By Datuk Chang Kim Loong

In the first of a two-part article, we look at why a conveyancing lawyer is needed when purchasing real estate.

ON May 31, 2014, StarBiz published my article entitled “Leave conveyancing to lawyer”. Recently, there have been calls to do away with lawyers in conveyancing transactions, with some uninformed people comparing the acquisition of immovable property with movable property.

The comparison that was given: “When we buy a luxury car (movable) for RM800,000, we can get the bank facility within two or three days without a lawyer. But when we buy an immovable property (condo or house) for RM400,000, we are required to have a battery of lawyers to complete the transaction which takes three to six months.”

With the availability of material and resources on anything and everything, there is no shortage of advice. However, if you have a toothache, would you seek advice from a qualified dentist or entrust your molars to quacks who learnt from YouTube and TikTok? 

The answer is obvious: seek treatment from a professional.

Buying a car via hire-purchase 

The pre-printed form of a hire-purchase contract (HP) requires you the hirer to “fill in the blanks” with description of model, make, chassis, details of the loan sum and its monthly repayment, and your personal details.

The HP merely requires the bank officer to witness the contract, get it stamped and then kept on the shelf after notifying the Road Transport Department (RTD) of its ownership. The hirer has to pay the monthly instalments or risk repossession of the vehicle.

Many people assume that if you can understand legal language, you can do the lawyer’s job. Is the role of a lawyer in the sale and purchase of property so simple that it can be equated with buying a car under HP?

Why use your own lawyer

One must understand the role of a lawyer in a sale and purchase transaction and reasons to engage your own lawyer. When a purchaser decides to buy a property – be it a house, an apartment, condominium, shop office or land – he would probably consult a conveyancing lawyer.

The lawyer could be someone recommended by the property agent or is your regular legal adviser. We advise purchasers to seek legal advice before making a commitment and not after paying a deposit to the vendor or real estate agency.

With early consultation, the lawyer can advise you on the sale and purchase terms, conditions of the property including the implications of encumbrances which may impede the transfer, and the financial commitments needed to complete the acquisition.

Complications arising from a botched transaction can be severe, leading to court proceedings or financial detriment due to payment of liquidated damages. So, the role of the lawyer is not just to affix his/her signature; it is to protect the interest of a vendor and purchaser and act as a filter against any irregularities.

We know of property agents who propagate the belief that both purchaser and vendor can “share” a common lawyer to save on legal fees. That is an untrue proposition and puts the vendor at a disadvantaged position.

In a sale and purchase of property, a lawyer cannot represent both vendor and purchaser. If a vendor chooses not to appoint a lawyer, he is considered as not legally represented.

In general, most property transactions undertaken with lawyers on board do tend to complete successfully because the lawyers are able to navigate the technical and procedural complexities associated with land and tax laws.

There are differences in buying property from a developer or from an individual or company, which we term as a “sub-sale” (short for subsequent sale). In this article, we will focus on the purchase of property from a licensed developer.

Buying from a housing developer

The purchase of residential property is regulated under the Housing Development (Control and Licensing) Act 1966 (Act 118) which has been amended over time to keep up with ever-changing facets of residential development.  

From the purchaser’s perspective, buying from a developer is a simple process: choose a unit, apply and obtain the loan, sign the SPA, pay the deposit, and wait for the property to be completed.

But completing the sale and purchase is not a mere three-step process. The end goal is to ensure that the property is properly conveyed to the purchaser.

The process of conveyance has become more complex because the process must ensure that the right property is transferred to the right person(s) to prevent fraudulent transfers.

As far as the purchasers are concerned, once they pay the legal fees they expect (and rightly so) the lawyers to complete the legal process so that the housing loan can be released progressively to the developer and then wait to take delivery of vacant possession of the property.

To a vendor, it may look even simpler: sign the SPA and wait for the payment. If you are buying directly from a developer, you may have to wait 24 to 36 months depending on the property type unless it is almost or already completed.

Preliminary verification in SPA

Before signing the SPA, some preliminary matters have to be addressed such as whether the developer has obtained the proper licenses and requisite approvals from the authorities, confirmation of the unit being purchased, the approved layout plans, the essential items that come with the property, the schedule of payments, relevant identification documents of the developer and purchaser, and conduct bankruptcy, winding-up and land title search.

If everything is in order, then the SPA can be signed by all involved. The signed SPA can then be stamped (online), and the stamp office issues a certificate to show duty has been paid.

Stamping of the SPA does not convey ownership. At this point, for the purchaser who has taken a loan to part-finance the property, the financier’s lawyer will coordinate with the solicitor in charge of the SPA to prepare the loan documents.

Datuk Chang Kim Loong