THE last time I penned the article entitled “Leave conveyancing to lawyer”, it was published on StarBiz on May 31, 2014.
This time around, there has been calls to do away with the necessity of a lawyer in conveyancing transaction with some naïve and uninformed layperson adopting simplistic approach of comparing the acquisition of real property with movable property. The comparison that was given is:
“When we buy a MOVABLE luxury car say for RM800,000, we can get our bank facility within two or three days without a lawyer. BUT, when we buy an IMMOVABLE property/ condo/ house for say even RM300,000, we are required to have a battery of lawyers to complete the transaction which takes an average of three to six month”’.
The Housing & Local Government (KPKT) is no different. Recently, KPKT came up with the idea of an electronic form of Sale & Purchase Agreement (SPA) with the acronym- eSPA. This eSPA module is part of the Housing Integrated Management System (HIMS) set up by KPKT. We will argue this “intellectual issue” in another article.
With the availability of material and resources on anything and everything, there is no shortage on professional advice. However, if you suffer from toothache, would you seek advice from a qualified dentist or entrust the fate of your molars to quacks who has seen 100 videos on YouTube and TikTok on treating toothache?
The answer is obvious, any person of sound mind would seek treatment from professional!
Buying a Car via a Hire Purchase Contract (HP)
The pre-printed form of hire purchase contract (HP) requires the mere clerical “filling of blanks” in the HP Schedules with description of model, make, chassis and details of the loan sum and its monthly repayment by the hirer’s (customer) and the hirer’s name, address and other personal details.
These HP merely requires the bank officer to witness the contract, get it stamped and thereafter kept on the shelf after notifying the Road Transport Department (RTD) of its ownership. Hirer merely has to adhere to the HP arrangement by paying the monthly instalments otherwise risk repossession of the hired vehicle. End of story!
Many people have this assumption that if you can understand legal language, you can do the lawyer’s job. Is the role of a lawyer in the sale and purchase of real property so simple that it can be equated with the same process as buying a car under hire purchase?
Signing the SPA is merely the beginning of a journey
Does anyone know that signing a SPA is merely the beginning of a “journey” and a tip of the iceberg of what entails in the said transaction? Read on to understand better.
Why you need to use your own lawyer?
For us to answer this question, one must understand the role a lawyer plays in a sale and purchase and reasons to engage your own lawyer.
Usually, when a vendor or purchaser decides to buy real property such as a house – be it an apartment, condominium, shop offices or land, they would probably consult a conveyancing lawyer.
The lawyer could be someone recommended by the property agent or is your regular legal adviser or even your relative! We would recommend that a purchaser of real property get legal advice from the onset before committing to a purchase and not after payment of a deposit to the vendor or the real estate agency is made.
Reasons to seek early consultation is so the lawyer can advise you on the terms of sale and purchase, conditions of the real estate including the implications of encumbrances over the real estate which may impede the transfer, restrictions-in-interest and the financial commitments needed to complete the acquisition.
The Latin phrase “caveat emptor” (let the buyer beware) certainly holds true for properties. No purchaser would want to pay a deposit or the purchase price only to discover the property does not exist, cannot be purchased owing to certain public policy or the vendor being a fraudster using another person’s identity.
The complications arising from a botched transaction can be severe, leading to court proceedings or financial detriment due to payment of liquidated damages. So, the role of the lawyer is not just to affix his/ her signature, it is to protect the interest of a vendor and purchaser and act as a “filter” against any irregularities in dealings.
Of course, we know of property agents who propagate the belief that both purchaser and vendor can “share” a common lawyer so that there is some savings in legal fees. That is an untrue proposition and puts the vendor at a disadvantaged position.
In a sale and purchase of property, lawyers cannot represent both a vendor and purchaser. If a vendor chooses not to appoint a lawyer, the vendor is considered as not legally represented. In general, most real property transactions undertaken with lawyers on board do tend to complete successfully because the lawyers are able to navigate the technical and procedural complexities associated with land and tax laws. The benefits of having legal advice and a problem free transaction outweighs the fees payable for legal services. The adage “penny wise and pound foolish” is most appropriate here.
There are differences in buying property from a developer or from an individual or company that already owns the property which we term as a “sub-sale”, short for subsequent sale. In this article, we would concentrate on the purchase of a residential property from the licensed housing developer.
Purchasing from a licensed housing developer
The purchase of residential property from a housing developer is regulated under the Housing Development (Control and Licensing) Act 1966 (Act 118) which have been amended from time to time to keep up with ever changing face(s) of residential development.
Pursuant to HD Regulation 11(4) the purchaser lawyers shall be entitled to a complete set of the SPA, including all annexures “free of charge” from developers, subjected to the lawyers’ undertaking and others.
From purchaser’s perspective, buying from a developer is even more simplified, they choose a unit, applying and obtain the loan, sign the SPA, pay the deposit and wait for the property to be completed.
On paper it sounds easy enough. However, the actual process for completing the sale and purchase is not a mere three step process, contrary to popular belief. The end goal of any sale and purchase is to ensure that the property is properly conveyed to the purchaser. The process of conveyance has grown more complexed these days; a property from one to another has evolved through the years to ensure that the right property is transferred to the right persons and to prevent fraudulent transfers.
Most of the essential work done by the lawyer is not known to the parties in a sale and purchase transaction. As far as the purchaser is concerned, once they pay the legal fees they expect (which is rightly so) the lawyers to complete the legal process so that the housing loan will be available for release progressively to the developer and wait for the end of the completion period, usually three months and thereafter to take delivery of vacant possession of the real property.
To a vendor, it may look even simpler; sign the SPA and wait for the payment. If you are buying directly from a developer, the time for you get the property varies from 24/ 36 months onwards, depending on the type unless the real property is almost or already completed.
Preliminary verification exercise in SPA transaction
Before even one signs the SPA, some preliminary matters need to be addressed such as whether the developer has obtained the proper and upfront licenses and requisite approvals from the Government and related agencies, confirmation of the unit being purchased, the type of property being purchased, the approved layout plans of the property, what are essential items that comes with the property, the schedule of payments, relevant identification documents of the developer and purchaser and conduct the relevant bankruptcy, winding up and land title search.
If all these are in order, then the SPA can be signed by the parties involved. The duly signed SPA will now be stamped at the stamp office. Stamping is done online, and the stamp office issues a stamp certificate to show duty has been paid.
Stamping of the SPA does not convey ownership to a purchaser. At this point, for those purchasers that has taken a loan to part finance purchase the property, the financier’s lawyer will have to coordinate with the solicitor in charge of the SPA to prepare the loan facilities documentation. – May 22, 2022
Datuk Chang Kim Loong is the honorary secretary general of the National House Buyers Association (HBA).
This article is intended to offer an insight into the works of the conveyancing processes vis-à-vis sale and purchase and housing loan transactions. If in doubt, please seek your own independent legal advice with lawyers registered with the Malaysian Bar.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
