Landowner Protections in a JV Agreement

Landowners are right to ask how their interests are protected. Land may be your family’s most valuable asset, and a JV (joint venture) agreement can tie that land up for several years. The following protections can be negotiated and included in the JV agreement.

This guide explains each protection: what it is, why it matters, and the questions you should ask. At the end there is a checklist table to bring to your meeting with your lawyer.

General information only, not legal/financial/tax advice. Every protection is subject to negotiation and to the final agreement prepared by lawyers.

What protections can be included in a JV agreement?Each protection only applies if it is written into the final agreement reviewed by your lawyer

• Checking the developer before signingLicence, SSM, CIDB, financial capacity, project record and litigation
• Title, time limits and the performance bondTitle stays in your name; a deadline for each stage, limited extensions and late-delivery compensation; the bond amount and claim conditions
• Power of attorney and caveatLimited scope and revocation of the power of attorney; the caveat withdrawn if the agreement is terminated
• Termination, return of the land and your unitsGrounds for termination, return of the land, specification and handover timing of the landowner units
• Insurance, stakeholder and disputesInsurance throughout construction; money and documents held by a lawyer; negotiation, mediation, arbitration or court

Basic terms

• JV agreement: the contract between the landowner and the developer setting out who contributes what, the landowner’s share, when it is received, and what happens if things do not go to plan.
• Licensed developer: a developer holding a housing developer’s licence under section 5 of the Housing Development (Control and Licensing) Act 1966 [Act 118]. Section 5(1) prohibits housing development except by a developer holding a licence.
• Power of attorney (PA, surat kuasa wakil): a document authorising another person (the donee) to act on your behalf (you are the donor).
• Private caveat (kaveat persendirian): an entry on the title that prevents certain dealings from being registered while it is in force (section 322 of the National Land Code).
• Performance bond (in Malay, jaminan bank): a document from a bank or insurer that pays a sum of money to the landowner if the developer fails to perform specified obligations.
• Stakeholder: a neutral party, usually a lawyer, who holds money or documents until certain conditions are met.

The JV journey and where protections fit

Protections work best when they are put in place at the right stage. The flow below shows where each protection usually does its job.

1. Before signing: check the developer Licence, SSM, CIDB, financial capacity and project record.
2. At signing: lock in the terms Time limits, performance bond, scope of the power of attorney, caveat, heirs' distribution schedule.
3. Approvals stage Deadline for approvals. If missed, the agreement can be terminated and the land returned.
4. Construction stage Progress reports, insurance, site visits, housing development account.
5. Handover of landowner units Quality, choice of units, handover timing, defect repair period.
6. If a dispute arises Negotiation, mediation, arbitration or court, as set out in the agreement.

1. Checking the developer before signing

The best protection starts before the agreement: choosing the right developer. Check the following and keep copies.

2. Title stays in your name, and time limits

“My land will slip away.” The land title stays in your name until planning approval is obtained. Any power of attorney is limited to specific tasks only.

“Approvals never come through.” A time-limit clause: if approvals are not obtained within the agreed period, the agreement ends and the land returns to you in full.

Time limits are the backbone of landowner protection. Without them, your land can be tied up indefinitely. Items that can be included in the agreement:

• A deadline for each stage: applications for change of conditions and planning permission submitted, approvals obtained, construction started, project completed, and landowner units handed over.
• Limited extensions: for example one or two extensions for reasonable cause, not open-ended extensions.
• Late-delivery compensation: payment to the landowner for each month of delay in handing over units, calculated by a formula in the agreement.
• Regular reporting: "I don't know what is happening." Monthly progress reports, regular site photos and the right to visit the site.

“The project gets abandoned.” Construction starts only after buyers and financing to complete the project are secured.

3. Performance bond

A performance bond (known in Malay as a jaminan bank) is issued by a bank or insurer at the developer’s request. If the developer fails to perform specified obligations (for example, failing to complete the landowner’s units), the landowner can claim the bond amount under its terms.

Items that can be negotiated and included in the agreement:

• The bond amount and how it is calculated.
• When the bond is delivered (for example before transfer, or before construction starts).
• The bond’s validity period, and the developer’s duty to extend it if the project runs late.
• Claim conditions: an “on demand” bond is easier to claim than a conditional bond.
• When the bond is returned (for example after the landowner units are handed over and the defect repair period ends).

4. Power of attorney: scope and revocation

In many JVs the developer needs a power of attorney to submit applications to the authorities on the landowner’s behalf. Section 309 of the National Land Code requires that an instrument executed under a power of attorney and presented for registration be accompanied by an office copy of that power of attorney. In other words, a power of attorney can be used for registered dealings on your land. That is why its scope matters so much.

Limited scope

Items that can be included in the agreement and in the power of attorney itself:

• Powers limited to specific tasks, for example signing applications for change of conditions, subdivision and planning permission.
• The power to sell, charge or transfer the land is not given, or is given only for specific lots once certain conditions are met (for example after the performance bond is delivered).
• The power of attorney is given to the developer company, not to an individual.
• The power of attorney is handed to a lawyer as stakeholder, and released only when conditions are met.

Revocation

The Powers of Attorney Act 1949 [Act 424] distinguishes several types of power of attorney:

• Ordinary power of attorney (section 5): stays in force until written notice of revocation by the donor is deposited in every office where a copy was deposited, or on death, unsoundness of mind or bankruptcy as set out in that section.
• Given for valuable consideration and expressed to be irrevocable (section 6): in favour of a purchaser, it cannot be revoked by the donor without the donee’s concurrence, and is not revoked by the donor’s death or bankruptcy.
• Irrevocable for a fixed time (section 7): cannot be revoked during that period without the donee’s concurrence.

Developers often ask for an irrevocable power of attorney. If so, make sure the JV agreement clearly states that if the agreement is terminated, the developer must sign a revocation of the power of attorney and lodge it at every office where the power was filed. Ask your lawyer to explain the effect of each type before you sign.

5. Private caveat

A private caveat is an entry on the title under Part Nineteen of the National Land Code. A caveat binding the land prohibits the registration of instruments of dealing by or on behalf of the proprietor while it is in force (section 322(2)).

In a JV, a caveat can work both ways:

• The developer may want to lodge a caveat on your land to protect its interest under the agreement. Section 323 allows a person claiming a registrable interest to apply for a private caveat using Form 19B.
• You want to make sure the caveat is withdrawn promptly if the agreement is terminated.

Key facts from the National Land Code:

National Land Code details: Forms 19H and 19C, court applications, the six-year lapse and compensation

• The proprietor can apply to the Registrar for removal of a caveat using Form 19H (section 326). The caveat lapses two months after the notice in Form 19C is served, unless the caveator obtains a court order extending it.
• An aggrieved party can also apply to the court (section 327).
• A private caveat lapses six years after it took effect, if not withdrawn or removed earlier (section 328).
• Anyone who wrongfully or without reasonable cause lodges or fails to withdraw a caveat may be liable to compensate the party who suffers loss (section 329).

Items that can be included in the agreement: the developer’s duty to withdraw its caveat within a set period after termination, and a signed withdrawal form held by a lawyer as stakeholder.

6. Termination and return of the land

The termination clause sets out when each party can exit the agreement and what happens afterwards. Items that can be included in the agreement:

• Grounds for termination by the landowner: approvals not obtained in time, construction not started or halted beyond a set period, the developer wound up or insolvent, the developer in breach of a key term and failing to remedy it after notice.
• Return of the land: if the title is still in your name, all caveats are withdrawn and the power of attorney revoked. If the land has been transferred, the developer transfers the land, or the remaining unsold lots, back to you.
• Who bears the costs: of returning the land and cancelling documents.
• Your right against the performance bond: a claim on the bond if termination results from the developer's failure.
• Work already done: whether you must pay anything for approvals or site work already carried out (usually negotiated so that you do not).

7. Landowner units: quality, choice and timing

If your share takes the form of completed homes, make sure those units are clearly defined. “My units get finished last” is a common worry. Items that can be included in the agreement:

• Specification: house type, built-up area, finishes and specifications the same as units sold to buyers, attached to the agreement.
• Choice of units: how lots are chosen (for example first pick before sales open, or a list of lots fixed on the plan).
• Handover timing: landowner units in the first phase, or handed over no later than buyers’ units in the same phase.
• Inspection and repairs: the right to inspect units before accepting them, and a defect repair period no shorter than that given to buyers.
• Documents: the Certificate of Completion and Compliance (CCC) and individual or strata title, with transfer costs borne as agreed.
• Heirs’ distribution schedule: “The heirs don’t agree.” A family briefing session and a distribution schedule attached to the agreement.

8. Insurance

During construction, the land and the works on it are exposed to risks such as fire, flood and accidents. Items that can be included in the agreement:

• The developer or its contractor takes out contractor’s all risks (CAR) insurance and third-party liability insurance throughout construction.
• The landowner is named as an interested party on the policy, or at least receives a copy.
• Proof of policy renewal is provided each year.
• The developer indemnifies the landowner against third-party claims arising from the development work.

9. Stakeholders and dedicated accounts

A stakeholder is a neutral party holding money or documents until conditions are met. Examples in a JV:

• Cash forming the landowner’s share is paid to a lawyer as stakeholder, and released at set stages.
• Key documents (original title, power of attorney, caveat withdrawal form, transfer form) are held by a lawyer and released only when specified conditions are met.

For housing projects, section 7A of Act 118 requires a licensed developer to open and maintain a Housing Development Account for each development (or each phase). If your share includes a percentage of sales, ask how payments to you are made from project proceeds and at what stage.

10. Dispute resolution

Disputes can happen even when both sides act in good faith. The agreement should set out clear steps:

• Negotiation between senior representatives of both parties within a set period.
• Mediation: a neutral third party helps reach a settlement.
• Arbitration: under the Arbitration Act 2005 [Act 646]. An arbitration agreement must be in writing (section 9). An arbitral award binds both parties.
• Court: if there is no arbitration clause, the dispute goes to court.

Ask your lawyer which method best suits in terms of cost and time, and make sure the landowner can seek urgent orders (for example to stop dealings on the land) if needed.

Examples: how the protections work

All figures and names are invented for learning purposes, and are not terms offered by RumahHQ.

Three examples: late approvals, late handover of landowner units and construction stopping

Example 1: Late approvals

Puan Aminah signs a JV for her land. The agreement says planning approval must be obtained within 18 months, with one 6-month extension. After 24 months, approval has still not been obtained. Because a time-limit clause was included in the agreement, Puan Aminah serves a termination notice. The title is still in her name. The lawyer holding the caveat withdrawal form lodges it at the land office, and the revocation of the power of attorney is deposited. The land is free again to be developed with another party.

Example 2: Landowner units handed over late

Encik Rahim's share is a number of completed homes. The agreement says the units are handed over in the first phase, with late compensation per unit for each month of delay, at a rate set in the agreement. The units are handed over 4 months late. Compensation: number of units × 4 months × the monthly rate, paid by the developer under the formula in the agreement.

Example 3: Developer stops construction

Construction stops for 9 months and the developer fails to remedy it after a 60-day notice. The agreement lets the landowner terminate and claim the performance bond, in the amount set in the agreement, delivered before construction began. This money helps the landowner cover costs while finding a solution, including appointing another developer.

Common mistakes

• Signing a broad general power of attorney before reading its scope.
• No deadlines, or open-ended extensions.
• Relying on verbal promises not written into the agreement.
• Vague unit specifications, for example “terrace house” with no built-up area or finishes.
• Not appointing your own lawyer. The developer’s lawyer acts for the developer; you should have a lawyer who acts for you.
• Inherited land without all heirs’ consent. Settle the ownership status first. See How to Apply for Small Estate Distribution.

Protection checklist table

Bring this table to your meeting with your lawyer. Tick each item already included in the draft agreement.

All protections are subject to the terms of the final agreement prepared by lawyers and agreed by both parties.

Next step

Before discussing protections, you need to know what can be built on your land. RumahHQ’s preliminary feasibility report is free and carries no obligation. See the Landowners page, or compare your options in JV, Sell, Lease or Build Yourself?.