A five-member bench of the Federal Court on 21st January 2010 unanimously ruled that the previous Federal Court had misconstrued the provisions of section 340(3) of the National Land Code, 1965 (“NLC”) in its decision of Adorna Properties Sdn Bhd v Boonsom Boonyanit 2000 (“Adorna Properties”) because the principle of deferred and not immediate indefeasibility applies to the NLC. This decision was arrived at in Tan Ying Hong v Tan Sian Sang, where it was ruled that illegally transferred land must be returned to their rightful owners. Explaining, the Chief Justice (CJ) said sub-section 340(2) of the National land Code provides that a title or interest can be indefeasible if the property is acquired by fraud, misrepresentation, forgery or the likes.
What’s the good thing about this judgement? Well, you do not need any TITLE Insurance anymore, or do you?
However, this recent judgement is certain to open a whole can of worms – for instance, if the third party, presumably innocent purchaser who dealt with the fraudster charged the ill-gotten land to a bank in order to pay for it, what position would the bank be in if the land is returned to its rightful owner?
Secondly, things may worsened if the land has already been developed and sub-divided with individual titles, what would be the position of individual owners?
Hmmm… I supposed if any subsequent purchasers and those after them did not “acquire the title or interest in good faith and for valuable consideration”, whatever gained is “also liable to be set aside” in what is called “deferred indefeasibility of title”.
Whatever is it, I am sure bankers and many new owners who had inadvertently bought into property (or scheme) built on land not obtained “in good faith” are by now
|The introduction of a mandatory Title Insurance should help protect all future bona fide purchasers for value for transactions done in good faith|
getting nervous and worrying about the next worst thing to come. Even if those purchasers did buy those properties in good faith (bona fide purchasers for value), any legal action by the bona fide owner will only serve to affect their legal position – getting a cloud hanging over your head is not something welcoming….
The government should now seriously look into how best to protect and compensate innocent bona fide purchasers who had become victims of land scams – perhaps setting up some compensatory mechanism, either in the form of an Assurance Fund, a Compensation Fund, or even a mandatory Title Insurance to protect against future similar transactions…..
What does this Title Insurance serves? In it most simplicity form, it is meant to protect an owner’s or lender’s financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.
Planning the Malaysian markets…. We are in the process of designing and working out capacity with some insurers and reinsurers – hopefully we can roll it out before the end of the year. We certainly welcome views and comments.
(References were made Andrew Wong’s PropTalk, “Forging New Ground” and Salleh Buang’s LandMatters – Reversing the verdict just the beginning) (Also read “New Product in the Making… Insuring your Land with Title Insurance”)