CHARGE

CHARGE

INTRODUCTION Charge is a dealing whereby the registered proprietor of an alienated land or a lease conveys it as a security for the repayment of a loan, an annuity or any other periodical payment, to another. The proprietor of the land or the lease is known as the ‘Chargor’ and the person to whom the property is conveyed or in whose favour the charge has been effected is known as ‘Chargee’. s. 5 defines a charge as registered charge. Eventhough NLC only recognizes registered charge but unregistered charge is also recognized. Where a chargor holds an instrument of charge in statutory forms but fails to register it, the law regards him as an equitable chargee and may seek remedy in equity or contract u/s. 206 (3) NLC.Thus if parties had signed an agreement then remedy in contract, if no agreement then remedy in equity. DIFFERENCE BETWEEN CHARGE AND MORTGAGE Charge: (1) Only gives a right to payment out of a property w/out transferring the land (2) Chargee acquires an interest in the land but not title/ownership (3) Remedy is upon chargee & statutory remedy under NLC for sale of land or chargee take possession of the land in default. Mortgage: (1) transfer of an estate or interest to another person (2) Mortgagee acquire ownership (3) Remedy is upon mortgagor based under equity i.e. equitable redemption BBMB v Doric Development (a charge is govern by detail statutory provision of NLC but Mortgage at common law) INSTRUMENTS FOR REGISTRATION s.242 Form 16A for the purpose of securing payment of principle sum Form 16B for securing the payment of an annuity or other periodic sum. Tan Yee v Equity Finance Corp. D wrongly used F16A instead of Form 16B.Held that although wrong dforms used to effect the charge (by refering to s. 62 of Intepretation Act) it was heldthat the deviation was not substantial as the used of the form 16A did not mislead the P.

EFFECT OF REGISTRATION REMEDIES OF THE CHARGEE s. 243 ORDER OF SALE RIGHTS OF THE PARTIES It expressly states that every charge created s. 254 under NLC shall effect upon registration so as The rights of the parties are either Where the chargor breach any condition and the breach to render the land or lease in question liable implied by the NLC or by express continues for 1 month or such other period as may be as security. specified, the chargee may serve on the chargor a agreement . s. 304 Notice in Form 16D: Manner how instrument to be registered and s. 249 time from which the registration effective. (a) specifying the breach in question It is implied on the part of chargor: Upon Registration of legal Charge it has the (a) requiring the chargor to remedy it within 1 month to pay the sums due to the(b) following effects: or such other alternative period as specified ; and chargee (a) title/ownership of the property does not (b) warning the chargor that if the notice is not to pay rents, rates , taxes and (c) vest in the chargee complied with, the chargee will take proceedings other outgoings in respect of the (b) chargee will acquire interest in the land to obtain an order of sale. land to the authorities or over the lease (c) to comply with conditions to*the notice is also effective on any person on whom the charged land or lease is vested. (c) charge does not involve the transfer of which the land is subject ; and title or ownership of property as such (d) in the case of a lease, to observe may create any number of legal and comply with the terms and If on the expiry of the period specified in the notice, the breach has not been remedied, the whole sum secured charges(if not prohibited by the earlier conditions of the lease. by the charge shall become due and payable to the charges) s. 250 (d) The first registered charge will haveIt is also implied in the absence of any chargee and the chargee may apply for an order of sale. If the title is Registry Titles the chargee must the priority over all later charge unless express prov to the contrary that the(a) apply to HC for the order of sale.u/s. 256. Upon there has been a change in priority duechargor must keep all the buildings in receiving any such application, the court shall, to mutual agreement (consent) throughgood, insure in the joint name and where defaul is proven, order the sale of the land consolidation (s.245), tacking (s.246)permit chargee or his agent for or the lease unless it is satified of the existence of or postponement (s.247) inspection any cause to the contrary.[256(3)] The order of priority is determined according (b) If the title is Land Office Title, the chargee must to the date of registration unless there is as. 251 apply to the LA of the District u/s. 260. After due mutual agreement as regard to the priority. it shall be implied in the absence of any enguiry, if the default is proven, LA shall order the express prov to the contrary that the sale of the land or thelease unless he is satisfied THE UNREGISTERED EQUITABLEchargee will not w/out reasonable of the existence of any cause to the contrary. CHARGE cause, withold his consent to the [260(3)] granting by the chargor of any lease or Tan Teng Pan v Wong Fook Shang Mahadevan s/o Mahalingam v Manilal & tenancy. It was held that the case of land held under Land Office Sons (M) Sdn.Bhd. Title the court has no jurisdiction to order the sale of Salleh Abbas CJ held that the decision in Hj.s. 218(2) Abd. Rahman case does not prevent theThe registered charge can be assignedsuch land in foreclosure proceedings instituted at the creation of an equitable charge.Thereforeby the lender (chargee) to another instance of the chargee. Lim Beng v AVA Palaniappa Chetty equitable charge and Lien are permitted person. P was the purchaser at an austion of a land held by the under NLC. defendant (chargee). The Certificate of transfer was s. 215 & 216 WHAT CAN BE CHARGED The chargor may also transfer the land issued by the supreme court on 31/12/1915. P later subject to the charge to another person, discovered that on 21/11/1915 the same land had been s. 241(1) provides that the following can be but invariably the consent of the chargeesold for arrears of rent by the Collector. The D had been served wita notice of sale dated 24/8/1915 but failed to charged: is required. inform the court of the notice. Held that D must refund (a) the whole but not a part only of any back the purchase money. alienated land s. 244 (b) the whole but not part only of anyThe first Chargee (in the event of many Ragavaniadu v Supramaniam Chetty undivided share in alienated land ; and charges) shall ( subject to the contrary It was held that in cases where chargee had made (c) any lease of alienated land. of express agreement by the parties) application for an order of sale to the Collector, it is vital entitled to the custody of IDT or the for the collector to consider the following: s. 241(3) the powers of charging as above isduplicate lease so long as the liability (a)that the amount claim by ch`ee is properly due to him (b) that the chargor has been in default and to what subject to: under the charge still subsist. extend he was in default (a) any prohibition or limitation imposed by (c) whether it is necessary to sell the whole of the land or the Code or any written law for time s. 244(2) being in force When the IDT /duplicate lease is only a portion of it. (b) any restriction in interest to which therequested by the chargor by writing, theNagappa Chetty v Lam Seng land in question is for the time beingchargee must produce it to the Registry In this case the Collector after ordering for sale alter his order by ordering pay the instalment. subject ; and or Land Office. It was held that a collector had no right to postpone the (c) in relation to leases the provisions sale except in cases of fraud or mistake.If he do so , he thereof, whether express or implied. is altering the terms of the contract. s. 241(4) it also provides that no charge may John Edgar Jones v Palaniappa Chetty be effected in favour of two or more persons When an order for sale made by Court, the chargee or bodies otherwise than as trustees or bought the land with lessr price. Can he recover the representatives. balance of the debt.Held, he still can recover.

V.A.M. Hussain v BP Malaysia The owner of a piece of land had entered into an agreement with the R to turn it into a petrol filling station.Monies were advanced by the R to the owner.It was mutually agreed by the parties that if the project could not materialise (not approved) the money shall be refunded to R. When it was not approved R served a Notice under Form 16E to recover the money. Ap objected that the corrrect form TAKING POSSESION OF THE LAND. The second remedy for the Charge in case of a default by chargor is taking posssession of the land s. 270(1) The Chargee`s right to take possession does not extend to land held under Land Office Titles or the corrospeonding form of qualified titles, nor is the power exercisable in the case of any charge of an undivided share in alienated land. Where the right is exercisable such as in the case of any town land or village land not held under Land Office title it is only exercisable if the land is not occupied by the chargor. s. 270(2) The right to take possession is given to the first chargee only if there are 2 or more charges created in respect of the same land. Taking possession can be two forms: (a) Chargee himself goes into occupation must give a prior notice in Form 16K ; [s. 272(3) ]or (b) Constructive taking (eg) collect rent payable by tenant or lessee to the chargor.Must give notice in Form 16J to the lesse or tenant before he do so.[s. 272(3)] Upon receiving the notice , chargor must admit or secure admission if not then the chargee apply to court for an order of possesion. s. 273 The Chargee may remain on the land so long as the land continues subject to any liability under the charge. s. 274 Chargee who has taken possession the land is entitle to manage the land and also liable to the chargor to for any act wherebythe capital value of the land is impaired or cost loss. s. 274(2) Chargee accountable for any additional sum he receive in exercising his power of management prudently. Woon Foon Hoh v Muthiah Chetty The chargee take possession after notice given to the chargor for his default.It was 35 acres of rubber trees.The chargor later claim that the Chargee had overtapping and for waste of not tapping more than 2 months. It was held that a chargee taking possession for a charge has the same responsibility like of a mrtgageee under EL that is he must reasanobly diligent in getting in the rents and profit and will be held strictly accuntable to the mortgagor. s.275(1) In the absence of any contrary provision a chargee in possession of any land may lease the whole or any part of it and he also can accept the surrender of existing lease or tenancy. s.275(2) & (8) Chargee also can grant building lease if he is authorised by the instrument of charge.The lease must be for 3 years but subject to the consent of chargor ,not exceed 14 years. s.277(1) Where sums of money received by chargee in possesion these must be applied: (a)firstly discharge all rent or other payment due to SA (b)secondly,in payment of insurance premium for building (c)thirdly, in carying out any repairs and for preservation any buildingg in it (d)fourthly in payment of all sums due to him under the charge. The balance must return back to chargor.