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Understanding an SPA - (Part 3)
05/01/2007 The Sun - Law & Realty By Cheong Yoke Ping

IN this final part. the writer continues to explain the terms and conditions of the Sales and Purchase Agreement (SPA) and the process of completing the transaction of a purchase of a Property from a party (ďVendorĒ) other than a developer.

Payment of Redemption Sum

Once all the conditions of the Loan have been fulfilled, the solicitors for the Purchaserís Bankís (ďBankís SolicitorsĒ) will advise the Bank to release the Redemption Sum to the Vendorís Bank and obtain the original title and other necessary documents (Please refer to Part 2 on the 22 Dec, 2006 issue of Propertyplus).

Sometimes, the Redemption Sum is paid to the Vendorís Solicitors for its onward transmission to the Vendorís Bank. There have been cases where some banks have delayed in the return of the required documents thereby delaying the completion of the purchase by the Purchaser. It is quite common to provide in the SPA that where the Vendorís Bank does not return the required documents, say, within 14 days, then the Vendor must grant an extension of time for each day of delay which is in excess of the said 14 days. This means that if the Purchaserís Solicitor receives the documents say, 22 days, from the date of payment of the Redemption Sum, then the Purchaser is entitled to extension of time of 8 days to pay the Balance Sum without interest.

Presentation of Transfer and Charge (Property with title)

Once the Bankís Solicitor has obtained the required documents (discharge, original title and duplicate charge), he will stamp the discharge and the charge (by the Purchaser in favour of the Purchaserís Bank) and prepare all the relevant documents including the stamped Transfer, received from the Purchaserís Solicitors, for presentation at the relevant land office or registry. Presentation is the submission of documents for registration.

After the presentation and land search on the Property, the Bankís Solicitors will advise the Bank to release the balance of the Loan (Loan minus Redemption Sum) to the Vendor.

Assignment and stamping of Loan documents (Property without title)

The Bankís Solicitor will upon receipt of the R&R and other documents from the Vendorís Bank and the Assignment from the Purchaserís Solicitors proceed to date and stamp the Loan documents and register the power of attorney (ďPAĒ) granted by the Purchaser to the Purchaserís Bank at the relevant High Court. When the PA has been registered and extracted from the High Court, the Bankís Solicitors will advise the Purchaserís Bank to release the balance of the Loan to the Vendor.

Real Property Gains Tax (RPGT)

The payment of RPGT by the Vendor, if any, is a standard provision in a SPA. The Vendorís solicitor is normally required to retain an amount sufficient to pay the RPGT, if applicable. The amount payable is based on a decreasing scale from 30% to 5% of the chargeable gain depending on the period between the date of acquisition and date of disposal of the Property, and this ranges from within 2 years to disposal in the 5th year after the date of acquisition. If the Property is disposed by an individual Vendor in the 6th year after the date of acquisition, no RPGT is payable. The Vendor and Purchaser are required to complete Form CKHT 1 and 2 respectively to inform the relevant authority of his acquisition of the Property. This Form is normally prepared by their Solicitors.

Vacant or legal possession

The SPA will provide for vacant or legal possession of the Property to be delivered by the Vendor, upon full payment of the Balance Sum by the Purchaser. Where the Property is sold subject to an existing tenancy, the name and particulars of the tenant together with the amount of the monthly rent ought to be mentioned in the SPA. It is prudent for the Purchaser to obtain a copy of the tenancy agreement, if any, to check for any onerous terms.

Where the sale is subject to vacant possession, it is the responsibility of the Vendor to deliver vacant possession. If the sale is without vacant possession and subject to an existing tenancy, there should be provisions in the SPA for the assignment of the tenancy and the handing over of deposits. Notice of the sale should be given by the Vendor to the existing tenant. The SPA should also provide that the rent paid for the last month of the Completion Date should be pro-rated as at the date of payment of the Balance Sum by the Purchaser.

In some cases, the parties may agree that the Purchaser may take vacant possession of the Property prior to the payment of the Balance Sum. Sometimes a monthly sum is payable by the Purchaser to the Vendor pending the completion of the transaction. This arrangement ought to be included in the SPA. In such a case, the Purchaser may be required to pay the quit rent, assessment, service charges, insurance and other charges of the developer (where applicable). Proper provisions for this in the SPA will avoid any dispute.

Payment of Outgoings

Outgoings include quit rent, assessment, Indah Water charges, telephone, water and electricity charges. The Vendor is required to pay for such outgoings incurred by him prior to handing over possession. The outgoings are normally apportioned as at the date of delivery of possession. It is usual for the Vendor to indemnify the Purchaser in respect of the payment of the outgoings. The Purchaser is advised to check that all payments have been made and to obtain all relevant receipts from the Vendor. If payments have not been made, the Purchaserís Solicitors may make arrangements with the Vendor to deduct any non-payment from the balance purchase price or obtain payment from the Vendor prior to release of the balance purchase price to the Vendor.


The process of ensuring the completion of the sale and purchase by the Purchaserís Solicitor is a complicated process. It is the responsibility of the Purchaserís Solicitor to ensure that the purchase of the Property is completed within the time frame specified in the SPA. This process starts from the appointment of the Solicitor until the presentation and registration of the document of title in the name of the Purchaser or the assignment of the Property from the Vendor to the Purchaser. However, this can only be completed with the cooperation of the Purchaser. The Purchaser should be well informed and advised of the terms and process of the purchase of the property.

Part 1 of this article appeared a month ago while Part 2 appeared a fortnight ago.

The writer is a member of the Conveyancing Practice Committee, Bar Council, Malaysia


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