PROCEDURE: Part 3 continues with the final stage of the sub-sale process — from Redemption Sum payment up to Completion
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Part 3 continues with a discussion of the terms and conditions of a sub-sale contract or agreement (“SPA”) and the process of completing the sub-sale.
Payment of Redemption Sum: Once all the conditions of the Loan have been fulfilled, the Purchaser’s Bank’s Solicitors will advise the release of the amount owing by the Vendor to his bank (“Redemption Sum”) and obtain the original title and other necessary documents from the Vendor’s Bank (please refer to Part 2 published in NST RED last week, 20th July).
Sometimes, the Redemption Sum is paid to the Vendor’s Solicitors for its onward transmission to the Vendor’s Bank. There have been cases where some banks have delayed in returning the required documents thereby delaying the Completion.
It is quite common to provide in the SPA that where the Vendor’s Bank does not return the required documents, say, within 14 days, then the Vendor must grant an extension of time for each day of delay which is in excess of said 14 days. This means that if the Purchaser’s Solicitor receives the documents, say, 22 days from the date of payment of the Redemption Sum, then the Purchaser is entitled to an extension of time of eight days to pay the balance purchase price (“Balance Sum”) without interest.
Presentation of Transfer and Charge (Property with Title): Once the Purchaser’s Bank’s Solicitor has obtained the required documents (discharge, original title and duplicate charge), he will stamp the charge (signed by the Purchaser in favour of the Purchaser’s Bank). He will also prepare all the relevant documents including the stamped Transfer received from the Purchaser’s Solicitors and the stamped discharge of charge from the Vendor’s Bank for presentation at the relevant land office or registry. Presentation is the submission of documents for registration.
After conducting a land search on the Property and presentation of the documents, the Purchaser’s Bank’s Solicitors will advise the Bank to release the balance of the Loan (i.e. Loan less Redemption Sum) to the Vendor.
Assignment and stamping of Loan documents (Property without Title): The Purchaser’s Bank’s Solicitor will, upon receipt of the document known as receipt and reassignment (“R&R”) and other documents from the Vendor’s Bank and the Deed of Assignment from the Purchaser’s Solicitors, proceed to date and stamp the Loan documents and register the power of attorney (“PA”) granted by the Purchaser to the Purchaser’s Bank at the relevant High Court. When the PA has been registered, the Bank’s Solicitors will advise the Purchaser’s Bank to release the balance of the Loan to the Vendor.
Real Property Gains Tax (RPGT): With effect from 1st January, 2012, a sale by a Vendor of his Property within two years of his date of acquisition will attract a real property gains tax of 10 per cent of the chargeable gain. However, if a Vendor has acquired his Property for more than five years, he is exempted from RPGT.
The SPA will provide for the Vendor to submit Form CKHT 1A and the Purchaser to submit Form CKHT 2A for RPGT purposes. If the Vendor is exempted from RPGT, he will also submit Form CKHT 3 to claim the exemption.
The CKHT forms must be signed by the Vendor and Purchaser and submitted within 60 days of the date of the SPA except where the consent of the state authority for the sale is required, in which case the time limit starts from the date of the said consent. Failure to submit the CHKT forms may attract penalty.
In the case where RPGT is payable, the Purchaser’s Solicitors shall retain two per cent of the purchase price for payment to the Director General of Inland Revenue together with Form CKHT 2A. If the amount paid is more than the actual RPGT due, then the Vendor may claim the excess paid from Lembaga Hasil Dalam Negeri Malaysia.
Vacant or legal possession : The SPA will provide for vacant possession of the Property to be delivered by the Vendor upon full payment of the Balance Sum by the Purchaser. Where the Property is sold subject to an existing tenancy, legal possession is to be delivered. The name and particulars of the tenant together with the amount of the monthly rent should to be stated in the SPA. It is prudent for the Purchaser’s Solicitors to obtain a copy of the tenancy agreement, if any, to check the terms and conditions of the agreement and advise his client accordingly.
Where the sale is subject to vacant possession, it is the responsibility of the Vendor to deliver vacant possession. If the sale is without vacant possession and subject to an existing tenancy, there should be provisions in the SPA for handing over or the assignment of the tenancy. Notice of the sale should be given by the Vendor or his Solicitors to the existing tenant. The SPA should also provide that the rent paid for the last month of the Completion Date should be pro-rated as at the date of payment of the Balance Sum by the Purchaser as well as the handing over of deposits held by the Vendor to the Purchaser.
In some cases, the parties may agree that the Purchaser may take vacant possession of the Property prior to the payment of the Balance Sum. Sometimes a monthly sum is payable by the Purchaser to the Vendor pending the completion of the transaction. This arrangement should be included in the SPA.
In such a case, the Purchaser may be required to pay the quit rent, assessment, service charges, insurance and other charges of the developer (where applicable). Proper provisions for this in the SPA will avoid any dispute between the parties.
Payment of Outgoings: Outgoings include quit rent, assessment, Indah Water charges, telephone, water and electricity charges and sinking fund. The Vendor is required to promptly pay for such outgoings incurred by him prior to handing over possession. The outgoings are normally apportioned as at the date of delivery of possession.
It is usual for the Vendor to indemnify the Purchaser in respect of the payment of the outgoings. The Purchaser is advised to check that all payments have been made and to obtain all relevant receipts from the Vendor. If payments have not been made, the Purchaser’s Solicitors may make arrangements with the Vendor to deduct any non-payment from the balance purchase price or obtain payment from the Vendor prior to release of the balance purchase price to the Vendor.
Conclusion: The process of ensuring the completion of the sale and purchase by the Vendor’s and Purchaser’s Solicitors is a complicated process. It is the responsibility of both Solicitors to ensure that the purchase of the Property is completed within the time frame specified in the SPA.
This process starts from the appointment of each Solicitor until the presentation and registration of the document of title in the name of the Purchaser or the assignment of the Property from the Vendor to the Purchaser, apportionment of outgoings and delivery of vacant possession.
However, this can only be completed with the co-operation of the Vendor and Purchaser including at times communicating with their respective banks to expedite the release of the redemption statement, release of loan documents and the loan.
The Vendor and Purchaser should be well informed of the terms and process of the purchase of the Property by their respective Solicitors.
Part 2 appeared in the NST- RED Advisory column last week.
The writer, YP Cheong @ Cheong Yoke Ping (Ms), is a member of the Conveyancing Practice Committee, Bar Council, Malaysia and this article has been contributed to National House Buyers Association (www.hba.org.my) for Education, Information and Empowerment