In the case where the author is dealing with the sale and purchase agreement (SPA), sometimes clients would not understand why it would take three months for a seemingly simple sale and purchase of a property. They like to say “Isn’t it just taking the title deed to the Land Office to change the name?” Here, I hope this article can help our lawyers to elude grievances.
Well, let’s take the most common scenario where the seller still owes a sum of money to the bank, but he wants to sell the house. The buyer does not have enough cash, so he has to borrow from the bank to buy the house. In this case, there are four parties involved in the process of buying, selling and lending; they are the seller, the seller’s bank, the buyer, and the buyer’s bank. This house also has an Individual title.
Firstly, lawyers will prepare a sale and purchase agreement (SPA) for the seller and the buyer to sign which clearly states the responsibilities of both parties, compensation for any breach of the agreement, etc. When the agreement is stamped and dated, the familiar 3+1 starts to count. The so-called 3+1 is actually means that the seller must complete the transaction such as changing the ownership of the property within 3 months and hand over the key to the buyer and the buyer must use his own cash or money borrowed from the bank loan within 3 months to pay to the seller. If it cannot be completed within 3 months, there is still a one-month conditional and interest period for the buyer to complete the part that he has not completed.
When the seller and the buyer sign the SPA, usually our lawyers will also include other documents for both parties to sign such as Memorandum of Transfer, MOT. MOT can be said to be a formal land transfer document regulated by the Land Office. In other words, the SPA regulates the responsibilities of both parties during the three-month period, but when going to the Land Office to change the name or ownership, you do not need to submit SPA to the Land Office.
Previously I had mentioned that the seller still owes a sum of money to his bank, and the title deed of the seller’s house has also been charged to the seller’s bank. At this point of time, the seller’s bank will say: “Even if you want to sell your house, don’t forget that you still owe us money!” The seller’s lawyer then needs to ask the buyer’s bank to first use part of the buyer’s loan to settle the seller’s remaining loan. If the process goes well, when the seller’s bank loan is fully settled after paid off by the buyer’s loan, the seller’s bank will then sign the discharge documents and return the title deed to the seller’s lawyer.
After the seller’s lawyer receives the documents and title deed from the seller’s bank to release the charge, they will hand these documents and the security documents to the buyer’s bank lawyers for safekeeping. After the buyer’s bank lawyer confirms that all the documents are complete and the bank’s interests are protected, they will then (1) release the seller’s bank discharge documents, (2) the seller’s transfer of the title deed to the buyer, and (3) the charge documents of the buyer’s bank were submitted to the Land Office. Therefore, basically the names of the seller and the seller’s bank will be changed to the names of the buyer and the buyer’s bank. In the end, the title deed will also be handed over to the buyer’s bank for safekeeping. Of course, the buyer’s bank will also transfer the remaining loan amount to the seller’s lawyer. After the seller’s lawyer confirms that the seller has handed over the key to the buyer, the remaining loan amount will be handed over to the seller.
The procedures written above are just some basic concepts. During this period, the matters that lawyers must also take care include:-
1. For the memorandum of transfer, loan documents, etc. stamp duty must be paid. The documents must be sent to the Inland Revenue Department (LHDN) to assess the market price of the property. This process may take two to three weeks;
2. You must declare your taxes when you are buying or selling a house. When the seller sells the property and makes a profit, he must pay the real property gain tax (RPGT) to LHDN;
3. It is necessary to ensure that the seller has paid off the latest Quit rent (Cukai Tanah) and assessment tax (Cukai Pintu), etc.;
4. LHDN sometimes messed up and gave the seller the wrong RPGT list;
5. The seller’s bank or the buyer’s bank are late in attending the case, etc.
“Summary: In addition to preparing documents and telling clients about the legal procedures, there are a lot of things that lawyers must act as a “coordinator.”
The reason the author saying this is because there are many parties, such as banks, LHDN, land office and etc, which are NOT WITHIN OUR CONTROL. If any party delays the process, the entire process of the sale and purchase agreement will be delayed. The 3+1 deadline is the wisdom left by our predecessors. Relatively speaking, it is the deadline that most of the buying and selling process can be completed.
In addition, if you are interested in the knowledge related to this sale and purchase agreement, you may leave a message to let the author know. In addition of sharing the knowledge of civil litigation law, the author also wishes to write more about the legal knowledge related to the Sale and Purchaser transaction.
BY WINSON TAN
Note: This article is for reference only and does not constitute legal advice. Therefore, if readers have any legal questions or needs, they should seek professional legal advice. If the reader suffers any loss by relying on this article, the author will not be held responsible.