When buying a property there are many types of document that you need to know and one of it is Memorandum of Transfer (MOT). We're going to walk you through why this piece of paper is so important to have as part of the home ownership process.
When it comes to buying that dream home, there are more than a few documents you need to remember.
These legal documents are the official checkpoints on your property purchase journey, and one of the most important you’ll encounter is the Memorandum of Transfer (MoT).
The MoT is the clap-your-hands-and-laugh-in-delight part of purchasing a property. Sure, you’ve got your fancy Sales and Purchase Agreement (SPA)
with all the terms and conditions laid out.
That’s important too, don’t get us wrong. But it’s when the Memorandum of Transfer comes into play that things really get ownership-level exciting.
How Do I Identify The Steps Required?
Transferring ownership of something as important (and valuable!) as a property requires some crucial legal steps. So once you’ve identified a realistic piece of real estate which you can afford and it shows good potential for capital gains yield, it’s time to start the legal process. Here are the 5 key steps in the legal process of buying a house, and the documents that go along with them.
1. Home Loan And Lawyer Up
Searching for the right home loan is the first step towards owning a property, unless you’ve got reallyyy deep pockets, of course! It’s also the perfect point to contract a legal professional to help with the process. It’s not compulsory for you to hire said professional, but with all the many legal documents to come, it’s probably a pretty good idea to get all the help you can!
2. Letter Of Offer (LO)
You’re at the start of the purchasing process, and you’re keen to put your name down for a property. The Letter of Offer is a document which sets out your initial desire to purchase, and a seller’s willingness to sell. It notes things such as the agreed selling price, relevant furnishings, and the date by which the SPA should be signed.
3. Sales And Purchase Agreement (SPA)
This is it, the legal document we’ve all been waiting for. The SPA is a comprehensive agreement setting out the terms and conditions of a purchase. This important document sets out conditions such as the date of transfer, conditions of purchase, items included in the sale, as well as other relevant terms.
4. Facility Agreement
It’s time for the Facility Agreement! Don’t worry, this isn’t about setting out your access to the swimming pool and gymnasium. This is the legal document to officially confirm the home loan agreement that you have signed with your bank.
5. Memorandum Of Transfer
It’s the big one! Now is your chance to sign your Memorandum of Transfer, or the less excitingly titled ‘Form 14A’. The MoT is the document which legally confirms the actual transfer of ownership. It’s the legal equivalent of handing you the keys to the front door and saying the property is yours.
The Confusing Case Of Strata Titles And Master Titles
Now you might think that it all sounds relatively straightforward, so we’re going to throw a strata-shaped spanner in the works.
Only properties which have the relevant master title will have their ownership transferred using an MoT. The MoT will not be used as a transfer method for properties without the relevant master, individual, or strata title. This sort of situation would usually relate to strata properties where developers have not yet properly registered the individual properties.
In those cases, a Deed of Assignment (DOA) form is used to transfer ownership of property, and a further document recording the Developers Consent will also be required.
It’s also worth mentioning that strata titles
sometimes come with a Deed of Mutual Covenants. This deed is a legal document which sets out promises of behaviour and obligations for ownership in these shared developments.
It lists down things like pet ownership, acceptable renovations, and all sorts of stuff to make sure that these shared communities don’t get too crazy.
So, What Does A Lawyer Do?
We mentioned the value of getting a lawyer to help you through this process, and now hopefully you’ve got a good idea of ‘why’. The lawyer is essentially your champion in ensuring you get the right deal, and that everything is done properly and honestly. They’re trained to draft up and check through complex legal documents (like the SPA) to ensure that the terms and conditions are fair and balanced. That means making sure you’re not signing up to some crazy deal where it turns out you’re only allowed to use the front door of your property every third Tuesday. Of course, in reality, that kind of extreme example is unlikely to happen, but there are all sorts of complicated legal jargon that are important to cross-check. A legal professional is also experienced in navigating processes to:
- Ensure everything runs smoothly
- Making sure things like documents are stamped
- Legal requirements are fulfilled within the right time frame
- All sorts of other little miscellaneous things you’d never know to check
That also involves searching Land Office registrations to ensure the property you’re actually buying, really does belong to the person selling it. There’s so much to remember that it’s easy to slip up, thus having someone in-the-know would greatly expedite everything!
What Are The Costs Associated With Each Stage?
Alongside the major payments of purchasing the property itself, there are actually a number of financial requirements and transactions linked to the various legal steps noted above:
1) Loan Agreement
As if the financial burden of a loan wasn’t exciting enough, you also have to pay a stamp duty on it!
House Price
|
Stamp Duty Charge
|
| First RM500,000 |
1% (minimum RM500) |
| Subsequent RM2 million |
0.8% |
| Subsequent RM2 million |
0.6% |
| Subsequent RM2.5 million |
0.5% |
2) Letter Of Offer
This is usually the point where an earnest deposit comes into play. That’s 2% of the total value of the property, and counts towards the overall 10% downpayment. The earnest deposit is usually non-refundable.
3) SPA
Signing the SPA is when the big money payments begin. At this point, the full 10% downpayment will be required. Any earnest deposit already paid will count towards this total. This will also require payment of the SPA stamp duty.
House Price
|
Stamp Duty Charge
|
| First RM500,000 |
1% (minimum RM500) |
| Subsequent RM2 million |
0.8% |
| Subsequent RM2 million |
0.6% |
| Subsequent RM2.5 million |
0.5% |
4) Memorandum Of Transfer
It makes sense that the Deed of Transfer document is also the part where the largest stamp duty is owed! As of 1st July 2019, these are the stamp duty charges that will be due.
House Price
|
Stamp Duty Charge
|
| First RM100,000 |
1% |
| RM100,001 – RM500,000 |
2% |
| RM500,001-RM1,000,000 |
3% |
| RM1,000,001+ |
4%
|
A Transfer Of Love
A transfer of love is (maybe) the sweetest-sounding property transaction you’ll ever hear of. What it relates to, is use of an MoT to transfer property between family members.
That means situations like husband to wife or parent to child. In these cases, the stamp duty for the MoT is waived either fully or partially.
You receive 100% exemption in the case of wife to husband and vice versa, and 50% exemption in the case of parent to child or vice versa.
Source: https://www.propertyguru.com.my/
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