Bringing court auctions online to enhance transparency

PETALING JAYA (July 30): Online property auction platform e-Lelong for court auctions of immoveable properties has taken off with an initial pilot project to smoothen out the kinks in the system before going nationwide.

The e-Lelong pilot project was officially launched by the Chief Registrar’s Office (CRO) of the Federal Court of Malaysia in Kuantan on July 27 at Kompleks Mahkamah Kuantan, Pahang, officiated by Chief Justice of Malaysia Tan Sri Md Raus Sharif.

The e-Lelong process is mostly similar to the manual auction process, except that “we are shifting things online”, Deputy Chief Registrar (Policy) Datuk Aslam Zainuddin told TheEdgeProperty.com in an interview prior to the launch.

He said the main purpose of digitising the auction system is to enhance transparency and minimise human intervention.

“In the current manual auction system, we sometimes don’t get to auction the property at market price due to human intervention. Without the human element in the auction process, I believe things will be more transparent because no one is able to find out who and where the bidders are once things go online. The bidders’ identities and whereabouts are protected.

“We have done at least four engagements with stakeholders such as the Malaysian Bar, financial institutions, auctioneers, the Malaysian Anti-Corruption Commission, the Malaysian Institute of Integrity and cyber-security experts to make sure the system is intact. Bidders don’t have to worry about any tampering or hacking of the system during the auction process,” Aslam assured.

How e-Lelong came about

Currently, public auctions for immoveable properties are conducted manually at 15 locations of the High Court in Peninsular Malaysia, according to Aslam.

“In 2014, Tun Arifin Zakaria, the former Chief Justice of Malaysia, had mooted the idea of e-Lelong. This is to protect the interests of genuine bidders and also as a platform for introducing innovation to the delivery of justice.

“Thus, the CRO — currently headed by Datuk Seri Latifah Mohd Tahar — had conducted various studies to develop an electronic system to conduct auctions online for immoveable properties in all 15 High Courts in Peninsular Malaysia,” he said.

Aslam added that the innovation by CRO on this new system had then been brought to the attention of the Special Task Force on Facilitating Business (Pemudah), chaired by Chief Secretary to the Government of Malaysia Tan Sri Dr Ali Hamsa where the Pemudah team has expressed full support for the idea and suggested that the development of this system be accelerated.

“This is because e-Lelong will also improve Malaysia’s ranking in the World Bank’s Ease of Doing Business Report,” he added.

Starting out with Kuantan

The pilot project at the Kuantan High Court will ensure everything runs smoothly before it is expanded to the rest of the country.

“We are launching the pilot project in Kuantan because that is where our e-Lelong Operations Centre is stationed,” he said. The e-Lelong portal has gone live since June 1, 2017 and foreclosure cases registered after June 1 in the Kuantan High Court would be auctioned online. A total of 27 cases have come up since then.

The e-Lelong pilot project was initially scheduled to be launched on March 29 but it was deferred to resolve certain technical issues, the then-Registrar of the High Court of Malaya Sabariah Othman had told TheEdgeProperty.com earlier.

Practice Direction No. 1/2017 dated March 15 had been issued to Senior Assistant Registrars and Deputy Registrars of the High Court of Malaya, comprising an introduction to the e-Lelong system and the procedure of hearing foreclosure applications and the conduct of public auctions of immoveable properties via electronic means.

Eligible bidders can bid from the comfort of their homes, provided they have good internet connection.

“If our e-Lelong Operations Centre encounters a power failure or internet connection disruption, then we will reschedule the auction to another date and time. If this happens on the bidder’s end, it is beyond our control,” he added.

Aslam hopes the online auction system will attract more bidders than in a normal auction; with more bidders, the properties may be auctioned off at higher prices.

“It is also beneficial to both the defendant/borrower and the bank if a higher selling price can be obtained to reduce the borrower’s debt. Normally at auctions, the price might not be as high as the loan amount, so borrowers might still have to top up the balance after the property is auctioned off,” he explained.

The CRO is currently also in talks with certain banks to enable online payment. For now, online bidders have to provide the 10% deposit by way of a bank draft.

Impact of e-Lelong on auctioneers

Auctioneers had raised concerns earlier over the impact of e-Lelong on their livelihoods. Aslam said the CRO had engaged with the auctioneers about e-Lelong since November 2015 via the Council of Auctioneers Malaysia and the respective state’s Auctioneers Association.

“We have had four engagements with the auctioneers so far. The first one was in November 2015, then subsequently in March 2016, June 2016 and the last one was in February 2017.

“We have suggested that they come on board to do the pre-auction work such as advertisements for foreclosures, proclamation of sales and title searches. We have also suggested to them to set up centres to help the public register their profile for e-Lelong or even provide assistance to bidders who are less IT-savvy.

“It’s really up to them to take our suggestions and work within the e-Lelong system.

“Like our e-Filing system, for instance, runners who used to do filings on behalf of the lawyers are out of job because lawyers can now file their documents from their own offices.

“We cannot stop technology; we have to move forward. The court’s pace should keep up with technology’s march,” he said.

Step-by-step expansion

As to when the e-Lelong system will be expanded to other states in Malaysia, Aslam said it all depends on how the pilot project fares.

“We gave ourselves nine months to test this out in Kuantan. If we are able to stabilise the system and ensure everything runs smoothly within the trial period or even earlier than that, then we will expand the system to the other states in Malaysia,” he said.

“We are doing it step-by-step by starting out in Kuantan. We will be disseminating information to raise public awareness on the e-Lelong system,” he added.

How to bid on e-Lelong

1. Before the auction:

- Register an individual or business account as potential bidder on the e-Lelong website (https://elelong.kehakiman.gov.my/BidderWeb) as a potential bidder.

- Bidders can then look out for the auction properties.

- Bidders shall deposit 10% of the reserve price of the auction property in the form of bank draft to e-Lelong Operation Centre via Pos Laju services or by hand, no later than three working days before the public auction is to be conducted.

- Bidders who have paid the deposit may withdraw from the public auction no later than one day before the date of the public auction by informing the Registrar of e-Lelong Operation Centre via email.

2. During the auction:

- The public auction is divided into three sessions: 9am, 11am and 3pm (Monday to Friday).

- Each session will last one hour except in the following circumstances:

i) If no bid is made within 30 minutes of the start of the session, the auction will be terminated.

ii) Two minutes after the last bid has lapsed and no more bids are made, the last bidder shall be declared the successful bidder.

- The Registrar of e-Lelong Operation Centre will notify both successful and unsuccessful bidders by a notification in the e-Lelong website.

3. After the auction:

- Upon successful bidding, the Registrar of the e-Lelong Operation Centre shall generate the Memorandum of Sale and deliver it to the successful bidder and the deposit amount paid by the successful bidder will be delivered to the plaintiff solicitors via Pos Laju services.

- Unsuccessful bidders or bidders who have withdrawn from the public auction will have their deposit returned via Pos Laju services or at the counter of e-Lelong Operation Centre (only for those who submitted their deposit by hand).

- The successful bidder needs to settle the balance purchase price within 120 days from the date of successful public auction. Otherwise, the sale shall be void and the 10% deposit will be forfeited by the plaintiff.

- The Registrar of e-Lelong Operation Centre will issue the Certificate of Sale in Form 16F of the National Land Code 1965 (prepared and completed by the successful bidder) to the successful bidder.

This story first appeared in TheEdgeProperty.com pullout on July 28, 2017. Download TheEdgeProperty.com pullout here for free.