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Land
deals
08/06/2004 The Star
Articles of Law with Bhag Singh
LIKE other forms of property, land can be transferred from one
person to another. In the process terms such as Sale and Purchase
Agreement (SPA), Transfer and Deed of Assignment are used.
A reader wants to know which is the correct document and at what
point of time does the property change hands. In order to understand
the difference it is necessary to set out a brief explanation of
each of these words to show what they involve and also what the
effect of each of the documents is.
An SPA generally records the terms and conditions on which a
property is to be transacted between the buyer and the seller. It
constitutes a commitment which would create a binding obligation.
As a matter of general practice an SPA provides for a 10%
downpayment on the signing of the agreement and the balance to be
paid within three months or a period agreed to between the parties.
By entering into such an agreement the buyer acquires a right to
become the owner of the property subject to his fulfilling his
obligations. These would be matters such as paying the balance of
purchase price within the stipulated time as well as fulfilling
other obligations in the agreement. Upon fulfilment of these
obligations the buyer becomes entitled to the property,
The word “transfer” is used in a somewhat different sense. This
refers to the formalities that have to be complied with to have the
ownership of the property legally moved from the seller to the
buyer.
Where there is a title to the land a register of titles will be
maintained at the registry. The process involves having the name of
the seller on the title deed changed to the name of the buyer.
This is done by means of completing a document called a transfer
which is signed by the seller and the buyer and duly attested,
stamped and submitted to the appropriate land registry which then
endorses the name of the owner on the title deed and its duplicate
in the register.
It is said that once the name of the buyer appears on the register,
his title is indefeasible subject to certain exceptions. This is
provided for by Section 340 of the National Land Code. The use of
the word “assignment” on the other hand has developed from the word
“assign” which simply means to make over a right or interest to
another. It is basically a word of general application.
Where an individual title exists, the question of an assignment does
not apply. However, the term has relevance when an individual title
for the property in question has not been issued and therefore the
person who has entered into an SPA to acquire the property is
actually only transferring his rights under the agreement.
House buyers who entered into an SPA but were not issued an
individual title will recollect signing a Deed of Assignment when
they dispose of their rights under the SPA. Similarly when they
obtain a loan they have to assign all their rights to the lender as
a security for the loan.
It will therefore be seen that an SPA serves the purpose of
recording the terms on which the parties have agreed to and the
manner in which these terms are to be fulfilled. On the other hand
the transfer process, whether through registration or assignment, is
the actual moving of the legal ownership from one person to another.
Therefore the rights that a person has under an SPA depend on the
obligations provided for and to what extent these have been acquired
and to what extent the rights have been fulfilled. The SPA, without
regard to the actual contents, does go very far.
Thus a person may sign an SPA to purchase a property for RM100,000
but has only paid RM10,000 as deposit. Unless the balance is paid,
the right exists only on paper.
In a different scenario a purchaser may have paid up the entire
purchase price and may only be waiting for a third party approval.
Here, subject to such consent, the buyer is as good as the owner of
the property.
What then is the difference between a person who merely has an SPA
and has fulfilled all his obligations and is therefore for all
practical purposes the owner and another who has land transferred to
him?
In legal terms the former is referred to as the “equitable” owner
and the latter a “legal owner”. An equitable owner may lose his
rights to the property if unknown to him the earlier owner who sold
the property to the buyer then proceeds to sell the property to
another and that other person registers himself as the owner.
Of course such conduct would amount to cheating. However, if the
subsequent purchaser is unaware of the earlier transaction and has
paid the full purchase price, he acquires a superior right to the
person who has paid for the property but not have it transferred to
his name.
Such occurrences are rare these days. This is because all measures
are adopted such as filing a caveat as soon as the SPA is signed and
by requiring the original title deed to be handed over. However,
given the various steps involved things can still go wrong when
there is an an oversight. |
