What is the conveyancing process when buying a house in Malaysia?

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From the sale of property to a legally binding sales and purchase agreement (SPA), here’s a quick guide to the basics of the conveyancing process for your property transaction. It’s something that you can do on your own too.

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For regular individuals like ourselves who are unfamiliar with the legal system and its terms, seeking legal services when purchasing a home has always been the convenient alternative. One of them is the ‘conveyancing process’, which plays an integral part of a property transaction and it usually involves a conveyancing lawyer where he will provide legal advice throughout the process. In fact, it’s so vital that it could determine whether or not you’re successful in purchasing your dream home or even selling a piece of real estate.

What is conveyancing?

Conveyancing is described as the transfer of legal title of real estate from one owner to another. This process normally involves the buyer and seller of a property. This is an important step in acquiring or selling the property.

In a nutshell, it involves two stages: drawing up the legal contracts and the completion stage, which involves the signing of loan ducumentations, passing over the real estate and finalising the purchase.

Isn’t this a lawyer’s job and what does a conveyancing lawyer do?

Yes and no. Both the buyer and seller may choose to hire a conveyancing lawyer for the legal procedure, or they could do it themselves. The latter option tends to be tedious and a difficult process, as it requires you to have sound knowledge of the legal system and land law.

A professional conveyancer or conveyancing lawyer helps settle the property transfer process by making sure you meet all legal obligations and that your rights are protected during the property transaction. Your lawyer will also help draw up all of the legal and loan documentations that are part of any real estate transaction, provide legal advice, help you make the right decisions and navigate this process successfully, and arrange final details of the settlement.

What is the conveyancing process? 

Your next step should be to find a licensed conveyancing lawyer or solicitor to carry out the conveyancing process. If you’re buying a new home from a developer, chances are they will have a panel of legal firms for you to engage. You could also find one online or seek recommendations from people you trust. More often than not, you can also get referrals from banks.

Once you have decided on one, your appointed solicitor will then proceed to draft the legal document, which is the sales and purchase agreement (SPA). This draft will include comprehensive details of the purchase deal that has been mutually agreed for by both buyer and seller including the purchase price, payment terms, conditions of the property, loan details, and other information related to the property.

Your solicitor will also assist in conducting a background search of the property, which is important if you’re purchasing a secondhand property.

Once the draft is ready, the solicitors for both buyer and seller will review the legal and loan documentations. It is essential that both parties take this time to vet through the documents and communicate to each other any concerns or changes that need to be done in the legal documents.

When both buyer and seller agree on the final draft, the conveyancing lawyer will then proceed to prepare the SPA for signing.

How much is the conveyancing lawyer’s legal fee for drawing up a SPA?

The fee will vary according to the price of the real estate. However, a benchmark according to the Solicitors’ Remuneration Order 2005 states that:

For the first RM500,000 1% (or subject to a minimum of RM500)
For the subsequent RM500,000 0.8%
For the subsequent RM2,000,000 0.7%
For the subsequent RM2,000,000 0.6%
For the subsequent RM2,500,000 0.5%

That’s not all. Remember that the legal fees you pay also includes the registration of transfer or assignment, as well as the legal documents needed to process your SPA. There will also be a stamp duty fee.

Note: Under the Home Ownership Campaign (HOC), the government has proposed to waive the stamp duty on the instruments of property transfer and loan agreements for any property priced between RM300,001 and RM2.5 million. However, this only applies to the SPA for the purchase of residential properties between an individual and a property developer. This exemption is only valid for SPAs executed between June 1, 2020 and May 31, 2021.

Read more: HOC 2020 (Home Ownership Campaign) extended until 2021! Here’s what homebuyers should know

How to manage the conveyancing process without a lawyer? 

Can you do it yourself? Definitely. If you feel that the charges above are not something you can afford, you might want to try managing the conveyancing transaction yourself.

1. Determine the title

conveyancing-process-in-malaysia

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The first and most important step is to determine whether or not the real estate has a ‘title’. If it does, what kind is it? The ‘title’ is the legal document that essentially tells you the ownership of the property.

In a situation where non-landed properties (such as condominiums) are in issue, only a master title – a big title document that covers the entire piece of land where the non-landed property sits on – will be issued. Subsequently, this title will be divided into smaller strata titles for each individual unit.

However, the situation gets complicated when the selling and buying of non-landed property occurs before the strata title is issued. In a way, the buying and selling transaction is done “without a title” and legal documents are instead created to assign rights to the buyer. The chain of assignment will continue if the second buyer decides to sell the property before the issuance of the strata title.

With the absence of a title, the proof of ownership will lie in this chain of assignment of ownership documents. This could get complicated and troublesome for a regular person to handle.

2. Any encumbrances?

Once the title has been determined, the next step is to check for any existing encumbrances – a mortgage or other claim on real estate or assets – on the title of the real estate.

You can do that by performing a simple land title search. The search will tell you if there are any existing encumbrances, for instance, a charge where the current owner has charged the property to a bank by way of securing a home loan.

If this is the case, the property is then considered to be “locked” and cannot be sold or transferred until the charge is removed or discharged. In order to release the property, a redemption process should be carried out to redeem the property from the bank by repaying the amount owed to the bank.

In such circumstances, a redemption process can usually be done by structuring the sale and purchase transaction in a way that a percentage of the purchase price paid by the new buyer is used to ‘repay’ the bank. With the ‘repayment’, the property can then be transferred to the new owner after the bank discharges the property.

Note: It is vital that the redemption process is detailed out in the SPA to ensure the timings, payments, and exchanges of documents are well-coordinated. There are instances where buyers have found themselves stuck because the SPA does not sufficiently provide the legal procedure.

Read more: What is Real Property Gains Tax (RPGT) in Malaysia & how to calculate it?

3. Restriction and consent

In addition to any encumbrances, a simple land title search will also reveal if there is any restriction-in-interest on the property title.

The most common restriction is the consent form the State Authority. This refers to the application for consent before proceeding to property transfer.

The process of getting consent is not as easy as it may seem. The application process varies according to every state’s procedures, forms, timelines, supporting documents and fees. The legal procedure may also take up from two to six months, perhaps more if there is any complication arising along the way.

Similarly, the restrictions-in-interest process should also be documented in the SPA to avoid any severely delayed situations.

4. Here comes the administrative work – filling up forms

Another important element is to ensure that you have all the required forms and documents in order. These include the Sales and Service Tax (SST) form and the real property gains tax (RPGT) form which you can obtain from the local land office.

You need to fill them up accordingly and submit them to the local land office once you are ready.

5. And then, there’s the stamp duty payment

The stamp duty payment is required for the title transfer document. This can be done through the adjudication process.

The process involves submitting the transfer documents to the stamp duty office (also known as the Inland Revenue Board of Malaysia or LHDN). Then, a notice will state the amount you’ll need to pay for the stamp duty.

The adjudication process will take approximately a few weeks for completion, but it could stretch to months if the process is manually performed.

6. And finally, submitting the forms and documents

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The official forms and documents can finally be submitted to the land office to process the change of ownership when all the above are done and the purchase price is paid.

Should there be an existing charge by the seller and a new charge (home loan by the new buyer), the discharge and charge documents will also be needed to be presented together to the land office.

The process can be confusing for inexperienced people, and small mistakes in the forms can also result in the presentation or submission being rejected. Therefore, it is important that all the details are accurately filled and presented.

Once all the above have been done and the legal and loan documentations are finalised, the conveyancing process and property transaction is finally completed.

Written by Geraldine. 


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