Before You Rent a Factory: How to Check for a Bank Charge, Caveats and Auction Risk

Key Takeaways

• Do a land search before you sign. It shows the registered owner, any bank charge and any caveat on the factory's title.
• A charge is normal; what matters is the bank's consent. Most factories are financed. Ask the owner for the bank's written consent to the letting.
• Caveats are a warning sign to ask about. A private caveat, a lien-holder's caveat or a registrar's caveat each means someone claims an interest in the land.
• Check whether the factory is already listed for auction. Search the address in factory auctions before paying a deposit.
• Write protection into the lease: registration or endorsement of the tenancy, the bank's consent, and the owner's duty to tell you of any default notice.

Most tenants check power, height and floor loading carefully, then sign a lease without looking at the title. If the owner later defaults on the loan, the factory can be auctioned, and whether the tenant can stay depends on things that were visible on the title before signing. This guide shows what to check. It is general information, not legal advice.

What a land search shows

An official land search (carian rasmi) at the land office, which many states now offer online, shows:

Item on the search	What it tells a tenant
Registered proprietor	Whether the person or company offering the lease actually owns the factory
Category and express conditions	Whether the land is industrial and what use is allowed
Charge (gadaian)	Which bank holds security over the factory
Caveats	Who else claims an interest
Leases and endorsed tenancies	Existing registered leases on the land

For strata factories or units without individual title, the search is on the master title, and the owner's financing may be under a loan agreement and assignment instead of a registered charge. Ask the owner for the sale and purchase agreement and the bank's letter.

The bank charge and the bank's consent

A charge on the title is normal: most owners finance their factory. The risk is not the charge itself but what happens if the owner stops paying. Loan documents commonly forbid letting without the bank's consent, and a tenancy granted without consent may not bind the bank or a buyer at auction.

Ask for:

1. The bank's written consent to the letting, naming you as tenant.
2. Registration or endorsement of your tenancy. A lease of more than three years should be registered; a tenancy of up to three years can be endorsed on the title.
3. A lease clause requiring the owner to tell you within a set number of days of any default notice, such as a Form 16D notice under the National Land Code, or any auction proceedings.

Caveats

A caveat freezes dealings with the land in favour of someone who claims an interest. On a factory title you may see:

• A private caveat, entered by a person or company claiming an interest, for example a buyer under an unregistered agreement.
• A lien-holder's caveat, where the title has been deposited as security for a loan.
• A registrar's caveat, entered by the land office, sometimes in connection with government action or an error on the title.

None of these automatically means you should walk away, but each needs an explanation from the owner, and ideally your lawyer's view, before you pay a deposit.

Check the auction listings too

A factory already heading to auction can still be offered for rent. Search the address and lot number in BidNest's factory auctions, and look for a proclamation of sale. If the factory you are about to rent is listed, your position as a new tenant would be weak, and our guide to what tenants can do when a rented factory is auctioned explains why.

Frequently Asked Questions

How do I check if a factory has a bank loan before renting it?

Do an official land search at the land office. A registered charge shows which bank holds security. Then ask the owner for the bank's written consent to the letting.

Is it risky to rent a factory that has a bank charge?

A charge is normal. The risk is a default by the owner. With the bank's consent to the letting and a registered or endorsed tenancy, a tenant is in a much stronger position if the factory is ever auctioned.

What does a caveat on a factory title mean?

Someone claims an interest in the land. Private, lien-holder's and registrar's caveats each have different causes; ask the owner to explain any caveat before you pay a deposit.

Can a factory that is up for auction still be rented out?

It can be offered, but a tenancy granted at that stage is unlikely to bind the auction buyer. Check the auction listings for the address before signing.