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In summary, it is the process transferring ownership of property from the vendor to the purchaser by registering the property title in the name of the purchaser.
There are instances where the individual title is not yet issued at the time of purchasing the property and hence cannot be transferred into the name of the new owner. An example of this is when purchasing a unit in a new development from a property developer where the developer who owns the property holds the entire property under a master title.
In such cases, the entire plot of land where the development project is built will need to be subdivided into individual parcels where a strata title will be issued for each parcel. This allows purchasers to own individual units in the development project which was previously held under one master title by the developer.
Strata title (also referred to as subsidiary title) is a title that is issued as a result of subdivision of a building. Where a building has been divided into multiple individual parcels, the strata title is the evidence of ownership of such parcels by the purchasers.
When buying a unit in a new development from a developer where strata title is not yet issued, the sale is done by a Sale and Purchase Agreement (SPA) and with an undertaking from the developer to apply for strata title and subsequently transfer the strata title into the name of the purchaser.
By virtue of the SPA, the Purchaser acquires an in personam right meaning that the Purchaser acquires the right to the property against the vendor personally but not against the whole world.
This is so because in Malaysia, we follow what is known as the Torrens System where only the registration of ownership in title at the land office constitutes conclusive evidence of ownership of property. Thus, where title is not yet issued, registration of the name of the purchaser on the title cannot be performed.
If the purchaser subsequently sells the property before strata title is issued, the Deed of Assignment acts as evidence that the right has been assigned to the new owner.
Back to the question of “what is perfection of transfer?” – it is simply the act of completing (or perfecting) the transfer of the title into the name of the purchaser as the new owner when the strata title is issued.
The perfection of transfer grants the new owner an indefeasible title that is registered in his name at the land office. This tells the whole world that he is now the registered legal and beneficial owner of the property as per the National Land Code. The new title will also reflect any encumbrances or restrictions on the property, such as charges that were registered prior to the transfer.
When strata title is issued, you will be duly notified of this by your developer or alternatively, you may be notified of this by the lawyer who attended to your SPA.
This marks the beginning of the perfection of transfer process. At this stage, you may appoint a lawyer to attend to the perfection of transfer – you may appoint the same lawyer who attended to your SPA or you may appoint any other lawyer of your choice.
Your developer will require a Letter of Authorisation notifying them that you have appointed a lawyer to act for you. The Letter of Authorisation will allow your lawyers to liaise with the developer and obtain the necessary documents.
*if there is a restriction in interest (a.k.a. “sekatan kepentingan” in BM) on the title, the consent of the State Authority will be needed before any transfer or charge can be registered. Usually, the developer is responsible for applying for consent and will require the purchaser to assist with filling up the application form and providing the necessary documents. The application for consent may take up to 3 months depending on the requirements of the land office.
The MOT is the document that sets out the details of the transfer. Your lawyer will assist with preparing the MOT in the required format stipulated by the National Land Code. The MOT is then signed by both the transferee (purchaser) and the transferor (developer).
Before the MOT can be registered, it must be adjudicated and stamped at the Inland Revenue Board (IRB/LHDN). Adjudication is the process where the amount of ad valorem stamp duty payable is ascertained to fulfil the requirements of the Stamp Act 1949. Stamp duty that is calculated based on the value of the property is known as stamp duty ad valorem. When the adjudication is complete, the Inland Revenue Board Malaysia (IRBM) will issue a Notice of Assessment requiring stamp duty to be paid.
Upon receiving the Notice of Assessment, payment of the stamp duty must be made within 30 days from the date of the Notice failing which a penalty will be charged. After payment is made, the MOT will be stamped at the stamp office to indicate that the stamp duty has been paid. If stamp duty ad valorem has already been paid on the Deed of Assignment, you will not need to pay for this again.
Registration is done by presenting the MOT at the land office for registration. The land office will review the transfer documents to ensure that it complies with legal requirements and the appropriate stamp duty has been paid. Once the transfer has been registered, the land office will issue a new title in the name of the new owner.
Where the purchaser has taken a loan to pay for the property, the MOT will be forwarded to the Bank’s solicitors for perfection of charge.
The perfection of transfer may be completed within 3 – 6 months. Where the State Authority’s Consent is required, this process may take longer.
Perfection of charge is required when the purchaser has used a loan from the bank to finance the purchase of the property. It is the process of registering the name of your lending bank on the strata title as the chargee of the property. This process is done along with the perfection of transfer.
When taking out a loan to purchase the property, the lending bank will require a charge to be registered on the title in its name as security for the loan. This will give the bank the right to sell the property should the purchaser default on the loan repayment.
The bank is responsible for the perfection of charge and will appoint its own lawyers to attend to the matter. As such, the purchaser will forward the MOT to the bank’s lawyer for registration of the charge.
The perfection of transfer process involves transferring ownership from the developer to yourself whereas the perfection of charge involves transferring that ownership to the bank who paid for the property.
The lawyer will prepare the charge document (Form 16A) together with Annexure which will be signed by both the purchaser and the bank. These documents are then submitted to IRB/LHDN for stamping and finally it is presented at the land office for registration. When the new strata title is issued, the original document of title is to be forwarded to the bank for safe keeping.
Some of the complications may arise should you delay or refuse to attend to the matter:
If the property was purchased from an individual owner under subsale, stamp duty ad valorem would have been paid on the Deed of Assignment. As such, no further stamp duty needs to be paid on the transfer. Stamp duty only needs to be paid once on a purchase and transfer.
If the property was purchased directly from the developer, stamp duty ad valorem may be payable on the transfer and the amount payable is prescribed by the Stamp Act 1949. Stamp duty is calculated based on the sale price of the property as stated in the SPA.
From time to time there may be certain stamp duty exemptions available to purchasers for medium and low cost properties. First-time home buyers may want to look out for such exemptions which will help in saving money.
Your lawyer’s professional fees for the perfection of transfer are provided under the Solicitors Remuneration Order (SRO). The applicable legal fees for transfer are prescribed by Schedule 1 of the the SRO:
As per the SRO, the applicable fee shall be 25% of the scale fee above if the solicitors attending to the perfection of transfer are the same solicitors that previously attended to the sale and purchase agreement / loan documentation. If new solicitors are appointed to attend to the perfection of transfer, the applicable fee shall be 50% of the scale fee above.
You may refer below for an estimate calculation of the fees involved for perfection of transfer:
In conclusion, the process of perfection of transfer can be a rather daunting and lengthy process therefore it is always advisable to engage a professional to attend to it as this ensures that the transfer is properly completed your rights and interests are protected.