What is Lien-Holder Caveat?
Lien-holder caveat is a statutory lien entered by the Lender with whom the issue document of title to any land has been deposited as security for a loan. It is effective upon registration at the relevant land registry and shall continue in force until it is removed or the debt is settled or the Lender obtained a court order for sale of the property (Section 330(5) of the National Land Code 1965).
The criteria for creating a lien-holder caveat are as follows:
(a) The registered proprietor (the Borrower) must deposit the original title of the Property with the Lender;
(b) The registered proprietor must intend to create a lien-holder caveat; and
(c) The Lender must register the lien-holder caveat together with the original title, all relevant forms and documents and prescribed fee at the land registry. The effect of the lien-holder caveat is that it freezes any dealings to the land concerned. However, it only vests the Lender with equitable interest and not proprietary right in the land. In the event of default of the Borrower, the Lender shall proceed to the court to obtain a judgement against the Borrower (Section 281(2) of the National Land Code 1965). Thereafter, the Lender is entitled to apply for a court order for sale of the property (Section 253 to 269 of the National Land Code 1965 and Order 42 of the Rules of Court 2012).