Q.
Owing to old age, Mr Sukumaran left his shoplot to his brother Mr Narenthan to take care. However, Mr Narenthan is a busy man. Although the shop had been rented by En Ghazali for years, the assessment rates were never paid.
Now, the arrears has accumulated to an astonishing sum of RM25,000! The last known fact was that the shoplot is now for sale in an Auction. According to En Ghazali, he heard from neighbours that officers from the local council had come over numerous time, but he wasn't in as he uses the shop as warehouse and not for retail business.
What are the procedures that local authority could carry out to enforce such action? List out the law that governs the default on payment of assessment rates.
What can Mr Sukumaran do to get back his shoplot?
And at the meantime, Maimunah has signed a SPA with Mr Sukumaran that she is purchasing this shop. What would happen to her?
A.
See also:
What do you mean by 'DISITA'?
This is about procedures in default of quit rent (assessment or consolidated rates) payment.
The law that governs this area is Local Government Act, 1976, particularly S.146 to S.156.
S.146 specifies that all rates shall be paid by owners of the holdings, and if not, shall be subject to actions to recover the outstanding not paid.
So, there was a number of years that the assessment rates of Mr Sukumaran's shoplot not paid. This RM25,000 is being arrears to be recovered by the local authority. Hence, the eventual action of putting the shoplot for Auction.
S.147 deals with proceedings in default of payment, quite like giving definition to what is default of payment.
S.147 If any sum payable in respect of any rates remain unpaid by Feb or Aug of any year(s), the owner or owners shall be liable to pay the sum outstanding plus interest and cost, which is called 'arrear'.
These arrears may be recovered by the local authority in accordance with S.148 which is about proceedings for recovery of an arrear.
In a default of payment, Form E is issued pursuant to S.148 - Proceedings for recovery of an arrear.
After effort to recover arrear by Form E has failed, the local authority would serve a Form F (warrant of attachment) as below.
This part is to take any valuable movable property to be sold for cash so as to repay the arrears.
If there were any surplus, after having paid the arrear, interests, and cost of auction, it will be returned to the owner. However, if it is not enough, then proceed to Form G (Inventory and Notice) - under S.151 - which is what Mr Sukumaran is facing now, ie the sale of his holding - the shoplot, by way of Auction.
So, distinguishing the difference between Form F and G you would find that F is about 'property' and 'movable' whereas G is about 'immovable' and 'holdings'.
Even before S.151 - attachment and sale of holding, S.149 - sale of property attached in fact has an allowance of 7 days from the date of the attachment Form F, to pay up the arrears. This is the same for Form G under S.151 - also 7 days.
Hence, if it is within 7 days (as stated in Form G) that Mr Sukumaran gets to pay up the arrears RM25,000, the auction of the shoplot (holdings) is thus called off.
Going back to earlier times when Ghazali said officer from local authority did visit their shop, it was in fact the action of the local authority to pursue S.148 - proceeding for recovery of arrears. The officers were there to ascertain that any reasons that arrears can be recovered, before they proceed to issue a warrant to collect any property for sale in an Auction.
At this stage, of course Ghazali was not obligated to allow his possession be used to pay up the arrears. But, he being the occupier, could have settled the arrears on behalf of Mr Sukumaran.
In such case, the law provides that the occupier can deduct the sum paid from the subsequent rental payment to the owner. This is specified in S.155 - recovery of rates paid by occupier.
And, the local authority should refrain from seizing and selling property which was lawfully seizable under S.148 earlier on. This is provided under S.151(4) and (5) - shall release the property seized when the occupier pay up the arrears.
This amount paid to get release of property seized under S.148 by occupier can be used to deduct from rental to the owner as provided in S.151(6). In concept, this is similar to S.155 above.
During Ghazali's absence, the local authority can even break in to the shop and effecting such attachment, ie take the movable properties for auction to recover the arrears. This is allowable under S.148(3) as Form F is a 'warrant of attachment'.
However, even by breaking in, if there is nothing to seize for attachment, the local authority can apply to the Registrar of High Court to order the attachment in Form G, ie to sell the holdings in an Auction S.151 (1) and (2) - execution of a decree by attachment and sale of immovable property following civil procedures.
So, what can Mr Sukumaran do? The answer is straight away to see the local authority and make payment of RM25,000 and any other incidental fees and at the same time inform the Court of such payment.
This is specified in S.153 - power to stop sale.
And, as being unfair to Mr Sukumaran that he was never made aware by his brother or Ghazali about the pending payment, Mr Sukumaran may consider using S.154 - objection to attachment, to cause an order to stay the proceedings of sale.
S.154(2) however, insists that the arrear must first be paid up before the stay of proceedings. The Court would then make enquiry to such objection and arrive at a decision deemed just to Mr Sukumaran.
Take the above scenario even further, Maimunah being the new owner, what is her legal position in this?
This is under transfer. According to S.160, it is the duty of the seller or transferor (Sukumaran) and the purchaser or transferee (Maimunah) to notify the local authority within three (3) months of such transfer in Form I.
So, in the above scenario, the purchaser can notify the local authority and stay the proceedings of sale. May be it is better that the purchaser becomes occupier and pay off the arrears and deduct from the rent (in this case, any amount not paid to Mr Sukumaran as a claim of debt).
According to S.160(4), during a transfer it is the owner who is supposed to pay the rates. Thus, anyone who sells would be liable until the name is changed to the new owner in the book of the local authority. Hence, S.160(5) says nothing therein shall affect the liability of the purchaser or transferee to pay the rates in respect of such holding or to perform such obligation, or affect the right of the local authority to recover the arrears.
So, Maimunah does not need to pay up the arrears.
However, if the Court action is to order for sell in an Auction not knowing that there is a buyer, Maimunah (if still loves the shop so much) should effect an objection under S.154 Objection to attachment - so that the Court can consider a fair outcome for her.
Anyway, in the process of SPA, it is stated that the seller must ensure the property is free from all emcumbances to proceed with the sale. So, unless it is a rock bottom price, Maimunah can choose to purchase the property at the Auction instead.
Ref:
Local Government Act, 1976 Sections 147 to 155, and 160.