Land Fraud — How Lawyers Can Protect Their Clients (and Themselves)

Whilst land fraud is by no means a recent occurrence[1], the number of such cases has increased exponentially over the last 20 years[2].  This significant rise could, perhaps in no small part, be attributed to the computerisation of the land registration system in 1993[3].
 
According to newspaper reports, there were close to 500 cases involving land fraud between 2021 and 2023 alone[4].  In one of the most well-known cases regarding land fraud, two innocent parties spent close to 15 years embroiled in litigation, with the Court at each level overturning the preceding decision[5].  To add to the losing party’s grief, it was subsequently held that the Apex Court's decision was erroneous[6].  
 
In some instances, the fraud committed was aided and abetted by solicitors involved in the conveyancing transaction[7].  But innocent solicitors are occasionally caught in the web of deceit spun by fraudsters and find themselves cited as defendants for negligence[8].
 
Modus Operandi of Fraudsters
 
Fraudsters implement elaborate schemes that could result in either the innocent landowner being deprived of his land without receiving any consideration[9], the innocent purchaser losing the purchase price paid without acquiring indefeasible ownership of the land[10], or the end-financier having disbursed the loan without security that prevails over the original landowner’s title[11].
 
Their strategies include, inter alia:

1. Changing the mailing address of the registered owner by forging his / her signature, obtaining a court order in default declaring the land to be beneficially owned by someone else, and selling and transferring the land more than once in haste[12];
2. Impersonating the registered owners to sell and transfer the land and forging their signatures on the transfer form[13], and carrying out multiple sales[14];
3. Acting as the purported attorney of the landowner to sell the land under a forged[15] or false[16] power of attorney; and
4. Obtaining a court order for wrongful distribution of a deceased’s estate and thereafter, selling and transferring the land[17].

 
Proposal for Assurance Fund
 
The Federal Court have, on more than one occasion, recommended that Parliament consider setting up an assurance fund to compensate innocent landowners who are wrongly deprived of their lands[18].  As we wait for legal reform to materialise, legal practitioners should take proactive steps to safeguard not only their client’s interests but also their own.
 
Steps to Protect Against Land Fraud
 
Several sets of solicitors are usually involved in a land deal — one acting for the vendor / transferor, another for the purchaser / transferee, and another for the end-financier (if financing is involved).  Recent land fraud cases usually involve more than one transaction or transfer.
 
For solicitors acting in a conveyancing transaction, the routine preliminary steps involve:

1. Verifying the identity of the parties;
2. Carrying out a bankruptcy or winding up search on the parties; and
3. Conducting a land search on the register document of title to determine the identity of the registered proprietor and of any encumbrance on the land.

 
In addition, conveyancing solicitors should also take the following precautionary measures:
 

1. Exercise extra vigilance when verifying the identity of a purported landowner, especially when the identification particulars presented do not match the details reflected in the title deed[19] or they only have temporary identity cards[20];
2. Investigate whether any previous registered owner’s title to the land was obtained pursuant to a default order, which may be liable to be set aside and wipe out the current vendor’s title[21];
3. Inquire into the previous sale and transfers, to determine whether there was any haste in effecting the transactions and the proposed sale[22];
4. Scrutinize whether the vendor had the financial capacity to acquire the land in the first place[23];
5. Obtain a valuation report to ascertain the market value of the land, especially when the purchase price is substantial[24];
6. Probe into the validity of the power of attorney under which any vendor purports to sell or transfer[25];
7. Ascertain whether the vendor is himself an immediate purchaser, so that the purchaser can become the subsequent purchaser[26];
8. Look out for unusual terms for the purchase e.g., huge sum paid upfront[27];
9. Witness the execution of the conveyancing documents[28];
10. Exercise extra caution if the purchase price is below market value[29];
11. Ensure that there is adequate documentary proof of payment of the purchase price[30], especially when payment is said to be by cash[31]; and
12. Prepare the real property tax gain (cukai keuntungan hasil tanah, “CKHT”) forms and ensure that an amount to cover the real property gains tax payable was retained by the vendor’s solicitors[32].

 
Conclusion
 
These precautionary steps are recommended in light of the Appellate Courts’ decisions in cases involving land fraud.  We may question or challenge the correctness of some of these decisions, but it would be prudent to discharge our duties as solicitors ex abundanti cautela.
 
The author wishes to express his gratitude to his colleague, Michelle Chin Zi Shan, Advocate and Solicitor of the High Court of Malaya, for her assistance in preparing this article.