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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.
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