Understanding Perfection Of Transfer And Perfection Of Charge

Firstly, let’s establish what the term ‘perfection’ means in the context of property titles. Perfection is a process of transferring ownership. Simply put, it is the process of transferring of the title into the name of the purchaser.

Introduction

Originally all lands belong to the respective state government. When the state government gives/grants land to any party/person, this process is known as “alienation”. When the developer develops a housing project the entire development may be developed on a single title or multiple titles depending on the size of the land for the development. The developer may not necessarily be the landowner as there are many projects where the developer joint ventures with landowners to develop the housing project.

If the development is on multiple titles, the titles may be amalgamated to become a single title and the houses are built and constructed on these title(s) which are not subdivided which is known as “Master Title”.

When the houses are being constructed each house will have its own border, perimeter and identity number or detail. Individual titles will be issued for each unit of house. At this time the Master Title will be subdivided into smaller portions in accordance with the number of units of houses.

When Perfection of Transfer Takes Place?

Sometime at the beginning of the housing development, the Master Title(s) may not have been subdivided and when a purchaser purchase a house in the development he/she will sign the sale and purchase agreement prescribed under Schedule H of the Housing Development (Control and Licensing) Regulations 1989 in the Housing Development (Control and Licensing) Act 1966. At this time the Master Title(s) has not been subdivided.

When the Master Title(s) is finally subdivided and individual title is issued, the developer will begin the process of transferring the individual title to the respective purchaser. If the developer is not the landowner, this transfer will be managed by the developer but the actual transfer will be made by the landowner to the purchaser. Sometimes, the landowner may have granted a power of attorney to the developer to enable the developer to sign (execute) the transfer on behalf of the landowner.

If the housing development comprises stratified houses such as condominium, apartments or gated & guarded houses, the individual title issued is called strata title.

The process of transferring the title into the name of the purchaser is popularly known in the legal fraternity as Perfection of Transfer. You will be asked to sign the Memorandum of Transfer Form 14A (“MOT”).

Basic Processes of Perfection Of Transfer:

Step 1: Contacting and engaging lawyers .

Step 2: Signing of Form 14A (Transfer of Ownership) by the purchaser.

Step 3: Signing of Form 14A (Transfer of Ownership) by the developer.

Step 4: The purchaser pays the legal fees, stamp duty and disbursements accordingly

Step 5: Adjudication and Payment of Stamp duty at Lembaga Hasil Dalam Negeri.

Step 6: Presentation and Registration at the Land Office.

Step 7: Extraction and release of title in the purchaser’s name .

Necessary Documents For The Perfection Of Transfer:

A copy of the purchaser’s NRIC.
A copy of the SPA.
The latest assessment receipt (“Cukai Pintu”).
The quit rent receipt (“Cukai Tanah”).
If the property is under strata title (condominium, apartment or gated guarded house) to provide the receipt of payment of maintenance charges and sinking fund charged by the management (Joint Management Body/Management Corporation)
Other relevant documents as may be requested by the lawyer.

What Are The Costs for Perfection Of Transfer?

The costs include the charges and fees that will be collected by the lawyer for legal fees, stamp duty and disbursement fees. The items included in the disbursement fees are for registration, photocopies, transportation, consent to transfer and land search, bankruptcy search and other miscellaneous charges.

It is advisable to re-engage the same lawyer that attended to the signing of the sale and purchase agreement as there will be an allowable discount on the legal fee. If you engage a different lawyer, you may end up paying the full legal fee. (Note: lawyers’ professional fees are regulated and fixed under the Solicitors Remuneration Order 2006. You may refer to the schedule for the rate of the legal fees).

Professional Legal fees

For The First RM500,000.00 – 1.0%
For The Next RM500,000.00 – 0.80%
For The Next RM2,000,000.00 – 0.70%
For The Next RM2,000,000.00 – 0.60%
For The Next RM2,500,000.00 – 0.50%

The highest cost involved is the ad valorem stamp duty, in which the stamp duty to be paid will be calculated based on the value of the property (the purchase price value).

Property price	Percentage
First RM100,000	1%
From RM100,001 to RM500,000	2%
From RM500,001 to RM1 million	3%
Above RM1 million	4%

What Is Perfection of Charge?

If at the time when you first purchase the house with the assistance of a bank loan, the bank would require you to sign (execute) the “Memorandum of Charge” or “Charge Annexures” (“MOC”).

When you first took a loan from the bank you would have been required to sign (execute) a deed of assignment and a power of attorney as security and collateral of the bank granting you a loan.

When the individual title is issued, the bank will require a charge to be created on the title of the property as collateral (sometimes it is called a mortgage but in Malaysia it is known as “Charge”).

If you have not previously taken a loan from the bank, Perfection of Charge is not required.

The Perfection Of Charge Processes:

Step 1: Contacting and engaging lawyers

Step 2: Signing of Form 16A (Charge) by the purchaser/borrower.

Step 3: Signing of Form 16A (Charge) by the bank.

Step 4: Stamping of relevant documents at LHDN

Step 5: The purchaser pays the legal fees, stamp duty and disbursements accordingly.

Step 6: Presentation and Registration at the Land Office.

Step 7: Extraction, release of title and forwarding the original title to the bank.

Step 8: The client will receive copies of the title and Duplicate Charge (Form 16A).

Necessary Documents For The Perfection Of Charge:

A copy of the purchaser/borrower’s NRIC.
A copy of the of the loan facilities agreement with the bank.
The latest assessment receipt (“Cukai Pintu”).
Receipt of quit rent (“Cukai Tanah”).
Other relevant documents as may be requested by the lawyer.

What Are The Costs for Perfection Of Charge?

The costs involved are similar to that of the Perfection of Charge. The legal fees rates are the same. Except that there is NO ad valorem stamp duty on the Charge but there will be a nominal stamp fee of RM10 for each copy of the Charge.

You would have paid the ad valorem stamp duty of the loan (0.5% on the loan sum) when you first took the loan with the bank before the title was issued.

Similarly, it is advisable to re-engage the same lawyer that attended to the signing of the loan agreement earlier as there will be an allowable discount on the legal fee. If you engage a different lawyer, you may end up paying the full legal fee.

Should I attend to the Perfection of Transfer and Perfection of Charge quickly ?

Yes, you should. Title is the document that proves your ownership of the house you bought with your hard earned money. If your title is under strata title you must attend to the perfection as the Strata Titles Act 1985 provides that a buyer that fails to attend to the perfection of MOT can be liable to a fine of not less than RM1,000.00 and not more than RM10,000.00.

Furthermore, if you did not attend to the perfection of MOT and MOC, a myriad of circumstances may cause you insurmountable inconveniences and would eventually cost you even more such as :-

The developer wound up
The title is lost
The legal firm that attend to the SPA or the loan earlier may no longer operating
You will not be able to participate in the AGM or EGM of the Joint management body or Management Corporation
The cost of stamp duty or registration may increase
The legal fee may increase
You will face difficulty or may not be able to sell your house

Be Prepared For It

Many buyers can sometimes be taken by surprise when the lawyers contact them to sign the MOT and/or MOC.

It is because the cost of these procedures, which include legal fees, stamp duty and other miscellaneous charges or payments, must be borne by the buyer. That is why it’s important to know what these two perfection processes really are and the charges that come with it, so that you don’t end up being caught off-guard! We hope this article helped you in understanding it better.

The statement and information in the articles are the opinion of the writer and meant only as a guide. Any property purchase, rental or lease involve many legal issues and other complication depending on the individual facts and circumstances. Readers and Users are strongly advised to seek professional advise including from qualified and competent lawyers, bankers and/or real estate agent to verify the information and the statement before embarking on any purchase, rent or lease of any property. To the fullest extent permitted by law, we exclude and disclaim liability for any losses and damages of whatever nature and howsoever cause and arising including without limitation, any direct, indirect, general, special, punitive, incidental or consequential.