By Datuk Chang Kim Loong
5 May 2022
IN this second part of the article, we will discuss about the works a conveyance lawyer does for the parties involved; which could be non-exhaustive and tedious so as to protect the interest of buyers.
Memorandum of Transfer (MOT)
Do you not know that pursuant to Section 211 (Fifth Schedule) of the National Land Code, 1965, the designated persons to attest or witness the signatures appearing in all dealing instruments including, but not limited to Memorandum of Transfer (MOT) are “an advocate and solicitor (aka lawyer)” and a host of others permitted by the legislation? The bank officers/ Commissioner of Oaths/ clerk cannot attest/ witness the signatories to the MOT or such dealing instruments.
Undertakings and performance in housing loan transaction
The loan documentation is a tedious and complex process, with every bank having their own drawdown requirements and processes. Each party(ies) instrumental to the transaction has to issue their respective confirmations and undertakings; be it the SPA lawyers, housing loan lawyers, the property developer and the bank financiers. Hence, the time required for effectual disbursement of the loan (or part thereof) would consume approximately three months to be conservative, depending on its complexity.
End to end conveyancing process in immovable property transactions
The following are the checklist (which varies from banks to banks having different pre-disbursement criteria(s)) that conveyancing lawyers have to perform and undertake to the purchaser’s banks/ financier, though not exhaustive, inter-alia:
- Land searches to ascertain the land information as represented in the SPA is correct and to confirm the presence or absence of any encumbrances, restrictions, prohibitions, acquisitions on the land in which the buildings are erected which may materially prejudice a financier’s interest or cause the financier not to be able to register their interest over the purchaser/ borrower’s housing unit or parcel.
- Searches on the developer, vendor (for sub-sale), purchasers/ borrower to establish their solvency. If the purchaser/ borrower is a company, there are additional checklist such as reviewing the board of directors’ resolutions and the corporate documents are in order.
- For properties which are still under a master title, the end-financier lawyer must obtain letters of undertakings from the developer to assure the financier that the developer will effect the transfer of the property to the purchaser once the separate strata title is issued, not to encumber the land any further through the creation of additional charges, to apply for consent to transfer and charge. The financier lawyers also write to the purchaser’s lawyer to seek their undertaking to attend to the perfection of the transfer once the separate strata title is issued. The responses and documents requested are then subsequently reviewed to ensure the contents comply with a financier’s requirement and if need be, the financier lawyers will seek further information or clarification from the developer. If the master titles are charged to a financial institution (bridging financier), end-financier lawyer will also need to request for a redemption statement and a Letter of Disclaimer, whereby the master charge agrees not to foreclose the purchaser/ borrower’s unit or parcel so long as the redemption sum is paid.
The above do not include other checking such as sighting of the developer’s licenses, approvals for the project, issuance of the Certificate of Completion and Compliance (for completed projects), quit rent and assessment have been duly paid to the land authorities and local council, respectively. Not all loan processes are standard as development projects may have different schemes as a leaseback arrangement or guaranteed income scheme, in which a lawyer would also need to advise a financier on the terms of the scheme and its impact on the financier’s interest in the property.
Then, there is the procedures to witness the instruments; endorsement; affirmation of the Statutory Declaration (SD); stamping process; registration and extraction thereof.
The Letter of Advice for release of loan which is issued by a lawyer/ law firm to the financier is not a mere one pager; it usually runs into pages and pages (some nearly nine pages) of confirmation of facts, information and certain actions have been taken such as lodgment of caveats to protect a financier’s interests, explanation on the land conditions, applicable public policy for special housing schemes, compliance by the relevant parties to the conditions set in the financier’s letter of offer, the loan and security documentation have been properly executed, affirmed, stamped and registered; where required.
Once the drawdown requirements are satisfied, the financier lawyers then advises the financier to release part of the loan sum to the master charge (bridging financiers) for redemption purposes and thereafter to the developer’s Housing Development (Project) Account when the developer issues its progress claims to the end-financier and purchaser. The letter of advice may be uploaded onto a financier’s portal or printed in hard copies. The letter from the lawyer/ law firm, entrusted with the housing loan, usually contains a professional undertaking from the lawyer/ law firm to the financier to make good on any loss or damage suffered by a financier for any negligence, error, omission, or mistakes.
It is not such a simple and straightforward process as perceived. The end-to-end conveyancing process list is non exhaustive.
Discounted legal fees
We do acknowledge that the amount of work that has to be done should be, and is, taken into account in the scaled fees. However, in a case where the purchase transaction is governed by the Housing Development (Control & Licensing) Act, 1966 (Act 118), or where a loan is obtained to finance a HDA transaction, a permitted lower scale of fees will apply, ranging from 25% to 35% discounts (TABLE 2) based on the Solicitors’ Remuneration Order 2005, which was gazetted on March 2, 2017 and came into force on March 15, 2017.
The legal fees are calculated based on a percentage of the buying price of the property or housing loan sum, which can be anywhere from 0.5% to 1% (TABLE 1):
Such discounted legal fees are certainly to the benefit of purchasers. Regardless of said SPA is in statutory form, *professional insurance still have to be purchased by lawyers to cover all circumstances.
To our mind, the scaled fees work better for the lower income group. Without the scaled fees, I think lawyers will likely charge more for lower–end properties because the amount of work involved is often the same as higher end properties.
In the case of purchase of a low–cost house, it entails having to apply for the formal consent of the state authorities, land office and sometimes the local council on top of having to recite the status of the property in the SPA contract – that is more tedious work than a higher–end freehold property.
With the compulsory discount, I do not think house purchasers for low and medium–cost houses are overcharged.
Now, what else have I omitted to argue the case of requiring professional legal services in conveyancing? The task entails voluminous work and only a “hands on” legal practitioner a.k.a lawyer would understand the intricacies of the processes.
Of course, academicians understand the peripheral procedures but they are not practicing per se’ but merely lectures the ideal. What more a nescient layperson who do not have full knowledge of the legal intricacies, process, obligations and possible liabilities? – May 22, 2022
Datuk Chang Kim Loong is the honorary secretary general of the National House Buyers Association (HBA).
This article is intended to offer an insight into the works of the conveyancing processes vis-à-vis sale and purchase and housing loan transactions. If in doubt, please seek your own independent legal advice.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.