Understanding the Steps in a Property Transaction
When purchasing a property, understanding the formal steps involved can help ensure a smooth transaction. From the issuance of the Letter of Offer to the final registration at the Land Office, each stage serves a critical function in the process. Below is a breakdown of the key steps involved in a property sale transaction:
1. Issuance of the Letter of Offer
The Letter of Offer serves as a formal agreement outlining the key terms between the buyer and the seller before signing the Sale and Purchase Agreement (SPA). This document sets the groundwork for the entire transaction.
Key Elements of the Letter of Offer:
Buyer and Seller Details: Basic personal or company details of the parties involved.
Agreed Purchase Price: The mutually agreed price for the property.
Deposit Amount: The upfront deposit typically amounts to 10% of the purchase price.
Time Frame for Signing the SPA: Usually, a timeframe of 14-21 days is given for the SPA to be signed.
2. Drafting of the Sale and Purchase Agreement (SPA)
After the issuance of the Letter of Offer, lawyers will begin drafting the Sale and Purchase Agreement (SPA). This document contains the full details and legal obligations of the buyer and seller.
Solicitors Actions:
Conduct a land search to verify the title information and check for any encumbrances, caveats, or restrictions on the property.
Perform a bankruptcy or winding-up search to ensure the vendor is financially sound.
If needed, extended negotiations might result in a supplemental agreement for additional time or revised terms.
3. Execution of the Sales & Purchase Agreement(SPA)
Once the SPA is ready and both parties are satisfied, the SPA is signed thereafter the SPA Process shall commence.
Typical Steps:
The purchaser usually signs first, followed by the vendor.
At this stage, the balance deposit (7-8%) is paid to finalize the terms.
Additional Documents:
Form 14A (Memorandum of Transfer)
CKHT Forms: These are required for Real Property Gains Tax (RPGT) filings.
Form 19B (Private Caveat): Used to protect the purchaser’s interest.
4. Stamping of the SPA
Once all documents are signed, the SPA needs to be stamped to make it legally binding.
For more details on stamp duty, you can visit the online Stamp Duty Calculator here.
The stamped copies are distributed:
The original and duplicate go to the purchaser for loan finalization.
The vendor’s solicitor retains another copy.
5. Entry of Private Caveat and Filing of CKHT Form (SPA Process)
Once the SPA is signed, the Private Caveat is lodged to secure the purchaser's interest in the property.
Additionally, CKHT Forms (1A, 2A, 3) must be submitted to the Inland Revenue (LHDN) within 60 days of the SPA. If the property has been held for more than five years, no RPGT will apply.
6. Purchaser Loan & Adjudication of the Memorandum of Transfer
If the purchaser is financing the property through a loan, the following steps are taken:
The financier’s solicitor issues a letter of undertaking to the purchaser’s solicitor.
The purchaser's solicitor submits necessary documents to facilitate the loan.
Before disbursing the loan, the bank’s caveat is lodged to protect the financier’s interest.
For the Memorandum of Transfer, it is submitted for adjudication to determine the stamp duty payable, which must be settled within 14 days.
Vendor’s Role:
Request a redemption statement from the financier if the vendor has an outstanding loan.
Once the purchase price is paid, the financier will sign the discharge of charge documents.
7. Purchaser Loan and Completion Date
The completion date is the deadline for the full payment of the purchase price, which is usually 3-4 months from the signing of the SPA.
After full payment is made:
The vacant possession of the property is handed over, typically within 5-7 days.
Final adjustments for outgoings like utility bills and maintenance fees are made.
8. Presentation of the Memorandum of Transfer at the Land Office
The final step involves presenting the Memorandum of Transfer and other related documents to the Land Office. If a loan was taken out, the financier’s solicitor will present the transfer along with a charge to be registered.
The transaction is considered complete once the new title, reflecting the purchaser’s name, is issued by the Land Office.
Disclaimer
For any further enquiries or assistance with your property transactions, feel free to reach out to our experienced team. We're here to guide you every step of the way.
The content provided on this blog is for informational purposes only and should not be considered as professional advice. While we strive to provide accurate and up-to-date information, we make no warranties or representations, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog content.