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Understanding an SPA - (Part 2)
22/12/2006 The Sun - Law & Realty  By Cheong Yoke Ping

In this Part 2, the writer continues to explain some additional terms and conditions of a normal and typical transaction relating to the purchase of a Property from a Vendor, other than a developer.

Memorandum of Transfer or Deed of Assignment

When the Vendor signs a SPA to sell his Property, he is normally required to simultaneously sign a Memorandum of Transfer (Form 14A) (ďTransferĒ), in a case of a Property with title, or a Deed of Assignment (ďAssignmentĒ), in a case of a Property without title.

The Transfer or Assignment is usually deposited with the Purchaserís Solicitor as stakeholder. Sometimes the Assignment is kept by the Vendorís Solicitor as stakeholder until the Purchaser bankís (ďPurchaserís BankĒ) has given a written undertaking to the Vendor to release the Loan to enable the Purchaser to complete the transaction.

Developerís consent

In a case of a sale of Property without title, it has been the practice to require the Vendor to obtain the consent of the Developer to the sub-sale of the Property from the Vendor to the Purchaser (ďDeveloperís ConsentĒ). The Developer will normally grant its consent when the conditions stipulated by the Developer are complied with, including the settlement of an administrative fee, all outstanding charges due in respect of the Property, and receipt of certain documents, e.g. the Receipt & Reassignment (ďR&RĒ)(if applicable).

Delivery of documents by Vendor

The SPA will provide for the Vendor to deliver the following documents upon or after the signing of the SPA and payment of the Deposit of 10%:

ē Duly executed Transfer or Assignment

ē Quit rent and assessment receipts for the current year

ē Certified copy of Vendorís NRIC, Income tax reference no. and place of assessment, if any

ē Redemption statement of the Vendorís bank.

The purchase of a Property without title usually requires the Vendor to produce all documents tracing the transactions from the original purchaser to the Vendor, including all SPAs, loan agreements, Assignments and R&R.

Adjudication of Transfer or Assignment and Receipt and Reassignment (ďR&RĒ)

Adjudication is the process of determining the stamp duty payable on the instrument of Transfer or Assignment. Stamp duty is payable on the relevant instrument based on its consideration or market value, whichever is higher.

The Transfer or Assignment is submitted by the Purchaserís Solicitor to the Pejabat Duti Setem, Lembaga Hasil Dalam Negeri, and this will involve the valuation of the Property by the Valuation Department. Nowadays, the adjudication process has been computerised in some States, and computerised adjudication will normally take 2-3 weeks to be completed. The manual adjudication will take 2-3 months.

Once the Purchaserís Solicitor has received the Stamping Notice (Notis Taksiran) from the Pejabat Duti Setem, he will proceed to stamp the Transfer provided that the Purchaser has deposited the correct amount of stamp duty with him. The stamp duty is usually deposited earlier by the Purchaser to avoid any delay in the payment of the same.

The ad valorem stamp duty must be paid within 30 days of the date of the notice, failing which, a penalty is chargeable.

Unlike a Transfer, an Assignment will not be dated or sent for adjudication, soon after the date of the SPA. Where the rights over the Property have been assigned by the Vendor as security to the Vendorís Bank, such rights have to be reassigned by the Vendorís Bank to the Vendor by way of the R&R. The R&R is to be signed by the Vendor and the Vendorís Bank.

Once the Redemption Sum is paid by the Purchaser or the Purchaserís Bank, as the case may be, and a copy of the R&R is received by the Purchaserís Solicitor from the Bank, the Purchaserís Solicitor will date the Assignment and submit the Assignment for adjudication and subsequent payment of ad valorem stamp duty. (This is one of the reasons why the purchase of a Property without title takes longer to complete than a Property with title). Based on the Purchaserís Solicitorís earlier undertaking to the Purchaserís Bank, he will then forward the duly adjudicated and stamped Assignment to the Purchaserís Bankís or its Solicitor.

Redemption Statement from Vendorís bank and release of documents

The Vendorís Solicitor or the Purchaserís Solicitor (in a case where the Vendor is not represented) will write to the Vendorís Bank for a redemption statement, which will set out the amount owing by the Vendor (ďRedemption SumĒ). The Vendorís Bank is usually requested to furnish an undertaking to refund the Redemption Sum in the event that (a) the discharge of the Vendorís Bank cannot be registered for any reason (for Property with title) or (b) the R&R or the Assignment cannot be perfected for any reason.

The Vendorís Bank is also required to give to the Purchaser or the Purchaserís Bank a letter of undertaking that upon the receipt of the Redemption Sum by the Vendorís Bank:

(1) it will release the original title, duplicate charge and instrument of discharge to the Purchaserís Solicitor (in a case of Property with title); or

(2) it will deliver the duly executed R&R, original loan documents and other documents in its possession (in a case of Property without title).

Vendorís undertaking to refund

The Vendor is usually required to furnish a written undertaking to the Purchaserís Bank to refund the Loan in the event that the Transfer cannot be registered for any reason or in the event the Assignment cannot be perfected for any reason. This undertaking is to be delivered within 7-14 days, failing which additional time may have to given to the Purchaser to pay the balance purchase price without interest.

Part I appeared in the Law & Realty column a fornight ago.

The writer is a member of the Conveyancing Practice Committee, Bar Council, Malaysia www.malaysianbar.org.my.

 

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