While not as glorified as other important documents when purchasing a new home, the Perfection of Transfer (POT) is just as, if not perhaps more, crucial to homeownership: there is pertinent information contained within the Perfection of Transfer that will help the proprietor or homeowner, and ease real estate-related legal disputes, should they arise.
This article explains the necessity to complete the Perfection of Transfer to ensure a smooth property purchase.
Perfection of Transfer
About the Perfection of Transfer
Picture this: you have just completed the arduous task of purchasing a property, and after endless documentation and proceedings comes one final hurdle in the form of a document, known as the Perfection of Transfer, before the property is finally and officially yours.
The Perfection of Transfer is a simple but important document that pens the finer details involved in transferring ownership of a property in Malaysia, from the developer to the current property owner – without it, the purchaser of the property will not be recognised as the legal proprietor.
Filing for a Perfection of Transfer comes after the completion of the Sale and Purchase Agreement (SPA) and the Memorandum of Transfer (MOT/Form 14A) of a property. An important detail that is often missed is that the Perfection of Transfer will be required whence an Individual Title or Strata Title has not been previously issued for said property.
Why is the Perfection of Transfer important to proprietors?
For an individual to establish ownership of a property purchased from the developer and to receive the legal benefits associated with it, completing the Perfection of Transfer is required – for a landed property, this will ensure the purchaser of the property is registered in the land title (Deed of Assignment or DOA) as the landowner, making him/her eligible for the protections provided by the National Land Code 1965.
Besides avoiding confusion about the transfer of property or ownership, failing to attend to the Perfection of Transfer can cause the proprietor to face difficulties in the sale and purchase process of the property, and incur extra fees imposed by the developer of said property.
The proprietor is likely to also be unable to take part in the management of community housing projects (in the case of landed properties) or committee developments (in the case of mid- and high-rise properties such as apartment complexes).
On a more personal level, the proprietor may invite trouble in relation to inheritance/succession within his/her family.
How does one obtain/submit a Perfection of Transfer?
A brief recap: a developer who builds the property(s) from scratch owns that property, as well as the plot of land the property sits on, under a Master Title. A Master Title is simply the original title detailed in a document that legally defines the initial ownership of the development. It is issued during the building and construction phase of the development.
All properties within the development, such as apartment complexes, fall under the Master Title until the respective Individual or Strata Titles have been issued by the Land Office, to the registered proprietors – think of the Master Title as one big cake, while each slice of cake represents ownership under an Individual or Strata Title i.e. the Perfection of Transfer is akin to a piece of paper that marks the designation of each slice of cake.
In short, a Perfection of Transfer will be required to transfer ownership of various kinds of properties from the Master Title to subsequent titles, such as an Individual Title or Strata Title.
Here is a typical quotation regarding the Perfection of Transfer that denotes professional lawyer’s fees as well as stamp duty fees, registration fees, and/or disbursements.
Additionally, in the case of a property purchase directly from the developer, stamp duty payment will be included with payment for the Perfection of Transfer.
Conversely, in a direct property purchase from an independent seller, stamp duty payment is made once, on the Deed of Assignment; payment for the Perfection of Transfer must be made at the time of completion of the Sale and Purchase Agreement, between the previous owner and the current owner.
What is required to complete a Perfection of Transfer?
The purchaser of the property will need to appoint a legal representative, such as a lawyer, to register the property under the purchaser’s name. The lawyer will communicate directly with the developer’s solicitor, prepare the Memorandum of Transfer (MOT/Form 14A), and offer legal advice where necessary.
Meanwhile, the relevant documents that the purchaser needs to prepare should include the following:
A copy of the purchaser’s identity card
A copy of Deed of Assignment
A copy of the Sale and Purchase Agreement
The latest assessment receipt
The quit rent receipt
Run-through for a Perfection of Transfer?
The Perfection of Transfer process is slightly lengthy as you need to collect various documents beforehand, such as the assessment receipt and quit rent receipt – but it can be summarised as follows:
Step 1: The property purchaser is to pay legal fees, stamp duty, as well as disbursements.
Step 2: Execution of the Perfection of Transfer by the purchaser and developer.
Step 3: Registration is carried out at the Land Office.
Step 4: Legal transfer of ownership and granting of individual/strata titles the original proprietors to the purchasers or current proprietors.
The cost of transfer of a property title under the Perfection of Transfer?
The fees for the transfer proceedings related to the Perfection of Transfer falls under a law called the “Solicitors Remuneration Order” (SRO).
In addition to a range of financial stipulations, the Solicitors Remuneration Order states clearly the scale of legal fees payable for completion of the Perfection of Transfer, in particular, if:
The purchaser engages the same lawyer as during property purchase, or, during the Sale and Purchase Agreement – the maximum charge that can be imposed is 25% of mandatory legal fees (Rule 2 of the Sixth Schedule, Solicitors Remuneration Order).
The purchaser engages a new lawyer, specifically for the completion of the Perfection of Transfer – the maximum charge that can be imposed is 50% of mandatory legal fees (Rule 3 of the Sixth Schedule, Solicitor’s Remuneration Order).
The mandatory legal fees structure is listed below, after which follows a calculated example of a property purchase:
For the first RM 500,000
(subject to a minimum fee of RM500)
For the next RM 500,000
For the next RM 2,000,000
For the next RM 2,000,000
For the next RM 2,500,000
Excess of RM 7,500,000
Shall not exceed 0.50%
Note that the fee is also subject to certain discounts.
The following is a breakdown of the legal fees on a particular property purchased for RM3,000,000 in Kuala Lumpur, in 2021:
POT LEGAL FEE CALCULATION:
For the first RM 500,000 x 1.00% = RM 5,000
For the next RM 500,00 x 0.80% = RM 4,000
For the next RM 2,000,000 x 0.70% = RM 14,000
TOTAL LEGAL FEE PAYABLE = RM 23,000
Maximum POT legal fee retaining original lawyer (25%), additional RM 5,750 OR
Maximum POT legal fee with a new lawyer (50%), additional RM 11,500
Therefore, depending on the choice of a legal representative, the owner can expect to pay between RM28,750 to RM34,500 to complete the Perfection of Transfer for this property.
Calculating stamp duty fees under the Perfection of Transfer
The purchaser is only required to pay stamp duty ONCE on a property purchase – if stamp duty has been paid together with the Sale and Purchase Agreement, there is no need for a purchaser to pay additional stamp duty at the time of completing a Perfection of Transfer.
The stamp duty payable is a form of tax imposed on property transfer documents based on a tiered value system; a percentage is owed for each level based on the value of the property, according to the year of purchase.
Stamp duty charges as of 2022:
1% on the first RM100,000
2% from RM100,001 to RM500,000
3% from RM500,001 to RM1,000,000
4% for everything above RM1,000,000
Using the property purchased in Kuala Lumpur (2021) for RM3,000,000 as an example:
Cost of property, RM 3,000,000:
For 1% on the first RM 100,000 – RM 1,000
For 2% on the next RM 400,000 – RM 8,000
For 3% on the next RM 500,000 – RM 15,000
For 4% on the last 2,000,000 – RM 80,000
TOTAL STAMP DUTY FEES, RM 104,000
Note: First-time homeowners are entitled to a number of stamp duty exemptions depending on the value of the property – these exemptions are welcome when considering lofty stamp duty charges.
Perfection of Charge
About the Perfection of Charge
The Perfection of Charge (POC) is a legal document that covers the transfer of ownership to the bank in the event of applying for a home loan – the bank provides the financing to purchase the property and is considered the rightful owner.
The Perfection of Charge provides additional security to the home loan agreement as well. If the purchaser fails to make regular repayments on the property, the bank is permitted to sell the property to recoup the loan’s monthly repayments.
Just like the Perfection of Transfer, the Perfection of Charge is a lengthy process if the relevant documentation is not in order. The Perfection of Charge is also governed by the Solicitor’s Remuneration Order, and similar fees and property transactions apply.
How is the Perfection of Transfer different from the Perfection of Charge?
A signed and stamped Perfection of Transfer summarises when a property title is transferred from under a Master Title to an Individual Tile and so on, after a property purchase. Ownership of the property is then legally transferred from the developer or an independent seller to the purchaser/proprietor.
Meanwhile, the Perfection of Charge is required when a home loan has been used to finance a property purchase. The Perfection of Charge is only applicable to properties that have been issued an Individual or Strata Tile. It transfers ownership from the purchaser/proprietor to the issuing bank.
Why is the Perfection of Charge important to proprietors?
Failure to execute the Perfection of Charge will primarily affect financing from banks for a home or bank loan for a property purchase from a registered property developer. Be sure to keep title transfer documents and housing loan documents accordingly.
The Perfection of Transfer and Perfection of Charge both are forms of property transfer that seal the deal on a property ownership. It is necessary to complete this stage in a property purchase to avoid complications moving forward.
A registered proprietor hoping to settle into their newly-purchased home without a hitch will benefit from having a reliable legal representative from a notable legal firm to carry out the title transfer of their property – so choose wisely.