Typical Legal Process of Property Transaction

1. After a deal is closed by an estate agent, what is the next step?
In the case of sub-sale where the seller is not a developer, as soon as the Letter of Offer and Acceptance is signed, the buyer is obligated to engage a solicitor to handle the whole transaction. 
The seller has to provide copies of the following documents for the buyer's solicitor to carry out searches and to draft the SPA:
  • previous Sale and Purchase Agreement (SPA)
  • Individual/Strata Title (if issued)
  • previous Deed of Assignment (DOA) (if title is not issued)
  • buyer's and seller's NRIC cards 
  • latest receipts of assessment rate and quit rent
The buyer has to ensure that the SPA is prepared and signed without delay - usually within 14 days. If delayed, both parties' solicitors usually agree on an extension. Failing to do so may result in forfeiture of earnest deposit to the seller.
2. Should the seller appoint his/her own solicitor?
It is advisable for the seller to appoint his/her own solicitor. Both parties' solicitors are supposed to protect the interests of their respective clients. 
3. Whose solicitor is in control of the whole transaction process?
The buyer's solicitor usually handles the whole transaction process from drafting the SPA to the completion stage.
4. What are the first few things the solicitor does?
Before preparing the SPA, the solicitor carries out private searches at the Land Office/Registry to verify ownership and property particulars and to check for any restrictions or encumbrances on the title. 
The solicitor also does bankruptcy searches at the Insolvency Department to ensure that both the seller and buyer are not bankrupt or becoming so. If the seller or buyer is a company, a winding-up search is done.
The solicitor also writes to the seller's bank for a Redemption Statement to find out the redemption sum and deadline for payment. 
The solicitor then drafts the SPA, forward it to the seller's solicitor for comments. When all the terms and conditions are agreed upon by both parties, the SPA is finalized for signing.
5. What payment is expected at the time of signing the SPA? 
Upon signing the SPA, the buyer is required to make a down payment of usually 10% of the purchase price, less the earnest deposit paid earlier. 
6. What other documents to sign along with the SPA?
In case of properties with individual/strata titles, the Memorandum of Transfer (MOT) and Stamping Proforma are usually signed at the same time along with the SPA for expediency.  
7. What is a Memorandum of Transfer (MOT)?
A Memorandum of Transfer (MOT) is an instrument to transfer the title from a seller to a buyer. It is a statutory form known as Form 14A. The duly signed MOT, together with SPA and the Issued Document of Title (IDT) have to be sent to Stamp Office for stamp duty adjudication (calculation). 
In final stage, the MOT and the said documents will be presented to the Land Office/Registry for registration in the buyer's name. The MOT is an instrument of transfer.
8. What is a Stamping Proforma?
A Stamping Proforma, also known as Form PDS 15, is a statutory form to be submitted to the Stamp Office for adjudicating the stamp duty amount to be paid on the MOT. If necessary, the Valuation and Property Services Department (JPPH) values the property and advises the Stamp Office of the amount of duty to be levied. 
After adjudication, the Stamping Proforma is returned to the solicitor with a Notice of Assessment stating the amount of duty to be paid. The stamp duty must be paid within 30 days failing which a penalty is imposed. When stamp duty is paid, the MOT is then stamped.
9. How much does stamp duty amount to?
1% on the first RM100,000, 2% on the next RM400,000, and 3% on the balance of the purchase price. 
10. What are master title, individual title and strata title?
A master title is the title of the whole undivided land held by the developer of a certain project. 
An individual title is a title of a subdivided parcel of land for a landed property such as a linked house. 
A strata title is a title of a unit of stratified (multi-leveled) property such as a condominium.
11. Do all properties have individual/strata titles?
No. Some properties, the stratified type in particular, are yet to obtained the individual/strata titles from the Land Office due to non-compliance of the developer or delay by the authority. 
12. So, without an individual/strata title, how is a property transferred to a buyer?
A property without an individual/strata title is still transacted by using Sale and Purchase Agreement (SPA), but is transferred from seller to buyer by an agreement known as a Deed of Assignment (DOA). 
For a property without an individual/strata title, the developer's consent to transfer is required. The developer is the sole record-keeper of of all purchasers, and has to be notified of any ownership changes. Developers usually charge an administrative fee of RM500 for issuing the consent.
13. What is a Deed of Assignment?
A Deed of Assignment (DOA) is a written agreement signed between the seller and buyer - to transfer 100% of the ownership rights and interests in a property from a seller to a buyer. The DOA is an instrument of transfer.
For a property without individual/strata title, DOA takes the place of MOT, and is likewise sent for stamp duty adjudication, valuation and stamping as described above. Once the stamp duty is paid and the DOA stamped, the property is deem transferred.
14. When the individual/strata title is finally issued, how is the buyer's name registered in the title?
When the individual/strata title is finally issued, the buyer has to engage a solicitor to transfer the property into the buyer's name and charge to his/her financier (bank). The process is similar to registering a property with individual/strata title in the buyer's name.
15. Since developer's consent is required to transfer a property without individual/strata title, what happens if the the developer has gone out of business?
If a developer goes out of business, the ownership record of all the purchasers is handed over to an Official Receiver (OR) - an Officer of the Insolvency Services Dept - to manage the affairs of the developer's business. A seller then has to apply for consent from the OR to transfer the said property. 
16. How does a transaction of a leasehold property differ from that of a freehold property?
A leasehold property is leased from the State, typically for 99 years. Consent from the State Authority is required for transfer of the lease. 
17. How long does it take to obtain State Authority's consent to transfer a leasehold property?
It may take between one to three months to obtain the State consent for landed properties, and three to six months for strata properties.
18. What are the additional requirements for transacting a property from bumiputra seller to non-bumiputra buyer?
For freehold properties, there is no requirement for consent, unless the document of title states such restriction. 
For leasehold properties, State Authority's consent for transfer is required. The bumiputra seller has to prove that s/he has tried to sell to a bumiputra but was unsuccessful. Proof of prolonged advertisements in Malay newspapers may help.
19. How long does it take to obtain State Authority's consent to transfer a leasehold property from a bumiputra to a non-bumiputra?
It may take between three to six months to obtain the consent, but if it is rejected, appeals may take another three to six months. There is always a possibility that the consent is never obtained.
20. What if the bumiputra seller fails to obtain State consent to transfer the property to the non-bumiputra buyer, or if the State consent takes longer to be obtained than agreed in the SPA?
The SPA usually states that if the seller fails to obtain the the State consent, the buyer is entitled to full refund of money paid, and the transaction ends. If the consent takes longer to be obtained than agreed in the SPA, the buyer can continue to wait or end the SPA and ask for a refund of money paid.
21. What is the payment schedule for the purchase price? 
After paying 10% of the purchase price upon signing SPA, the buyer is typically required to settle the balance of purchase price (90%) within three months by loan, cash or both. 
The three-month payment period starts to run either from the date of SPA, date of developer's consent (for property without individual/strata title), or date of State consent (for leasehold properties), whichever is later. 
22. What if the payment of full purchase price is not settled within the said three-month period?
There is usually an automatic extension period of one month with interest (typically at 8% interest p.a.). 
23. What if the full purchase price is still not settled after the one-month extension period?
In that unfortunate event, the seller can choose to further extend the payment period and charge interest, or call off the deal and forfeit 10% of the purchase price paid. 
24. What if the buyer fails to get a loan or sufficient amount of loan?
The seller has no responsibility to ensure that the buyer meets his/her financial obligations, and is entitled to forfeit the earnest deposit/down payment paid.
Sometimes, the Letter of Offer and Acceptance or SPA provides a special condition that the purchase is subject to the purchaser obtaining a loan/certain amount of loan within a certain period - failing which the purchase shall become void and the earnest deposit paid shall be refunded to the purchaser. In this case, the buyer is entitled to a refund. 
25. How is the buyer's name finally registered in the document of title?
In the final stage, the solicitor gathers the following documents to present to the Land Office/Registry for registration:
  • copies of the buyer's and seller's NRICs
  • the Memorandum of Transfer (MOT)
  • Discharge of charge (from seller's bank)
  • a new Charge (from the buyer's bank)
  • the original Issued Document of Title (IDT)
  • latest receipts of assessment rate and quit rent
  • prescribed registration fee 
A new document of title (IDT) will be issued in the buyer's name in due course.
Note that the buyer's name can only be registered in the document of title if it is issued. 
For a property without individual/strata title, no registration is required. The duly signed and stamped Deed of Assignment (DOA) will be ultimate proof of ownership and legal rights. 
26. What are "direct transfer" and "double transfer"?
For a property without individual/strata title, a developer may sell it to A, and later A sells it to B. When the title is finally issued, the developer can directly transfer the property to B - known as a direct transfer - which is possible for a freehold property. For a leasehold property, the developer must transfer it to A and A in turn transfers it to B - known as a double transfer. 
A direct transfer incurs payment of stamp duty once, whereas a double transfer requires payment of stamp duty twice. Buyer A will prefer a direct transfer to save cost.
by Aaron Lee, Property Street
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