LAND LAW SEMESTER II

DIL 2233 2023/2024

LAND LAW : SECTION 2

DIPLOMA IN LAW (DIL 2233)
SEMESTER II, 2023/2024

TITLE:
ANSWERS TO QUESTION 1A & 1B

PREPARED BY:

NAME MATRIC NO

AZLAN SHAH BIN ZAINAL ABIDIN DIL 222027

FATIN SYAHEERA BINTI SYAHRUNNIZAM DIL 222038

HASSAN BASREE BIN ZAINAL DIL 223002

AMMAR RAFIQ BIN ANUAR DIL 223003

MASTURA SYALINA BINTI IZHAM RIZAL DIL 223005

INSTRUCTOR:
MADAM NORULJANNAH BINTI ABDUL RAHMAN @ SALLEH

SUBMISSION DATE:
6TH OF FEBRUARY 2024

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ACKNOWLEDGEMENT

Greetings and peace be upon you. In accordance with the Islamic tradition, the phrase
"In the name of Allah the most gracious and the most merciful" is invoked as a means of
acknowledging and seeking the blessings of Allah, who is believed to be the embodiment of
utmost grace and mercy.

First and foremost, we would like to express our utmost gratitude to Allah s.w.t. for
bestowing upon us the fortitude, resilience, resolve, and courage to undertake and fulfil this
task.

Next, we would like to express our utmost thanks and gratitude towards my esteemed
lecturer, Madam Noruljannah Binti Abdul Rahman @ Salleh. Her extensive knowledge,
invaluable assistance, and profound wisdom have bestowed enlightenment upon both myself
and my companions.

We would also like to express our deep appreciation and gratitude to each of us for
our dedication, valuable ideas, cooperative efforts, and thought-provoking comments. Each
member of our dissertation committee has provided valuable personal and professional
advice. As a result, we would be unable to complete this dissertation without each other's
assistance.

Additionally, we would like to extend our apologies for the errors and deficiencies that
were present in the completion of this assignment.

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TABLE OF CONTENT

01. INTRODUCTION.............................................................................................................. 4

02. QUESTION 1(A)................................................................................................................ 5

Answer:................................................................................................................................ 5

03. QUESTION 1(B).................................................................................................................9

i. Lien................................................................................................................................... 9
ii. Charge............................................................................................................................ 11

CONCLUSION.......................................................................................................................15

REFERENCES....................................................................................................................... 16

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01. INTRODUCTION

The customary land tenure system that existed in Malacca at the time of the
British colonialists' arrival was based on the idea that the land belongs to the ruler,
who has the authority to grant the right of possession rather than ownership. This
includes the right of succession, sale, mortgage, gift leasing, and waqf. However, the
Torrens System was later introduced by WE Maxwell when he was appointed British
Resident for the State of Selangor along with the formulation of the National Land
Code.

The National Land Code was established to make the transition from the
current land tenure system to the Torrens System easier. The Torrens System is a
dependable, affordable, quick, and community-focused system. This method of
conveyancing places the highest priority on registration and the title to all interests in
land. In fact, the only thing that may give or take away a person's title is the act of
registration. Because it can provide all the information required and offers significant
benefits, the Registar is everything. As a result, it seemed that the Torrens System
should take the place of the Deeds System that was in place.

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02. QUESTION 1(A)

Anggur Bank seeks your advice on their right to apply for the order of sale.

The registration should be in accordance with the prescribed procedure, and

failure to follow the procedure will render the chargee not registered. Once the charge
is registered, the chargee has the right to sell the land when there is default in
repayment and in breach of the express or implied agreement as mentioned in
Sections 253 to 267 of National Land Code, as well as the right to possession as
mentioned in Sections 270 to 277. The right to sell here means the right to apply for
foreclosure in order to sell the said land.

The failure to pay a charge is subjected to statutory remedies, either an order

for sale or the possession of land by the chargee. There are two ways to apply for an
order for sale from the chargee of the land. The method of application is deferred
according to the type of land title. An order for sale of registry land title shall be
applied to the High Court, while an order for sale of land office title land shall be
made to the Land Administrator. The chargee is obliged to obey the procedures
provided in the National Land Code for the application of an order for sale.

In this current case, the land charged to Anggur Bank is held under a land
office title. Following the first issue, Oren has defaulted on paying the monthly
instalment, and therefore, Anggur Bank shall follow the procedure of an order for sale
provided in Sections 260 to 265 of the National Land Code.

Under Section 260(2) of the National Land Code, it provides that the
application for an order for sale must be made to the land administrator in Form 16G.
This section empowers the Chargee (Anggur Bank) to apply for an Order for Sale at
the Land Administrator when the Chargor (Oren) defaults on repayment.

Under Section 261(1) of the National Land Code, it outlines the steps after
receiving an application for an Order for Sale (Form 16G), including fixing an inquiry
date, notifying the parties involved, and serving a summons on the Chargor.

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Under Section 263(2) of the National Land Code, this section details the
form (Form 16H) that the Order for Sale should take, specifying conditions for the
public auction, including the date, amount due, and other relevant details.

To apply in the present case, Anggur Bank, acting as the chargee, sent Oren a
statutory notice of default through National Land Code for 16D. According to Section
254(1) of National Land Code, Oren, who was the chargor, was required to serve
notice upon his inability to pay the charge since he was facing financial difficulties.
After several reminders made by Anggur Bank, Oren still failed to pay the monthly
instalment. Anggur Bank may apply in Form 16G to the Land Administrator for a
notice for sale under Section 260(2) of the National Land Code.

Under Section 261(1)(c) of National Land Code, The Land Administrator

will often question the Chargor about the reason for the default in payments to the
Chargee if the Chargor is present at the time of the inquiry. Generally, the Chargor
will be given another inquiry date to settle the amount required to be paid by the
Chargee if the Land Administrator is satisfied that the Chargor is making an attempt to
make payment and settle the outstanding debts.

However, In the event that Oren continues to fail to pay the monthly
instalment, given the situation, Anggur Bank has the right to apply for an Order for
Sale at the Land Administrator since Oren, the Chargor, has defaulted on repayment.
Anggur Bank should follow the procedures outlined in the National Land Code,
starting with submitting Form 16G along with relevant documents to the Land Office.
The Land Administrator will then fix an inquiry date, notifying both the Chargee
(Anggur Bank) and the Chargor (Oren).

During the inquiry, Oren will be questioned on the reasons for the default. If
Oren shows effort to settle arrears, a new inquiry date may be given. If Oren is not
present, the Land Administrator may proceed ex parte or postpone a new summons.

As stated in Section 263(2) of the National Land Code, if the Land

Administrator is satisfied with the default and no effort from Oren, they may grant an

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Order for Sale (Form 16H). This order specifies the auction details, including the date,
amount due to Anggur Bank, and other conditions. Before the auction, the Land
Administrator serves Form 16H to Oren and Anggur Bank. Anggur Bank must deposit
the duplicate charge and original title seven days before the auction. A licensed
auctioneer conducts the auction, requiring interested bidders to deposit 10% of the
reserve price. The highest bidder becomes the Purchaser. The process ensures a fair
and legal execution of the Order for Sale.

In M&J Frozen Food Sdn Bhd & Anor v. Siland Sdn Bhd [1994] 1 MLJ
294, Siland charged the second appellant a plot of land. Because the respondent had
defaulted, the second appellant requested that the land be sold. With the requirement
that the purchase money be paid in full before the 30-day period from the date of sale
expires, the first appellant was able to acquire the land at auction. The point at which a
public auction is concluded was one of the matters the court was to consider. It was
decided that the National Land Code's definition of a concluded transaction is one in
which the sales agreement has been accepted. It was also decided that the vendor
would lose their beneficial interest in the land even if the auctioneer's hammer fell and
no money or papers were dealt with. After the purchase price is fully settled and the
memorandum of transfer is executed, the purchaser will own the beneficial interest.

In MUI Bank Berhad v. Cheam Kim Yu [1992] 2 MLJ 642, the appellant
secured a loan from the respondent in exchange for a piece of land in Perak. The
appellant requested a land sale order after neglecting to pay back the loan and
disobeying the statutory notification that was sent. Following the order's issuance, the
land was sold, and the buyer received a certificate of sale after paying the entire
purchase price. But he accepted the respondent's offer to sell the land to a third party.
In this instance, the Supreme Court ruled that the responder could not sell the land to
a third party through a private deal unless the chargee approved it, and the auction was
entirely legitimate.

In review of the situation between Mr. Oren and Anggur Bank, in order for the
sale of land to be purchased, it shall be held in a public auction. In the case of M&J

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Frozen Food Sdn Bhd & Anor v. Siland Sdn Bhd [1994] 1 MLJ 294, it was held
that the sale was concluded at the fall of the hammer. This is because of the rules
pertaining to the notice of the location of the auction and the time the auctioneers
request bidding, which is seen as an invitation to treat. The bidder or buyer cannot
withdraw their approval once the fall of the hammer has taken place. However, once
an order for sale is granted, the land can not be sold in a private agreement. This can
be seen in the case of MUI Bank Berhad v. Cheam Kim Yu [1992] 2 MLJ 642, the
Supreme Court held that the respondent could not sell the land by way of private
agreement unless it is agreed by the chargee. This implies that without the consent of
the chargee’s, in this case Anggur Bank, Mr. Oren would not be permitted to sell the
land under a private arrangement.

Thereby, it can be said that these are the steps to be taken by Anggur Bank, as
stated in the National Land Code, in order to mandate the sale of the land that used to
belong to Mr. Oren.

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03. QUESTION 1(B)

Explain the advantageous and disadvantageous of both transactions with special

reference to the provisions in the National Land Code and case law(s).

In the context of the National Land Code, a lien is a security transaction that
creates an equitable interest in the land or lease, giving the holder the right to enter a
lien-holder's caveat. It is a non-registrable deal that serves as a short-term collateral
for the repayment of debt by the proprietor. A charge is a security transaction that
allows a person to use their land as collateral to secure the repayment of a loan. It is
governed by specific statutory provisions outlined in the National Land Code.

i. Lien

A lien is a non-registrable deal that creates an equitable interest in the

land or lease, providing the holder with the right to enter a lien-holder's caveat.
It is often used as a short-term collateral for the repayment of debt by the
proprietor. The nature of the interest created by a lien is sometimes treated as
being an equitable charge, allowing the lender to secure repayment of a loan
by depositing the original title or a duplicate lease. The lien is not a charge
created by common law or equity as a consequence of the prior actions of the
parties involved. It is an unregistrable interest, and the lien holder cannot sell
the land to recover the debt. However, the lien holder can seek the sale of the
subject property under specific provisions of the National Land Code if the
proprietor defaults on the debt.

In this case we can relate that, Mr. Apple prefers lien because it is a
fast loan method and simple. It is fast and simple because it only needs both
parties' agreement to perform it. Charge is a method that is safer because it
has a contract that has been written and cannot be done only by voice.
However, this does not mean that the lien is not safe to perform, Malaysia has
made a law to make sure both types of loan is fair for both parties.

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Like what Mr Apple said, lien did allow the proprietors to speedily
raise money on loan by depositing an Issue Document Title (IDT) registered in
his name with the lender. While the charge would involve a more complicated
and lengthy process in order to register a legal charge over the land.

Referred Law

Section 206(2)(b) of the National Land Code provides that a lien is a

dealing which gives rise to a non-registrable interest in a lease or undivided
share in land.

According to Section 281(1) of National Land Code, the creation of a

lien is begun when the deposition of an ID or duplicate lease with the lender as
a security of a loan is conducted. This is dangerous as the lender might run
away with the IDT before releasing the loan to you. On the other hand, the
custody of an IDT in charge would only be surrendered to the first charge
according to Section 244 of National Land Code after the creation of charge
agreement is effected in Form 16A or Form 16B in accordance with Section
242(1) of National Land Code.

Section 281(1)(a) of the National Land Code further specifies that

the proprietor or lessee depositing an instrument of dealing or duplicate lease
with any person to secure the repayment of a loan creates a lien. Additionally,
Section 281(1)(b) of National Land Code states that the proprietor or lessee
shall become entitled to a lien over the land. National Land Code distinguishes
a lien from a charge, providing specific provisions for the creation and
enforcement of liens.

To conclude, lien is taking something that has a value from a party that
borrowed something from you. For example, B gave his land with the
condition that A needs to pay him before the time expires. A never managed to
pay the sum of money and therefore B took his car to satisfy the sum of money
that A didn’t pay.

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Advantages of Lien

The advantages of a lien is to guarantee an underlying obligation such

as the repayment of the loan. In case the borrower fails to satisfy this
underlying obligation, the lender or the creditor has the legal right to seize the
asset that is subject of the lien. Many types of liens are used to secure assets.

Quick Release of Loan : As Mr. Apple prefers, a lien offers a faster mode to
release a loan. This is because a lien allows the borrower to retain possession
of the property while providing the lender with a security interest.

Possession Retention : The borrower can continue using and benefiting from
the property under lien, making it a more flexible option.

Disadvantages of Lien

The disadvantages of lien is Statutory and judgement liens have a

negative impact on your credit score and report, and they impact your ability
to obtain financing in the future.

Limited Security : Lien may be considered less secure compared to a charge,

as it relies on the possession of the property rather than a registered interest.

Vulnerability to Third Parties : In case of competing claims, a lien may be less

effective in protecting the lender's interest, especially if the property is
transferred to a third party without notice.

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ii. Charge

A charge is a security dealing that involves using the land as collateral

to secure a loan. It is a registrable transaction and is often utilised by finance
companies or moneylenders to ensure the repayment of a loan. The charge
must comply with the conditions precedent for the filing of a charge action,
and if the chargor fails to discharge the burden, the court may order the sale of
the charged land.

Referred Law

Section 241(1) of the National Land Code provides for the powers of
charging and specifies the type of property that can be charged. It allows for
the creation of a charge over alienated land, and the charge must be registered.
The charge is often used by finance companies or moneylenders to secure the
repayment of a loan, with the land serving as collateral or security to ensure
the debtor repays the loan.

Next, according to Section 241(2) of National Land Code, the

charger has the power to create second and subsequent charges which is
known as refinance while there is no provision in the National Land Code to
allow the subsequent creation to be made. There can be only one lien created
at one time

Advantages of Charge

The advantages of charges Interest helps to make the risk of default

worth taking. In general, the more risk there is of default on the loan, the
higher the interest rate demanded by the lender.

Registered Interest : A charge involves registering an interest against the

property, providing a clear legal claim. Mr. Duku's preference for charges
reflects confidence in the security offered through formal registration.

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Priority in Case of Insolvency : In the event of the borrower's insolvency, a

charge typically gives the lender a higher priority in recovering the debt from
the property.

Disadvantages of Charge

The disadvantage of charges is the risk that borrowers do not repay

their loans for each loan that it makes, a bank will assess the risk that a
borrower does not repay their loan (that is, the credit risk). This will influence
the revenue the bank expects to receive from a loan and, as a result, the
lending rate it charges the borrower.

Lengthy Process : The process of creating a charge, including registration, can

be time-consuming compared to a lien, potentially delaying the loan release.

Limited Possession Rights : Unlike a lien, a charge doesn't allow the borrower
to retain possession of the property, which may impact its use during the loan
period.

Related Cases

One example case related to charges and liens is Mahadevan & Anor
v Manilal & Sons (M) Sdn Bhd [1986] 1 MLJ 357. In this case, the plaintiffs
had entered into a contract with the defendant to purchase a piece of land. The
defendant had agreed to sell the land to the plaintiffs and had received a
deposit from them. However, the defendant later sold the land to a third party
without returning the deposit to the plaintiffs. The plaintiffs filed a suit against
the defendant, claiming that they had a charge over the land. The court held
that the plaintiffs had a common intention with the defendant to create a
security by way of a charge or lien, which amounted to an equitable charge or
lien being created. The court further held that the defendant had breached the
contract by selling the land to a third party and ordered the defendant to pay
the plaintiffs the amount of the deposit.

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This case illustrates the importance of understanding the legal

implications of charges and the consequences of breaching the terms of a
charge agreement. It also highlights the need for clear communication and
agreement between parties when creating a charge or lien. The case
demonstrates the legal recognition of charges as a form of security transaction
under the National Land Code, and the importance of adhering to the statutory
provisions governing the creation and enforcement of charges.

In addition in the light of the case of Co-Operative Central Bank Ltd

VY&W Development Sdn Bhd [1997] 3 ML 373, the power to charge
includes the creation of third party charge as section 241(1)(a) and (bb)
provides that a charge may be created to secure the repayment of any debt or
annuity. When a third party charge is recognised under the National Land
Code, financial institutions shall be able to enforce statutory remedy if
payment by the 3rd party borrower defaults.

In conclusion, a lien under the National Land Code is a non-registrable

transaction that produces an equitable interest in the land or lease, granting the
holder the opportunity to enter a lien-holder's caveat. It is an effective
technique for short-term collateral, striking a balance between simplicity of
development and limited duration of effect. However, a charge under the
National Land Code is a specific form of security transaction that allows for
the creation of a security interest over alienated land to secure the repayment
of a loan. It is governed by detailed statutory provisions outlined in the
National Land Code, differentiating it from other types of security
transactions. The creation, registration, and enforcement of charges are
specifically regulated under the National Land Code, providing a clear
framework for the use of charges as a form of security dealing. We agree with
Mr. Duku's opinion that the lien is less secure and we prefer if you want to
make a loan at land business, the charge method is the perfect option.

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CONCLUSION

Since land is the foundation of all essentials, it has an impact on our everyday
lives. Being the most adaptable and changeable type of property, it is also the most
permanent and indestructible. Conquering land and labor signifies strength for a
nation, and being the owner of property in a prominent area is seen as one of many
national emblems. Land is seen as an investment, an asset, and even the foundation for
personal security in trade and commerce. Land is seen as an essential resource for
preserving ecological balance by the environment and ought to be valued highly for
the sake of future generations.

Due to its inherent qualities, land may be used for a variety of uses and
transactional ways. Understanding legal terms and the legal issues of land in Malaysia
is so crucial. We all believe that this information does, in fact, offer a thorough
foundation for investigating pertinent law further in regard to legal issues. Another
important consideration for landowners and other legitimate occupants of property is
the amount of ownership and enjoyment of the land. These rights are enshrined in and
guaranteed by the National Land Code, notwithstanding significant restrictions and
the fact that they are exclusive rather than absolute.

Essentially, land laws offer a stable, transparent, and equitable legal

framework. In the process of encouraging ethical and sustainable development, they
safeguard the rights of people, communities, and the environment.

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REFERENCES

Books :

1. Principles of Malaysian land law

Principles of Malaysian land law: Maidin, A. J., Kader, S. Z. S. A., Ali, B. B. M.,
Noor, F. M., Mohamad, N. A., Sufian, A., & Rosli, R. A. (2008). Percetakan
Jiwabaru Sdn Bhd

Legislations :

1. National Land Code

Websites :

1. Norliza Ab Aziz, Application for an order for sale at Land Office. (n.d.). Azhar &
Wong | Advocates &Solicitors.

<http://www.azharwong.com.my/?cur=page/page&id=32&title=Application
_for_Order_For_Sale_at_Land_Office>

2. Musinski, B. (2022, October 13). What is a land lease? Forbes Advisor.

<https://www.forbes.com/advisor/mortgages/what-is-a-land-lease/>

3. Do lien rights exist against the property or the leasehold? – National Lien & Bond.
(2019, September 5).

<https://mechanicslien.com/do-the-lien-rights-exist-against-the-property-or-
the-leasehold/>

4. Admin. (2018, December 21). The New York Court of Appeals addresses the issue
of when a mechanic’s lien can be placed on a landlord’s property by a contractor
performing work for a tenant. Freiberger Haber LLP.

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<https://fhnylaw.com/new-york-court-appeals-addresses-issue-mechanics-li
en-can-placed-landlords-property-contractor-performing-work-tenant/>

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