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Understanding an SPA - (Part
3)
05/01/2007 The Sun - Law & Realty By Cheong Yoke Ping
IN this final part. the writer continues to explain the terms and conditions
of the Sales and Purchase Agreement (SPA) and the process of completing the
transaction of a purchase of a Property from a party (“Vendor”) other than a
developer.
Payment of Redemption Sum
Once all the conditions of the Loan have been fulfilled, the solicitors for
the Purchaser’s Bank’s (“Bank’s Solicitors”) will advise the Bank to release
the Redemption Sum to the Vendor’s Bank and obtain the original title and
other necessary documents (Please refer to Part 2 on the 22 Dec, 2006 issue
of Propertyplus).
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 the return of the required documents thereby delaying
the completion of the purchase by the Purchaser. 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 the 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 extension of time of 8 days to pay the Balance Sum without
interest.
Presentation of Transfer and Charge (Property with title)
Once the Bank’s Solicitor has obtained the required documents (discharge,
original title and duplicate charge), he will stamp the discharge and the
charge (by the Purchaser in favour of the Purchaser’s Bank) and prepare all
the relevant documents including the stamped Transfer, received from the
Purchaser’s Solicitors, for presentation at the relevant land office or
registry. Presentation is the submission of documents for registration.
After the presentation and land search on the Property, the Bank’s
Solicitors will advise the Bank to release the balance of the Loan (Loan
minus Redemption Sum) to the Vendor.
Assignment and stamping of Loan documents (Property without title)
The Bank’s Solicitor will upon receipt of the R&R and other documents from
the Vendor’s Bank and the 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 and extracted from the High Court,
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)
The payment of RPGT by the Vendor, if any, is a standard provision in a SPA.
The Vendor’s solicitor is normally required to retain an amount sufficient
to pay the RPGT, if applicable. The amount payable is based on a decreasing
scale from 30% to 5% of the chargeable gain depending on the period between
the date of acquisition and date of disposal of the Property, and this
ranges from within 2 years to disposal in the 5th year after the date of
acquisition. If the Property is disposed by an individual Vendor in the 6th
year after the date of acquisition, no RPGT is payable. The Vendor and
Purchaser are required to complete Form CKHT 1 and 2 respectively to inform
the relevant authority of his acquisition of the Property. This Form is
normally prepared by their Solicitors.
Vacant or legal possession
The SPA will provide for vacant or legal 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, the
name and particulars of the tenant together with the amount of the monthly
rent ought to be mentioned in the SPA. It is prudent for the Purchaser to
obtain a copy of the tenancy agreement, if any, to check for any onerous
terms.
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 the assignment of the tenancy and the handing over of deposits.
Notice of the sale should be given by the Vendor 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.
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 ought to 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.
Payment of Outgoings
Outgoings include quit rent, assessment, Indah Water charges, telephone,
water and electricity charges. The Vendor is required to 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
Purchaser’s Solicitor is a complicated process. It is the responsibility of
the Purchaser’s Solicitor 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 the 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. However, this
can only be completed with the cooperation of the Purchaser. The Purchaser
should be well informed and advised of the terms and process of the purchase
of the property.
Part 1 of this article appeared a
month ago while Part 2 appeared a
fortnight ago.
The writer is a member of the Conveyancing Practice Committee, Bar
Council, Malaysia www.malaysianbar.org.my |
