©The Sun
(Used by permission)
By Cheong Yoke Ping
A SUB–SALE of a property (“Property”) occurs when a Purchaser purchases a
Property from a Vendor who is not a developer. Many purchasers sign sale and
purchase agreements (“SPA”) without understanding the legal implications of the
terms and conditions of the SPA.
A Purchaser should not hesitate to seek explanation from his Solicitor at all
times, especially prior to the signing of the SPA and whenever amendments are to
be made to the SPA, so that he is informed of the terms and conditions of the
SPA, and the Solicitor should and is expected to explain the terms and
conditions of the SPA to his client.
Purchase Price and completion date
Besides the name and particulars of the Vendor and Purchaser, the SPA sets out
the Purchase Price. It is usual for a deposit of 10% (less any earnest deposit
paid earlier, if any) to be paid upon the signing of the SPA by the Purchaser.
The SPA will set out the date of the payment (“Completion Date”) of the balance
purchase price (“Balance Sum”), which is usually:
• 3 months from the date of signing; or
• 3 months from the date of receipt by the Purchaser’s Solicitors of the consent
from the relevant authority if the Property is subject to a restriction in
interest; or
• 3 months from the date of the receipt of the consent of the developer in the
case where the individual or strata title to the Property is not issued yet.
The SPA will, in most cases, provide an extension of time of 1 month or more for
the Purchaser to settle the Balance Sum. When an extension of time is granted,
interest at an agreed rate will normally be charged by the Vendor on the unpaid
Balance Sum. This interest is usually charged on a daily basis from the day
after the Completion Date until the date of full payment of the unpaid Balance
Sum.
In a case where the Property is subject to a restriction in interest, the time
for obtaining the relevant consent is usually agreed at between 4–12 months, and
the time for obtaining the relevant consent may be extended.
The Purchaser should be aware that if he fails for any reason to pay the Balance
Sum on the Completion Date or the extended date, as the case may be, the Vendor
has a right to forfeit the Deposit as liquidated damages. The SPA normally
provides for the Vendor to refund any money paid by the Purchaser which is in
excess of the Deposit. To avoid the forfeiture of his Deposit, a Purchaser has
to monitor the progress of his payment of his Balance Sum closely in cooperation
with his Solicitor.
Inventory of fixtures, fittings, etc
It is responsibility of the Purchaser to give his Solicitor an inventory of
fixtures, fittings, furniture and other items which may be included in the
purchase of the Property and such inventory should be attached to SPA to avoid
any misunderstanding on the completion of the transaction. Fixtures and fittings
include lights, air conditioners and fans and other items that are affixed to
the Property. It is common, however, for the Vendor not to charge extra for
normal lightings and fans.
Encumbrances and redemption sum
A Property sold by the Vendor may be encumbered, i.e. the Vendor may have
charged the Property to a bank to secure a loan granted by the bank to the
Vendor. Where no individual title or strata title has been issued for the
Property, the security taken by the bank is an assignment of the rights, title
and interest of the Vendor in the Property and the Vendor's agreement with the
Developer.
It is the Purchaser’s Solicitor’s duty to ascertain the amount owing to the
Vendor’s bank (“Redemption Sum”). Where the Redemption Sum exceeds the Purchase
Price or the Balance Sum, additional provisions are required to be made for
payment of the amount in excess by the Vendor.
Purchaser’s loan and difference sum
The SPA will normally provide that the Purchaser will require a loan (“Loan”) to
assist in the payment of the Balance Sum. Once the Purchaser has obtained his
Loan, his bank (“Purchaser’s Bank”) will appoint a solicitor to prepare and
complete the loan documentation for the release of the Loan. Sometimes the
Purchaser’s Solicitor may be appointed by the Purchaser's Bank to attend to the
loan documentation. It should be borne in mind that when the Purchaser's Bank
appoints the solicitor, that solicitor is acting for the Purchaser's Bank in the
Loan transaction, and that solicitor does not act for the Purchaser in the Loan
transaction even though the Purchaser may have to pay the legal fees due to that
solicitor.
Where there is a title to the Property, the loan documents to be signed by the
Purchaser are usually the loan or facility agreement, and a charge to be
registered over the Property in favour of the bank.
Where there is no individual or strata title to the Property, then the loan
documents to be signed by the Purchaser are usually the loan or facility
agreement, and an assignment of the Property from the Purchaser to the bank as
security, together with the grant of a power of attorney to the bank.
If the Purchaser's Loan is less than 90% of the Purchase Price, there will be a
difference between the balance purchase price and loan amount to be paid by the
Purchaser. This is usually referred to as the Difference Sum. Although most SPA
will not specify an exact date for payment of the Difference Sum, the Purchaser
should not delay the payment of the Difference Sum as this will delay the
release of his Loan. When in doubt as to when he should pay, the Purchaser
should contact his Solicitor. The Difference Sum must be paid by the Purchaser
before the Purchaser's Bank will release his Loan.
Conclusion
The Purchaser should be well informed and advised of the terms and conditions of
the SPA, with the assistance of his Solicitor, so that he is able to appreciate
the process of purchasing a Property in his best interests.
Terms and conditions of a SPA may vary from case to case, and in a forthcoming
Part 2 of this article, the writer will cover more terms and conditions relevant
in a typical sale and purchase transaction.
Part 2 will appear in the next Law & Realty a fortnight from today.
The writer is a member of the Conveyancing Practice Committee, Bar
Council, Malaysia
www.malaysianbar.org.my
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