeated by the original owner. Neither can the owner sue the perpetrator of the fraud for the value of the property lost as the felon is out of the law's reach.

The state of the law in this area -- based on the interpretation of the law pertaining to transfer of land through forged documents (Subsections 2 and 3 of Section 340 of the National Land Code) -- was established after the Federal Court ruling on the landmark case of Adorna Properties Sdn Bhd vs Boonsom Boonyanit (December 2000).

In that case, the Federal Court held that the buyer who purchased the land in good faith had obtained the title to the land even though it was later proved to have been acquired under a forged document.

The English equitable principle that favours the right of the "purchaser in good faith for valuable consideration" over the original owner who was deprived of his land through fraud or forgery is incorporated in a proviso to Subsection 3 of Section 340 of the Code.

It is hoped that the newly appointed minister for law will bring peace of mind to land owners by deleting the above-mentioned proviso.

Do not let the buyer to be "too innocent" and not make enquiries before committing his money.

In the meantime, land owners can have a caveat entered against their land. A caveat will freeze all transactions on the land while it is in force and can be removed only with consent of the High Court. Unfortunately, the Code has no provisions for the owner to enter a caveat on his land.

The caveat can also be entered by someone else with an interest on the land. For example, if the owner obtains a bank loan by pledging his land as security, the bank has a "caveatable" interest on the land until the loan is paid up.

If you give written undertaking to your wife that you will transfer a portion of the house to her if you fail to pay her loan to you within a specified time and then failing to do so, she can prevent its sale by setting up a caveat.