Importance of Perfection of Transfer & Charge: A Beginner’s Guide

What is Perfection of Transfer & Charge When a property is purchased before the issuance of a separate individual or strata title, the property remains held under a master title. At this stage, the purchaser is in law the beneficial owner of the property. However, the registered proprietor endorsed on the master title of the property is still the developer. Nonetheless, pending the issuance of the separate individual or strata title of the property, the beneficial owner’s rights and interests over the property are protected and secured by the terms and conditions stated in the principal sale and purchase agreement (the initial sale and purchase agreement between the developer and the first purchaser), the sale and purchase agreement between the vendor and purchaser, and deed of assignment by way of transfer from thevendor and the purchaser. Simultaneously, in situations where the purchase of the property is financed by a loan, the bank’s interests over the property are secured by the facility/loan agreement and deed of assignment (by way of security) pending the issuance of the separate individual and strata title. Once the individual or strata title is issued by the land office, the developer remains endorsed as a registered proprietor on the title. Hence, the developer is required to notify the beneficial owner to “perfect” the ownership of the property in favour of the beneficial owner and to notify the existing assignee of the property to perfect the charge in favour of the existing assignee. Therefore, to put it simply, the “perfection of transfer” process is the endorsement of the beneficial owner’s name as the registered proprietor on the individual title or strata title while the perfection of charge is the process of endorsing the existing assignee as the chargee on the individual title or strata title.

Importance of the process of Perfection of Transfer & Charge The process of perfection is without a doubt quite crucial and may affect dealings with the property. In the event of a sale of the property, when the perfection of the transfer and charge process has not been completed, the sale and purchase transaction would incur an additional delay. The transaction shall additionally require the Developer's confirmation of the said property details and the Developer's consent for direct transfer in favour of the new-intended Purchaser. Furthermore, most financial institutions and banks are reluctant to approve loans to finance the purchase or offer refinancing facilities to properties with titles that are still to be perfected especially when the individual/strata title has been issued. Therefore, the potential purchaser may undergo quite some inconvenience getting financiers to finance the purchase of the property or face difficulties in seeking financiers to facilitate the refinancing of the existing loan facilities of the property. Another potentially problematic scenario may arise where the Developer is wound up or liquidated before the perfection process is completed. In this situation, instead of dealing with the Developer, the beneficial owner is now required to deal with the appointed liquidator to perfect the transfer and charge. Not only that the beneficial owner now needs to deal with a different party, but the beneficial owner would usually need to pay additional fees and costs to the appointed liquidator to undergo the perfection of transfer process. Moreover, where the purchase of property is facilitated by loan, the financial institution or the bank may even exercise their rights under the power of attorney executed with the purchaser to sign the requisite documents for the perfection of transfer and perfection of charge as the beneficial owner’s Attorney after the owner’s failure to respond to notice of reminders for the perfection of transfer and charge. In this scenario, all the fees and costs incurred by the bank will be credited to the borrower’s existing financing which will affect the length of the loan term.

The Process When the individual/strata title has been issued, the developer will provide written notice to the owner, the developer's panel solicitors, the solicitors attending to the sale and purchase agreement, the existing assignee, and the assignee's solicitors. The developer's panel solicitors would soon contact the owner to execute the necessary documents, whereupon the beneficial owner has the option either to appoint the developer’s panel solicitors or any of his preferred solicitors to represent him for the perfection of transfer and charge. The legal fees for the perfection of transfer and charge may vary depending on whether the appointed solicitors are also the same solicitors who attended to the previous sale transaction. In respect of the chargeable legal fees, the rules under the Sixth Schedule of the Solicitor’s Remuneration Order 2005 provide that:

• When the appointed solicitors are also THE SAME solicitors who attended to the previous transaction prior to the issuance of the individual/strata title, Rule 2(a) states that the maximum charge shall be 25% of the mandatory scale fee (subject to a minimum fee of RM200);

• When the appointed solicitors DID NOT attend to the previous transaction prior to the issuance of the individual/strata title, Rule 3(a) states that the maximum charge shall be 50% of the mandatory scale fee (subject to a minimum fee of RM200);

The process of perfection of transfer and charge is broken down as follows;-

Conclusion It is therefore more convenient for the property owner to deal with the property where the perfection of transfer and charge process is completed. Bodie Thoene's quote says, "What is right is often forgotten by what is convenient." It is often easy to treat the perfection of the transfer and charge process lightly, but serious consequences may arise from the conduct of neglect as can be seen above. However, for properties with a properly perfected transfer and charge, the owner's position as the rightful owner of the property will never be in doubt because the names of all the correct parties, including the owner, are properly endorsed on the title.