Why do I need your consent to sell my property?

In a sale and purchase transaction of property in Malaysia, one may hear the agent or the solicitors advising parties in a transaction that “consent” is required from the relevant authorities before the transaction can be completed.

Some parties, particularly, first time purchasers of a property, would probably find this bewildering; why one needs to obtain permission (consent) before buying property.

There are a few types of “consent” that needs to be emphasized here. These consents are governed in the relevant sections in the National Land Code (Act 56 of 1965) and the gazettes by the Government in relation to purchase of property by a foreigner.

“Consent” from the relevant state authority is to be applied due to the ‘restriction in interest’ stated on the title. These ‘restriction in interest’ will vary in each title that holds the property but the main purpose of the statement is to get the seller of the property to apply for the “consent” of the relevant state authority to sell the property.

An example of a ‘restriction in interest’ that appears in a title for a property is “Tanah ini boleh dipindahmilik, dipajak atau digadai setelah mendapat kebenaran Pihak Berkuasa Negeri.”. What this statement simply means is that the current owner of the title to the property will only be able to transfer the title to anyone else, charge or mortgage AFTER the State Authority consent is obtained.

In relation to the foreigner’s purchase of property in Malaysia, Section 433 (B) of the National Land Code (Act 56, 1965) is particularly applicable. It is clearly stated that in the section, any foreigner that is within the interpretation of the act, will have to obtain the consent of the State Authority prior to acquiring or purchasing properties in Malaysia.

In furtherance to a foreigner’s acquisition or purchaser of property in Malaysia, the Government had set up a department called the ‘Economic Planning Unit’ or the EPU (formerly known as ‘Foreign Investment Committee’ or FIC) for any foreign body (individual or company) to apply for consent before purchasing a property in Malaysia which is of value below RM500,000.00. This was in a gazette of Circular 3/2011 which had taken effect from 1^st April 2011.

This application of consent to the EPU is an additional application for properties purchased by foreigner that falls below value of RM500,000.00. In the event that the property that a foreigner is intending to purchase is higher than RM500,000.00, application of consent to the EPU is not applicable BUT the foreigner would still need to apply for the consent from State Authority.

The purpose of having these consent procedures is for the relevant land authority to maintain control over ownership of property in Malaysia.

As you can see from the above examples, some consent relates to “leasehold” property, where in the “leasehold” property the land is leased for certain amount of years, which therefore mean the land belongs to the Government; hence the need for consent application.

Also in the examples above, foreign investors would require consent before buying property. This procedure acts as a safeguard to ensure that Malaysians’ property does not fall into foreign hands, freely.

The procedure to obtain “consent” can be cumbersome and procedural. Every process may take anything from one month to one year to complete the same.

Nevertheless, your appointed solicitors would be able to assist you in this procedure to apply and obtain the “consent”.

By Sarah Kambali 

Sub-Sale : The Term & The Procedures

A fictitious conversation over a cup of coffee between a potential purchaser of a property and the friend who is a lawyer

What is this thing phrased as “sub-sale”? 

Why do I continue to hear that phrase if I talk to a lawyer or a friend who happens to be a lawyer? 

I asked my friend who happens to be a lawyer, what is “sub-sale”?

My friend answered, “sub-sale” is a phrase that most lawyers who are involved in the transaction of buying and selling property from persons or company who are not the developer. 

So, what’s the difference with the normal sales with developers, I asked. 

My friend said, it is a transaction where at most of the time, the buyer, or in this case called “Purchaser”, is actually not the first-purchaser of the property. Parties would involve seller, who is called “Vendor”, who would most likely, but not always, the first purchaser. This Vendor would be selling his/her/their property to the Purchaser, who is eager to purchase the Property. Interesting, I thought. 

So, what would be the procedures to buy from a person who is most likely the first purchaser of a property? 

This was when my friend cringe. My friend answered, it depends on what you are intending to purchase. Most of the time, it would depend on the property that you intend to purchase. These properties are those which the Certificate of Fitness/Certificate of Occupation, has been issued. This certificate is important to prove that the property is already fit for human occupation, i.e. completed construction. 

What about those without the Certificate of Fitness/Certificate of Occupation? I asked. 

That property is normally the ones you are intending to buy from developer and it doesn’t fall into this category of “sub-sale”, my friend answered. 

Again, I had to ask my friend, what are the procedures throughout sub-sale transactions? It couldn’t be that difficult. I was pretty sure a person who is NOT a lawyer could understand the procedures and handles the transaction themselves. 

My friend sighs. 

The procedure depends on the property you are intending to buy. Whether it is a landed property, i.e. terrace, bungalows, semi-d or ones of “on air”, i.e. flats, apartments, condominiums? Whether the property has restriction or not? Whether the property is held under master title or individual title? Whether the property is assigned to banks or charged or free from any encumbrances? Whether you have to deal with the land office? Or do you have to deal with the developer in cases where the property is held under master title? Or would there be any liquidator involved due to the developer being wound up? This is just a few of “whether” situations that can be highlighted to you. 

There’s plenty more, said my friend. 

My friend continued on, “Generally, in any purchasing of property, you would need to deal with either the land office or the developer. In some cases, you would need to deal with the liquidator, for cases where the developer is wound up. If the property is one that is held under individual or strata title, you would need to deal with the land office. You would be signing a transfer form called Borang 14A. As for deals with the developer, this would mean that the property is still under master title. In this case, whoever you are buying the property from has only beneficial ownership of the property. The real owner of the property would still be the developer. This would mean that you would not be signing any Borang 14A for transfer of ownership. Instead, you would be signing another document called “Deed of Assignment. This serves to assign whatever beneficial interest from the seller to you.” 

I had listened to my friend going on and on and I was getting a spinning sensation in my head. In my head I was telling myself, "OMG! All that just to buy one property??" 

One day, I will learn them all from my friend and apply them to my situation. 

We sipped our last drop of coffee and bid farewell. 

At least now I know what are “sub-sale” and the general procedures that entails. Baby steps, I said to myself. Maybe my friend would go on further in details of the form and deed the next time we meet up for coffee.

By : SK aka the potential buyer

Buying a Property in Malaysia ; Who is an Estate Agent?

An Estate Agent is actually a Negotiator to assist parties to sell or buy properties in Malaysia. The Official organisation for these agents is Malaysia Institute of Estate Agents.

They usually impose a fee of around 3% of the purchase price. You may see the scale fee of an Estate Agent at their webpage, particularly at the FAQ page. Please see link at :-

http://www.miea.com.my/frame.php?page=faq.php

Additionally you may also read this 2007 article placed at Iproperty.com. The link is at http://www.iproperty.com.my/news/654/Who-Are-Estate-Agents.

Below is an extract of that article:-

"The Malaysian Institute of Estate Agents (MIEA) is the recognised body representing all registered estate agents in the country. Formerly known as the Malaysian Association of Real Estate Agents (MAREA), it was formed in 1974 but officially registered in April 1977 with the Registrar of Societies. The name was changed on 3 May, 1989 to reflect a more professional image of the organisation.

The MIEA's vision is to unite all registered estate agents in Malaysia as an independent body to promote greater excellence and professionalism in the real estate industry, so that it achieves higher ideals and creates more profitability.

Among its objectives are to:

• Address critical issues that affect the industry
• Cultivate a positive public perception of the profession
• Safeguard and protect the interests of its members and the general public
• Uphold high professional standards, ethics and integrity among its members
• Commit to continuous education to keep its members progressive and up-to-date to remain competitive
• Raise public awareness and encourage them to only use the services of registered estate agents

Useful Contacts:-

The Board of Valuers, Appraisers and Estate Agents Malaysia
Suite 3B-10-3A, Level 10 Block 3B,
Plaza Sentral, Jalan Stesen Sentral 5,
Kuala Lumpur Sentral,
50470 Kuala Lumpur.
Tel : 03-2273 7839/7862/ 5584
Fax : 03-2273 1808
Website : http://www.lppeh.gov.my/index.htm

The Malaysian Institute of Estate Agents (MIEA)
88-B, Jalan SS 21/39, Damansara Utama
47400 Petaling Jaya
Selangor Darul Ehsan
Tel: 03-7727 7477
Fax: 03-7729 3693
Website : http://www.miea.com.my"

Liquidated & Ascertained Damages

Parties entering into a Contract may at the outset, agree to a certain amount of damages. This is usually referred to as 'Liquidated & Ascertained Damages' (LAD).

In laymen language, before you agree to a contract and before you sign that contract, you can agree with the other party, how much money you will pay or receive as compensation, if one party did not respect the terms of the contract. When talking in legal language, this kind of compensation is called 'damages'.

A common place to find LAD is in Sale & Purchase Contracts of Properties. LAD is a useful and quick method to ascertain the quantum of damages to pay.

The Courts have however decided in some cases, that the LAD ought to be a reasonable amount and not punitive in nature. As stated above, LAD is meant to compensate, not to enrich or punish the party who breached the contract.

Next time you enter into a contract, you may consider discussing the insertion of a clause to quantify the LAD, in that contract. Your lawyer would be able to advise you whether that said contract can include an LAD clause (as not all contracts can have LAD).

Buying & Selling Properties in Malaysia

The perception that Conveyancing deals are straight forward is so far off target. It is remarkable sometimes how much Legal Firms involved in Conveyancing matters have to endure months of land administration issues and for fees below RM2,000.00

Clients sometimes fail to see that the volume and content of the work a lawyer has to do in Conveyancing deals are virtually the same irrespective the value of the Sale. A 10 million dollar Bungalow sale and a RM80,000 apartment deal, has similar problems and headaches to sort out.

Whilst the work may be the same, but it is not 'easy' same, but 'difficult' same. I hope that explains the situation in simple English.

Clients opine that work which is almost the same from one file to another, means it is easy. That is far from the truth, as even if the work is fairly similar, but if the similarity involves cumbersome paperwork and tiresome redtape at Land Office, the similarity is the only saving grace to the lawyer dealing that matter, knowing the work involved can be arduous and laborious.

An example we can offer here is this. If Mr X, a foreigner, buys Property at RM300,000-00 from Madam Y. And if the scenario involved a Leasehold Property (with restrictions) which requires consent from the Land Office, and the Property is sitting on a Master Title which is just about to be sub-divided into smaller individual title for each property in that Development project. So what will the Lawyer likely face?

This is just a possible scenario for the lawyer acting for Mr X the foreign purchaser:-

1. The consent from the Foreign Investment Committee (FIC) is required.

2. Once that consent is obtained, the Lawyer would have to apply for consent from the Local Authority under Section 433B of the National Land Code to allow a non-Malaysian to buy a Malaysian Property.

3. In the meantime, the Lawyer would have to also apply for consent from the same Land Office to obtain the necessary consent since the Property involved is a Leasehold Property with restrictions.

4. If Madam Y the owner, owes a Bank a loan, then the Lawyer would have to deal with Madam Y's Bank for redemption. If Madam Y has her own lawyer, Mr X's lawyer would then have to deal with Madam's Y's lawyer instead.

5. If Mr X is buying the property, financed by a Bank, then relevant and necessary undertakings must be extracted from all relevant parties.

6. If the process goes well and fine, the Lawyer would have to sort out the adjudication of Stamp Duty for Mr X to pay to transfer the title of that property from Madam Y to Mr X, through the Deed of Assignment between 2 parties

7. Since the Property involved is just about to be subdivided, the Lawyer would have to deal with the Developer involved. One pertinent question is, can the Developer do a direct transfer to the new buyer, Mr X, so as to avoid a double transfer ie, from Developer, subdivided and transfered to Madam Y, and then transfer again to Mr X?

This is just some of the work the Lawyer would have to deal. As you can see, it is not as straight forward as one think. And the amazing thing is that the Professional Legal Fee for all that work is RM2,550-00 (not taking into account service tax etc etc).

How much do I have to pay for a Sale & Purchase Agreement of a Property?

The question above is a common question a legal firm receives from their clients.

Much have been said about the No-discount Rule of the Legal Fees for Sale & Purchase Agreements (SPA) and also Loan Agreements in Malaysia. Unlike Litigation Fees, Legal Fees for SPA and Loans are governed by Rules of the Bar Council, referred to as the Solicitors' Remuneration Order 2005 (SRO).

The intention of enforcing a fixed rule is to, inter alia, ensure:-

1. Customers know how much they have to pay and not be misled by lawyers;

2. That lawyers compete on quality of work as compared as to quantum of discount. The fact remains where large discounts are given, the quality of legal work for Conveyancing matters will deteriorate

Of course, there are arguments to the contrary, that lawyers are entitled to give discounts, particularly premised on supply & demand rules. Also, quarters who wish to vary the legal fees, contend that some Conveyancing transactions incur more working hours and the lawyer should be entitled to charge more.

However, as the Rules stand at the moment, potential property buyers/sellers out there should take note that legal fee is fixed. We append below the Fixed Scale Fee imposed by the Bar Council in the SRO, which this Firm is committed to adhere to. The Legal Fee depends on the value of the property, and the Fee will be calculated on a percentage of that value.

Value Legal Fee

First RM150,000 - 1%

Next RM850,000 - 0.7%

Next RM2,000,000 - 0.6%

Next RM2,000,000 - 0.5%

Next RM2,500,000 - 0.4%

Above RM7,500,000 - negotiable on the excess (but not exceeding 0.4% of that excess)

For more information of the SRO, please click the link below to the Malaysian Bar website:-

http://www.malaysianbar.org.my/index.php?option=com_docman&task=doc_view&gid=545&Itemid=332