Owning your own home is one of the most important milestones in almost everyone’s adult life. The process of owning a house or any property, in general, requires you as the owner to sign all necessary documents. The signing of the various legal documents through the purchasing process marks official checkpoints on the journey of owning your dream home or real estate property. This might be a challenge especially when you are trying to make sense of the significance of each and every legal document.
When buying real estate property in Malaysia it’s important to have an idea of all the important types of documents required including a Memorandum of Transfer (MoT). This article is a handy guide providing all the crucial information you need to know about the Memorandum of Transfer as well as the ownership process and the legal documents required before acquiring one.
A Memorandum of Transfer is a legal document indicating the ownership of a property. This document is important in the ownership process as it is used in the transfer of ownership of a house or real estate property from the developer to you as the new owner or from a seller to you in the case of secondary market purchases.
Components of a Memorandum of Transfer
The most recognizable component of a Memorandum of Transfer in Malaysia is the presence of the company letterhead. The company letterhead should belong to the initiating party of the transfer request. The memo also lists all the parties involved in the transfer of the property.
The rest of the document provides detailed information about the person who is requesting the transfer and a description of the items to be transferred. There is also a space provided to indicate information on the valuation of items that are being transferred in the items transfer memos. Valuation of the items being transferred is required for insurance purposes.
Both the government of Malaysia and homeowners/property owners use Memorandum of Transfer documents and materials to create a proof of transfer on paper. The document is also useful in the event that people are injured or items are lost.
In Malaysia, a Memorandum of Transfer is a required legal document that is usually prepared following a particular format and piece of paper. This document must be accompanied by other documents collected prior to the transfer. These documents include Letter of Offer, Sales and Purchase Agreement and Facility Agreement. The transfer may be unsuccessful if the MoT isn’t acquired within the provided time frame.
Steps Required To Acquire A Memorandum Of Transfer
For something as valuable and important as property, the process of transferring ownership entails some vital legal steps. These legal steps require the procurement of some documents. So once you have identified an affordable and realistic piece of real estate with capital gains yield potential, it’s time to embark on the legal process. Here are the key steps required in the legal process of acquiring a Memorandum of the transfer.
1.Finding a suitable home loan and conveyancing lawyer
Finding and negotiating for an ideal home loan is the most common first step for owning property unless you have all the required resources. Most loaning institutions and banks in Malaysia offers financing up to 90%. You are entitled to a loan financing for your first two residential real estate properties. Once you receive 90% financing, make preparations for the remaining 10% down payment that will cover the full price of the property.
2.Letter of Offer (LO)
This is your first stage of the legal purchasing process especially when you are keen to attach your name to the real estate property you intend on purchasing. This document legally shows the seller’s willingness to sell and the buyer’s initial desire to purchase the property. The Letter of Offer contains information about the relevant furnishings to be performed or provided, the agreed selling price as well as the specific date when the Sales and Purchase Agreement should be signed.
3.Sales and Purchase Agreement (SPA)
This is the document that every buyer looks forward to receiving. Generally, the Sales and Purchase Agreement is a comprehensive legal document that highlights the terms and conditions of the purchase. Most importantly the document shows items included in the sale, conditions of purchase, the date of transfer and any other relevant terms to the sale.
This agreement is relevant to property buyers who have procured a home loan. The Facility Agreement is an official document that provides the confirmation that the bank providing your home loan has signed on the loan.
5.Memorandum of Transfer (MoT)
Finally, you get to sign Form 14A or your Memorandum of Transfer. The signing of the MoT document legally confirms the transfer of ownership. In some instances, the issuing of the MoT may not take place at the time of the purchase particularly if you are purchasing from a developer. Properties that are still under construction may not have had their titles issued yet. The developer will get in touch with you to sign the MoT at a later date after the title has been issued.
Strata Titles vs Master Titles
Transfer of ownership using an MoT may turn into a complicated process. Ownership can only be transferred for those properties that have the relevant master title. Without the relevant strata, master or individual title then MoT cannot be used as the transfer method for the property.
This situation is common in the case of strata properties whereby the property developers have failed or delayed to properly register the individual properties. The transfer of ownership process, in this case, is done through a Deed of Assignment (DOA) form. In addition, a document is required to show a record of the Developers Consent.
A Deed of Mutual Covenants is sometimes issued alongside strata titles. It’s a legal document outlining the obligations and promise of behavior pertaining to ownership in shared developments. It provides a list of acceptable renovations, pet ownership and other conditions that ensure the shared developments or communities remain harmonious and uniform.
Why Retaining A Lawyer Is Necessary Through This Process?
Earlier on the article lightly explained the value of retaining the services of a lawyer through the process of acquiring an MoT. Essentially a lawyer will ensure that you will be getting a great deal in the purchase and the process is carried out in an honest and proper manner since legal professionals have experience in navigating the process and understanding the complicated legal jargon. A lawyer will be tasked with drafting and checking through the various complex legal documents to verify that the prescribed terms and conditions are balanced and fair.
A lawyer will ensure that:
All the documents are stamped.
All the legal requirements are fulfilled within the prescribed time frame.
The process of getting the MoT runs smoothly.
They check miscellaneous things including a search at the Land’s Office registration to clarify that the property you are interested in buying does indeed belong to the seller.
Truth is having someone in the know-how can greatly smoothen and expedite the entire process.
Costs Associated With Acquiring A Memorandum Of Transfer
Transfer of ownership title fees – a couple of hundred ringgit
Memorandum of Transfer stamp duty – 1% for the first RM100,000; 2% on the next RM400,000, and 3% on subsequent amount.
Sale and Purchase Agreement (SPA) legal disbursement fee – a couple of hundred ringgit
SPA legal fees – 1% for first RM500,000, 0.8% for the next RM500,000 and 0.5% to 0.7% for subsequent amount
SPA stamping – less than RM100
Tax imposed by the government on legal documents – 6% of the charged lawyer fees
Loan facility agreement legal disbursement fee – a couple of hundred ringgit
Loan agreement legal fees – 1% for first RM500,000, 0.8% for the next RM500,000 and 0.5% to 0.7% for subsequent amount of the loan
Loan agreement stamp duty – 0.5% of the loan amount
Loan processing fee – RM50-RM200
Other than the payments required in the purchase of the property there are additional transactions and financial obligations that are linked into the various legal steps of acquiring a Memorandum of Transfer. They include:
1. Loan agreement
In addition to getting a home loan to finance your purchase, you are required to pay stamp duty on the loan you take out.
2. Letter of offer
As indicated above, this is the first document presented to you in the process of purchasing a property. You need to sign this document regardless as to whether you will be purchasing the property from a sub-scale (previous homeowner) or a developer. In sub-scale sales, the property agent provides a simple form while the developer provides a letter of both documents that carry your signature signifying your acceptance to purchase and indicates the seller’s willingness to sell the property.
At this point, a non-refundable earnest deposit should be paid. This amount is equivalent to 2% of the total value of the property you are willing to purchase. This amount is also included in the overall 10% down payment placed on the property.
3. Sales and Purchase Agreement (SPA)
At this point in the process, you will be required to have paid the required 10% down payment in full. A stamp duty payment for the SPA is also required. The signing of the Sale and Purchase Agreement should be done in the presence of a lawyer. The lawyer will explain the primary terms of the contract.
There is a stamp duty charge due on the Deed of Transfer document in Malaysia.
Transfer To Spouses And Loved Ones
Some situations may not necessarily involve a seller and a buyer as in the case of transfer to or between family members. This kind of ownership transfer is different especially those involving spouses or parents to children. This consideration is stated in the Memorandum of Transfer as a “love and affection” type of transfer.
It only applies when a transfer is from a spouse to spouse or parent to children and vice versa. In these instances, the MoT is adjudicated and stamped. Stamp duty is partially or fully waived for the MoT. 50% exception is waivered for parent to child transfers or vice versa and 100% is waivered for husband to wife transfers and vice versa.
Take note of the following clauses regardless of the kind of property agreement.
Check the Title
The title legally confirms the actual owner of the property and whether that property is charged, that is if it has been used as security for any loan. Ensure the agreement gives a detailed description of the information provided in the title. The agreement should also have a clause showing the seller promise to transfer ownership for the title to carry your name after the agreement completion.
These plans show the designs and the layout of your house. House plans should be included in the developer’s sales First Schedule.
The manner in which you will find vacant possession of the property is an important consideration. The most common ideal vacant possession conditions include electricity and water connection as well as a certificate of completion and compliance showing that the house is completely safe to live in.
Area of your house
Note that the measurements provided in the agreement schedule should be the same as the final measurement. Should you get a substantial reduction in the measurements, then the developer should come up with an adjusted sum to be paid.
Free from encumbrances
If the property you are interested in is currently charged, then the seller should provide a written promise to clear that charge before the ownership of that property is transferred to you. A clause in the agreement should clarify that the property will be delivered free from encumbrances.
Late payment charges/liquidated damages
This stipulates interest accruing in case of a late payment on the property. Liquidated damages concern the damages owed by the seller or developer if they fail in delivering vacant possession in the stipulated time frame.
Defect liability period
A clause in the agreement should stipulate the basic warranty. It will specify the period through which you are entitled to ask the developer to carry out renovations or repairs to fix defects arising in the property. Sub-scale homes are however sold on an as-is basis.
The payment schedule is usually included in the Third Schedule for developer sales. It shows when to pay and what amount should be paid at that time. If you have taken out a home loan the bank will provide an outline of the payment arrangements.
The journey to owning property in Malaysia may seem difficult in the face of the various legal documents that are required whether you are citizen or foreigner. Keep in mind these documents particularly the Memorandum of Transfer are there to protect you which implies an easier property ownership experience without any worry.
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