deed of assignment vs memorandum of transfer

Deed of Assignment or Deed of Novation: Key Differences and Legal Implications of Novation and Assignment Contracts

Novation and assignment stand out as pivotal processes for the transfer of contractual rights and obligations. These legal concepts allow a party to the contract to adapt to changing circumstances, ensuring that business arrangements remain relevant and effective. This article explores the nuances of novation and assignment, shedding light on their distinct legal implications, procedures, and practical applications. Whether you’re a business owner navigating the transfer of service contracts, or an individual looking to understand your rights and responsibilities in a contractual relationship, or a key stakeholder in a construction contract, this guide will equip you with the essential knowledge to navigate these complex legal processes.

Table of Contents

• What is a Deed of Novation? 
• What is a Deed of Assignment? 

Key Differences Between Novation and Assignment Deeds

Need a deed of novation or assignment key factors to consider, selecting the right assignment clause for your contract – helping you make the right choice, what is a deed of novation.

Novation is a legal process that allows a new party to a contract to take the place of an original party in a contract, thereby transferring both the responsibilities and benefits under the contract to a third party. In common law, transferring contractual obligations through novation requires the agreement of all original parties involved in the contract, as well as the new party. This is because novation effectively terminates the original contract and establishes a new one.

A novation clause typically specifies that a contract cannot be novated without the written consent of the current parties. The inclusion of such a clause aims to preclude the possibility of novation based on verbal consent or inferred from the actions of a continuing party. Nevertheless, courts will assess the actual events that transpired, and a novation clause may not always be enforceable. It’s possible for a novation clause to allow for future novation by one party acting alone to a party of their choosing. Courts will enforce a novation carried out in this manner if it is sanctioned by the correct interpretation of the original contract.

Novation is frequently encountered in business and contract law, offering a means for parties to transfer their contractual rights and duties to another, which can be useful if the original party cannot meet their obligations or wishes to transfer their contract rights. For novation to occur, there must be unanimous consent for the substitution of the new party for the original one, necessitating a three-way agreement among the original party, the new party, and the remaining contract party. Moreover, the novation agreement must be documented in writing and signed by all involved parties. Understanding novation is essential in the realms of contracts and business dealings, as it provides a way for parties to delegate their contractual rights and responsibilities while freeing themselves from the original agreement.

What is a Deed of Assignment?

A deed of assignment is a legal document that facilitates the transfer of a specific right or benefit from one party (the assignor) to another (the assignee). This process allows the assignee to step into the assignor’s position, taking over both the rights and obligations under the original contract. In construction, this might occur when a main contractor assigns rights under a subcontract to the employer, allowing the employer to enforce specific subcontractor duties directly if the contractor fails.

Key aspects of an assignment include:

• Continuation of the Original Contract: The initial agreement remains valid and enforceable, despite the transfer of rights or benefits.
• Assumption of Rights and Obligations: The assignee assumes the role of the assignor, adopting all associated rights and responsibilities as outlined in the original contract.
• Requirement for Written Form: The assignment must be documented in writing, signed by the assignor, and officially communicated to the obligor (the party obligated under the contract).
• Subject to Terms and Law: The ability to assign rights or benefits is governed by the specific terms of the contract and relevant legal statutes.

At common law, parties generally have the right to assign their contractual rights without needing consent from the other party involved in the contract. However, this does not apply if the rights are inherently personal or if the contract includes an assignment clause that restricts or modifies this general right. Many contracts contain a provision requiring the consent of the other party for an assignment to occur, ensuring that rights are not transferred without the other party’s knowledge.

Once an assignment of rights is made, the assignee gains the right to benefit from the contract and can initiate legal proceedings to enforce these rights. This enforcement can be done either independently or alongside the assignor, depending on whether the assignment is legal or equitable. It’s important to note that while rights under the contract can be assigned, the contractual obligations or burdens cannot be transferred in this manner. Therefore, the assignor remains liable for any obligations under the contract that are not yet fulfilled at the time of the assignment.

Choosing Between Assignment and Novation in a Construction Contract

Choosing between a deed of novation and an assignment agreement depends on the specific circumstances and objectives of the parties involved in a contract. Both options serve to transfer rights and obligations but in fundamentally different ways, each with its own legal implications, risks, and benefits. Understanding these differences and considering various factors can help in making an informed decision that aligns with your goals.

The choice between assignment and novation in a construction project scenario, where, for instance, an employer wishes to engage a subcontractor directly due to loss of confidence in the main contractor, hinges on several factors. These are:

• Nature of the Contract:  The type of contract you’re dealing with (e.g., service, sales) can influence which option is more suitable. For instance, novation might be preferred for service contracts where obligations are personal and specific to the original parties.
• Parties Involved: Consent is a key factor. Novation requires the agreement of all original and new parties, making it a viable option only when such consent is attainable. Assignment might be more feasible if obtaining consent from all parties poses a challenge.
• Complexity of the Transaction: For transactions involving multiple parties and obligations, novation could be more appropriate as it ensures a clean transfer of all rights and obligations. Assignment might leave the original party with ongoing responsibilities.
• Time and Cost: Consider the practical aspects, such as the time and financial cost associated with each option. Novation typically involves more complex legal processes and might be more time-consuming and costly than an assignment.

If the intention is merely to transfer the rights of the subcontractor’s work to the employer without altering the subcontractor’s obligations under a contract, an assignment might suffice. However, if the goal is to completely transfer the main contractor’s contractual role and obligations to the employer or another entity, novation would be necessary, ensuring that all parties consent to this new arrangement and the original contractor is released from their obligations.

The legal interpretations and court decisions highlight the importance of the document’s substance over its label. Even if a document is titled a “Deed of Assignment,” it could function as a novation if it transfers obligations and responsibilities and involves the consent of all parties. The key is to clearly understand and define the objective behind changing the contractual relationships and to use a deed — assignment or novation — that best achieves the desired legal and practical outcomes, ensuring the continuity and successful completion of the construction project.

Understanding the distinction between assignment deeds and novation deeds is crucial for anyone involved in contractual agreements. Novation offers a clean slate by transferring both rights and obligations to a new party, requiring the consent of all involved. Assignment, conversely, allows for the transfer of contractual benefits without altering the original contract’s obligations. Each method serves different strategic purposes, from simplifying transitions to preserving original contractual duties. The choice between novation and assignment hinges on specific legal, financial, and practical considerations unique to each situation. At PBL Law Group, we specialise in providing comprehensive legal advice and support in contract law. Our team is dedicated to helping clients understand their options and make informed decisions that align with their legal and business objectives. Let’s discuss!

Authored By Raea Khan

Director Lawyer, PBL Law Group

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What Do You Need To Know About The Deed of Assignment?

What Is A Deed of Assignment?

Where does the deed of assignment come in when buying or selling a property.

• Assignor: A person or company who will be transferring the rights they hold to the property, over to the assignee.
• Assignee: The assignee, in this case, would be the property buyer.

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Is there a stamp duty for a deed of assignment.

• If the individual title is issued when entering into a SPA: The stamp duty will be calculated based on the property purchase price (as stated in the Memorandum of Transfer and SPA), or the property’s market value.
• If the individual title is not issued when entering into a SPA: Both the SPA and Deed of Assignment will bear a nominal stamp duty of RM10 on each copy of the documents. Once the individual title has been issued, the stamp duty will be assessed based on the property’s market value on the date of the SPA signing, not the date of the Memorandum of Transfer.

What Should I Look Out For In A Deed Of Assignment?

• If there’s more than one owner to the property purchased, the names of all owners must be mentioned in the document.
• Agreed price of the property, if applicable
• Size and description of the property
• Date of transaction
• Signatures of the parties

Sample Of A Deed Of Assignment

What’s The Difference Between A Deed Of Assignment And A Memorandum Of Transfer?

What’s The Difference Between A Deed Of Assignment And A Deed Of Mutual Covenant?

What’s The Difference Between A Deed Of Assignment And A Sale And Purchase Agreement?

Getting a new home soon? Check out this handy guide to the different types of documents involved in the home-buying process.

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Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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What is Perfection of Transfer?

In summary, it is the process transferring ownership of property from the vendor to the purchaser by registering the property title in the name of the purchaser.

There are instances where the individual title is not yet issued at the time of purchasing the property and hence cannot be transferred into the name of the new owner. An example of this is when purchasing a unit in a new development from a property developer where the developer who owns the property holds the entire property under a master title.

In such cases, the entire plot of land where the development project is built will need to be subdivided into individual parcels where a strata title will be issued for each parcel. This allows purchasers to own individual units in the development project which was previously held under one master title by the developer.

What is strata title?

Strata title (also referred to as subsidiary title) is a title that is issued as a result of subdivision of a building. Where a building has been divided into multiple individual parcels, the strata title is the evidence of ownership of such parcels by the purchasers.

Why do I need to attend to the perfection of transfer?

When buying a unit in a new development from a developer where strata title is not yet issued, the sale is done by a Sale and Purchase Agreement (SPA) and with an undertaking from the developer to apply for strata title and subsequently transfer the strata title into the name of the purchaser.

By virtue of the SPA, the Purchaser acquires an in personam right meaning that the Purchaser acquires the right to the property against the vendor personally but not against the whole world.

This is so because in Malaysia, we follow what is known as the Torrens System where only the registration of ownership in title at the land office constitutes conclusive evidence of ownership of property. Thus, where title is not yet issued, registration of the name of the purchaser on the title cannot be performed.

If the purchaser subsequently sells the property before strata title is issued, the Deed of Assignment acts as evidence that the right has been assigned to the new owner.

Back to the question of “what is perfection of transfer?” – it is simply the act of completing (or perfecting) the transfer of the title into the name of the purchaser as the new owner when the strata title is issued.

The perfection of transfer grants the new owner an indefeasible title that is registered in his name at the land office. This tells the whole world that he is now the registered legal and beneficial owner of the property as per the National Land Code. The new title will also reflect any encumbrances or restrictions on the property, such as charges that were registered prior to the transfer.

Brief description of the perfection of transfer process

1. issuance of the strata title.

When strata title is issued, you will be duly notified of this by your developer or alternatively, you may be notified of this by the lawyer who attended to your SPA.

This marks the beginning of the perfection of transfer process. At this stage, you may appoint a lawyer to attend to the perfection of transfer – you may appoint the same lawyer who attended to your SPA or you may appoint any other lawyer of your choice.

Your developer will require a Letter of Authorisation notifying them that you have appointed a lawyer to act for you. The Letter of Authorisation will allow your lawyers to liaise with the developer and obtain the necessary documents.

*if there is a restriction in interest (a.k.a. “sekatan kepentingan” in BM) on the title, the consent of the State Authority will be needed before any transfer or charge can be registered. Usually, the developer is responsible for applying for consent and will require the purchaser to assist with filling up the application form and providing the necessary documents. The application for consent may take up to 3 months depending on the requirements of the land office.

2. Preparation and execution of the Memorandum of Transfer (MOT)

The MOT is the document that sets out the details of the transfer. Your lawyer will assist with preparing the MOT in the required format stipulated by the National Land Code.  The MOT is then signed by both the transferee (purchaser) and the transferor (developer).

3: Adjudication of the MOT

Before the MOT can be registered, it must be adjudicated and stamped at the Inland Revenue Board (IRB/LHDN). Adjudication is the process where the amount of ad valorem stamp duty payable is ascertained to fulfil the requirements of the Stamp Act 1949. Stamp duty that is calculated based on the value of the property is known as stamp duty ad valorem . When the adjudication is complete, the Inland Revenue Board Malaysia (IRBM) will issue a Notice of Assessment requiring stamp duty to be paid.

4: Payment of stamp duty and stamping of MOT:

Upon receiving the Notice of Assessment, payment of the stamp duty must be made within 30 days from the date of the Notice failing which a penalty will be charged. After payment is made, the MOT will be stamped at the stamp office to indicate that the stamp duty has been paid. If stamp duty ad valorem has already been paid on the Deed of Assignment, you will not need to pay for this again.

5: Registration of the MOT  

Registration is done by presenting the MOT at the land office for registration. The land office will review the transfer documents to ensure that it complies with legal requirements and the appropriate stamp duty has been paid. Once the transfer has been registered, the land office will issue a new title in the name of the new owner.

Where the purchaser has taken a loan to pay for the property, the MOT will be forwarded to the Bank’s solicitors for perfection of charge.

The perfection of transfer may be completed within 3 – 6 months. Where the State Authority’s Consent is required, this process may take longer.

What are the documents required for the perfection of transfer?

• Copy of the purchaser’s NRIC or passport
• Copy of the strata title (obtained from the developer)
• Copy of latest quit rent and assessment receipt
• Copy of latest and TNB bill for the property
• Copy of latest receipt for maintenance fees
• Copy of Deed of Assignment (if applicable)
• Copy of SPA
• Other relevant documents as may be requested for by your lawyer or the developer

What is perfection of charge?

Perfection of charge is required when the purchaser has used a loan from the bank to finance the purchase of the property. It is the process of registering the name of your lending bank on the strata title as the chargee of the property. This process is done along with the perfection of transfer.

When taking out a loan to purchase the property, the lending bank will require a charge to be registered on the title in its name as security for the loan. This will give the bank the right to sell the property should the purchaser default on the loan repayment.

The bank is responsible for the perfection of charge and will appoint its own lawyers to attend to the matter. As such, the purchaser will forward the MOT to the bank’s lawyer for registration of the charge.

The perfection of transfer process involves transferring ownership from the developer to yourself whereas the perfection of charge involves transferring that ownership to the bank who paid for the property.

Brief description of the perfection of charge process

The lawyer will prepare the charge document (Form 16A) together with Annexure which will be signed by both the purchaser and the bank. These documents are then submitted to IRB/LHDN for stamping and finally it is presented at the land office for registration. When the new strata title is issued, the original document of title is to be forwarded to the bank for safe keeping.

Do I need to attend to the perfection of transfer and perfection of charge?

Some of the complications may arise should you delay or refuse to attend to the matter:

• You may face some difficulty in selling your property as the developer will have to transfer the strata title to the new owner. The purchaser may also face some difficulty obtaining a housing loan where the property they intent to finance does not have the strata title in the name of the vendor.
• This may delay the formation of the management corporation for stratified properties such as apartments and condominiums. You will not have a right to attend of vote at the annual general meeting of the management corporation if your name is not registered in the strata title.
• Possible issues in relation to inheritance/succession – your next of kin may deal with a lengthy process involving the developers for the transfer of title.
• The developer may impose a fee for storage of the strata title

How much stamp duty do I need to pay for perfection of transfer?

If the property was purchased from an individual owner under subsale, stamp duty ad valorem would have been paid on the Deed of Assignment. As such, no further stamp duty needs to be paid on the transfer. Stamp duty only needs to be paid once on a purchase and transfer.

If the property was purchased directly from the developer, stamp duty ad valorem may be payable on the transfer and the amount payable is prescribed by the Stamp Act 1949. Stamp duty is calculated based on the sale price of the property as stated in the SPA.

From time to time there may be certain stamp duty exemptions available to purchasers for medium and low cost properties. First-time home buyers may want to look out for such exemptions which will help in saving money.

What are the fees involved for perfection of transfer?

Your lawyer’s professional fees for the perfection of transfer are provided under the Solicitors Remuneration Order (SRO). The applicable legal fees for transfer are prescribed by Schedule 1 of the the SRO:

As per the SRO, the applicable fee shall be 25% of the scale fee above if the solicitors attending to the perfection of transfer are the same solicitors that previously attended to the sale and purchase agreement / loan documentation. If new solicitors are appointed to attend to the perfection of transfer, the applicable fee shall be 50% of the scale fee above.

You may refer below for an estimate calculation of the fees involved for perfection of transfer:

In conclusion, the process of perfection of transfer can be a rather daunting and lengthy process therefore it is always advisable to engage a professional to attend to it as this ensures that the transfer is properly completed your rights and interests are protected.

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Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

If you need help understanding, drafting, or signing a deed of assignment, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Property Terms Glossary: Memorandum Of Transfer

What is a Memorandum of Transfer (MOT)?

A Memorandum of Transfer (MOT) is a transfer of ownership procedure of a property for the price agreed between the buyer and seller. It is used to transfer ownership of the property from the developer to buyer, or in the case of secondary market purchases, transfer ownership of the property from the seller to buyer. The property can be transferred to a family, boyfriend, girlfriend, friend or any stranger. The cost of a MOT borne by the buyer will include professional legal fees, stamp duty, disbursement fees as well as sales and service tax.

Components of a MOT

• Company letterhead
• List of parties involved in the transfer of property
• Description of and valuation of items in the transfer

Documents needed prior to transfer of property

a) Copies of all present and previous SPAs b) Copies of present and previous Loan Agreement, Deed of Assignment, Deed of Receipt and Re-assignment (if any). c) Strata Title (from the developer) d) Current year quit rent receipt e) Current year assessment receipt f) Facility Agreement

Stamp duty charge on the MOT

Stamp duty waived: Between husband and wife by way of love and affection

Stamp duty exemptions

First-time homebuyers  will be exempted from stamp duty on the first RM300,000 of the property price  on any instrument of transfer and the loan agreement, for SPA completed between 1 January 2019 and 31 December 2020.

Process developer and buyer will sign the MOT (Form 14A) which indicates who is the owner and who is the transferor, transferee, and how much shares the transferor wants to transfer.

Conversation between Preeta and Adam (developer’s agent) discussing about a property transaction worth RM400, 000. Adam is finalising the MOT with the developer.

Adam: Hi Preeta, are all the documents in order for us to finalise the MOT?

Preeta: Yes, I have all the relevant documents ready.

Adam : I will calculate the stamp duty for the MOT.

The first RM100,000, stamp duty is 1%

RM100,000 x1% = RM1,000

From RM100,001 to RM500,000, stamp duty is 2%

RM400,000 x 2 = RM8000. So, the total Stamp Duty that I need to pay is RM9,000

Preeta: Let’s sign this MOT and complete the transaction and the property will be transferred to your name officially.

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Paperworks After A Property is Ready: Understanding MOT

Having to go through all the legal processes and the various documents when buying a property can be quite overwhelming! Aside from preparing mentally to be a homeowner , there are a few legal documents that you need to be familiar with and one of them is the Memorandum of Transfer (MOT).

The Memorandum of Transfer is an extremely important contract to indicate the transfer of ownership of the house from the developer to the buyer or in the case of secondary purchases, from the seller to the buyer.

Of course, the property can also be transferred between family members, spouses, friends, and even strangers. However, the cost of MOT is typically borne by the buyers/receivers.

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What is a Memorandum of Transfer (MOT)?

In Malaysia, the “Torrens System” in the National Land Code 1965 is used to govern the land law of Peninsula Malaysia. It is essentially a title deed system maintained by the land registry to prove a person’s ownership over a piece of property.

In short, your ownership over the property is only acknowledged when your name is registered on a “document of title” maintained by your respective land registry or land office.

If your name isn’t on the title deed, you don’t own the property yet – simple and straightforward.

That is where the memorandum of transfer takes place to transfer, officially, the ownership from the seller to the buyer.

The Memorandum of Transfer (MOT), also known as Instrument of Transfer is important because it is a legal document prescribed by the National Land Code 1965 to effect the transfer of property. It is only applicable for properties with the relevant master title, individual title, or strata title.

Contrarily, for situations where a property has yet to receive its individual or strata title, then a Deed of Assignment (DOA) will be used to transfer the ownership of a property from one to another.

What is the difference between Memorandum of Transfer, Deed of Assignment and Deed of Mutual Consent?

A Memorandum of transfer (MOT) is a legal document that follows the Sales and Purchase Agreement (SPA) to serve as evidence for the actual transfer of ownership of the property. For it to be effective, MOT can only be used when there is the relevant master title, individual title, or strata title.

Let’s take a residential development as an example. During the construction, the developer will be issued a Master Title for the whole development, be it landed or high-rise. Once the different units of the development are sold to individual buyers, the Master Title will then be divided into multiple, smaller titles. Thus, landed properties will carry Individual Titles while high-rise properties will carry Strata Titles.

Upon purchase of the property, an MOT will then be filled at the land office to transfer the name of ownership of the desired unit from the developer to you. As such, your name will appear in the title deed, making you the rightful owner of that property.

In situations where the master title is not yet divided into individual titles or strata titles, the Deed of Assignment will be invoked.

Deed of Assignment (DOA) will be invoked when the master title is not yet divided into individual titles or strata titles at the time of purchase. Under the Master title, the developer’s consent is required to assign all their rights of the property for the individual units/parcels to the buyer.

With that, a DOA can be filed at the High Court to temporarily transfer the name of ownership. Once the individual titles or strata titles are released, an official transfer of ownership will be processed using the MOT.

In reality, you want to be following up with the developer for the individual titles or strata titles fervently. The issuance of DOA is only a temporary transfer of ownership and any subsequent sales of the property will require consent from the master title, in this case the developer.

If you have came across Deed of Mutual Covenant (DMC) previously, then you do not want to confuse it with Deed of Assignment (DOA).

A Deed of Mutual Covenant (DMC) is essentially an agreement for strata properties whereby there exist a set of rules the owners are bound to. Legal actions can be taken against the owner should any of the rules are broken intentionally.

However, the DMC only lasts until before the Joint Management Body (JMB) is formed since the rules of the JMB will supersede the DMC. The intention of the DMC is to safeguard the interest of the community against individuals who wish to take advantage of the common facilities for their personal gain.

What is Perfection of Transfer (POT) and Perfection of Charge (POC) in MOT?

Perfection of transfer (pot).

Essentially, Perfection of Transfer (POT) is the transfer of ownership from the developer’s name to the current owner’s name.

As explained, when you buy a property that is still part of an ongoing project, it is most likely to be under a Master Title. The developer is then responsible to subdivide the Master Title into Individual or Strata Titles. Once it is approved by the respective land office, the previous Master Title will be revoked and each unit will be issued its own Individual or Strata Title.

Having said that, a POT is then required to complete the whole ownership transfer from the developer to the buyer.

Perfection of Charge (POC)

When the purchaser wants to obtain a loan to purchase a property, he/she will charge the property to the bank via Perfection of Charge (POC). A charge is a common form of a security registered in favour of the bank in exchange for granting a loan to the purchaser.

For instance, when you buy a property that has yet to receive its Individual Title or Strata Title, a DOA is used as a replacement to charge as security to the bank loan. Therefore, once your Individual Title or Strata Title is issued, the bank would prefer the security to its loan via a charge to the land title instead of the DOA.

The transaction of POC is usually handled by the bank whereby they will execute a discharge document known as Form 16N when the land title is issued to discharge their charge over the DOA. At this juncture, a lawyer from the bank will be appointed for the registration of transfer in which the land title and the MOT is to be forwarded to the lawyer for him/her to be able to register the charge in favour of the bank.

To put things simply, if you buy the property through a housing loan, you technically do not own the property until the housing loan is completely paid. Until the housing loan is paid, the property title will be in the bank’s possession as a charge.

What are the cost involved for Memorandum of Transfer?

Generally, the cost involved for a Memorandum of Transfer is the stamp duty fee.

Without the stamp duty, the Memorandum of Transfer cannot be made official and there will be no transfer of ownership from seller to buyer.

Remember, the stamp duty will be payable by the buyer and not the seller. The seller is instead required to pay for Real Property Gain Tax (RPGT) if a profit is earned from the selling of property.

The standard stamp duty charge is as follows:

Using the table as a reference, the total for duty stamp charged is calculated as shown below.

Given that your property was purchased at RM850,000. Therefore,

For the first RM100,000 – RM100,000 x 1% = RM1,000

For the next RM400,000 – RM400,000 x 2% = RM8,000

For the following amount – RM350,000 x 3% = RM10,500

Total Stamp Duty = RM1,000 + RM8,000 + RM10,500 = RM19,500

Thankfully, stamp duty exemptions are given for first-time house buyers that purchase their property between 1/1/2021 to 21/12/2025 for property prices below RM500,000 in the Malaysian Budget 2022.

Besides, stamp duty exemptions are also given for property transfers that are categorised under “love and affection”.

Love and affection property transfers are basically transfers between family members such as

• Spouses . The transfer of property from husband to wife and vice versa will be given a waived of 100%. Yes! Free stamp duty!
• Parent and child. The transfer of property from parent to child and vice versa will be given an exemption rate of 50%. That means if the original stamp duty payable is RM10,000, then you will only need to pay half that price – RM5,000.

Unfortunately, no exemptions will be waived for property transfer between siblings.

Final Words

The memorandum of transfer is an official process of handing over the title to the buyer. Some investors would choose to delay the process to drag out the stamp duty payment.

There is no right or wrong and I have heard of many similar stories. Other than that, the Memorandum of Transfer is quite a simple and straightforward document to deal with.

Until then, take care.

Paul is the creator of Bigger Estates. Through his writing, he shares his experience and insight as a property investor in an effort to encourage and guide aspiring property investors.

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Land Title Transfer Procedure In Malaysia

We have discussed on the types of land title in Malaysia. So now you may be wondering how do you then transfer a land title in Malaysia?

In this article we will go through a few crucial steps as well as give you some important knowledge and points that would assist you to transfer a land title from a land owner or known as a vendor to a purchaser.

In general, here are the things that we will be covering in this article;

Who are the parties involved in a land title transfer

What information you need to transfer a land title

What documents you will need before starting the land title transfer process

Why do you need a lawyer in a land title transfer

What do you have to pay and how much it will cost to transfer a title

How long does it take to transfer a land title?

When do you need a state consent for a land title transfer.

What information you need to transfer a land title in Malaysia

Parties information.

Based on Section 43 of the National Land Code 1965, the person who buys house or a land must attain the age of majority. And to indicate that the person is eligible, the parties must expressly provide a document as a proof that he has attained the age of majority.

Therefore, in order to prove so you must give a copy of your Identification Card (if you are a Malaysian citizen) or a copy of your passport (if you are a foreigner) to the relevant authority or your lawyer. Your personal identification is also needed by the relevant authorities i.e. land office for the said transaction.

Material information of the property

You can’t do the transaction without knowing what you are dealing with. For this reason you need the latest information of the land title. You can do this by conducting a land search at the land office.

With the land material details ascertained via the result of the land search you will have a glimpse of the procedures that needs to be complied.

Getting the result of the land search would allow your lawyers to have a base idea of how long it would take to transfer the land title. If you appoint a lawyer, the land search will be conducted by the lawyer.

Among the key information that you will look for in a land title as well as in a land search are;

If the land is subjected to Restriction in Interest, which means the owner of the land or the vendor cannot deal with the land unless he obtains consent from the State Authority.

If the land is an estate land in compliance to Section 214A of the NLC 1965, in order to transfer any estate land, the owner or the proprietor of the land must obtain consent from the Estate Land Board.

If the land is subjected to a charge, the purchaser would need to require the vendor to firstly discharge the charge on the land title.

Personal Tax Information for the purpose of Real Property Gains Tax purposes

At the beginning, it must be ascertained if the vendor is liable to pay any real property gains tax. A real property gains tax is a tax charged by the government on the profit that you make from selling the land. It is referred to as a chargeable gain. Therefore if you make a gain/profit from it, then you are is liable as a vendor to pay this tax.

In order prepare for this process you need to prepare your tax registration number. This information will then be used for this process at the Inland Revenue Board (LHDN).

Transaction Purchase Price of Property / Land

All the parties would need to come to terms or agree on the full purchase price as well as the breakdown of the payments.

For example, the amount of the earnest deposit, balance deposit and balance purchase price.

Parties need to also agree on the payment schedule of the transaction. Once the balance of the purchase price is fully paid, the new proprietor’s name will be registered on the title and a new title will be issued by the Land Office.

There are various documents involved whenever a transfer of real property is to occur.

Among others;

The sale and purchase agreement that has been executed and stamped between you and your vendor / purchaser;

The previous sale and purchase agreement of the property;

The executed Memorandum of Transfer;

The Quit Rent payment receipt of the current year;

The latest Assessment Tax payment receipt;

The original land title;

Deed of Assignment (in cases where the land title has not yet been issued to the Vendor)

The new Sale and Purchase Agreement

The Sale and Purchase Agreement is an agreement where it sets out the terms and conditions of the sale that shall be executed between the vendor and the purchaser.

It is a common practice for the vendor’s lawyer prepares the Sale and Purchase Agreement.

This is usual as the vendor’s lawyer would have all access to Vendor's information pertaining to the property. However, if both parties agree, the purchaser’s lawyer may also prepare the agreement, in which case the particulars of the Vendor's property should be made available to the purchaser’s lawyer.

Memorandum of Transfer (Form 14A)

Memorandum of Transfer (Form 14A) is a form of registering the title into the purchaser’s name at the Land Office. The Memorandum of Transfer is prescribed under the NLC 1965 to affect the registration of transfer of ownership where title is available, and it will be prepared by the purchaser’s lawyer. Both parties will need to sign this document to proceed the transfer of title from the vendor to the purchaser.

Deed of Assignment

Deed of Assignment is prepared when there is no title issued for the property. It functions to transfer all the rights of the vendor to other to the purchaser.

If a Vendor has entered into a financing agreement with a bank and has an exisiting Deed of Assignment for the benefit of the bank, the vendor will need to settle the loan first and get the bank to reassigned the property back to him.

What do you have to pay and how much do you have pay to transfer a title?

Here are the things that you need to take note of with regards to the cost if you intent to transfer a land title.

As a vendor

Payment of RPGT tax (chargeable gain if any);

Payment of quit rent & assessment rent (of the current year);

Payment of outstanding loan/redemption sum (if applicable);

Payment of registration for State’s consent (if applicable);

Payment of legal fees to the vendor’s lawyer.

As a purchaser

Payment of the deposit;

Payment of stamp duty tax;

Payment of MOT registration fee;

Payment of legal fees to the purchaser’s lawyer;

Usually, it will take about three (3) months from the day you have signed the Sale and Purchase Agreement (SPA) provided there isn’t any encumbrances on the land title.

However, in a situation where the process of transfer requires the vendor to ask for State Authority’s consent, it could take up to more than six (6) - nine (9) months from the date of signing the SPA.

However, it is also important to note that if the land is still subjected to a charge, the vendor or the owner must first discharge the charge from the property by paying the balance sum owed. Once the property has been discharge the title is no longer encumbered and the transaction can proceed.

Who are the parties involved in a land title transfer?

Aside from the vendor and the purchaser, cooperation and the involvements of other parties are also required to complete the land title transfer transaction. Below are the parties involved to ensure a successful transfer of the property;

1. The Vendor

The vendor is the party that sells the property and owns the property. Where there is title issued to the property, the appropriate authority to confirm registered ownership of the property is the land office.

However, if the title has not yet been issued, then the appropriate body to confirm beneficial ownership is the developer who is the current registered owner of the master title. In this particular scenario the vendor instrument of ownership is via Deed of Assignment and Sale and Purchase Agreement entered between the Vendor and its Developer.

2. The Purchaser

The purchaser is the party that buys the property and has to pay the purchase price of the property. The purchase price has to be paid in the manner as agreed in the Sale and Purchase Agreement.

3. The Vendor’s Lawyer/Solicitor

The vendor’s lawyer acts on behalf of the vendor, and their duties are:-

to ensure that the purchase price is received based on the completion date;

to assist the vendor to pay the tax if there is chargeable gain;

to apply for consent of transfer if the land is subject to restriction in interest;

to make sure that the title to the property is rendered and delivered to the purchaser’s lawyer; and

to act as a stakeholder for the money receive from the purchaser.

4. The Purchaser’s Lawyer/Solicitor

The purchaser’s lawyer acts on behalf of the purchaser, and among their duties are:-

to prepare the Sale and Purchase Agreement, MOT, entry and withdrawal of caveat (Form 19B & Form 19G), and CKHT 2A to LHDN;

to register the Form 14A MOT at the Land Office to ensure the successful registration of the title under the Purchaser's name;

to ensure that the title is registered in the name of the purchaser upon full payment of the purchase price to the vendor.

5. The Vendor’s Financier/Bank

The vendor’s financier/bank is also a party involved in the process of transferring the title to the purchaser if the vendor has a loan charge to the property and has not fully settled the housing loan. This loan was originally obtained by the vendor to help finance the purchase of his own property. The property was charged to the financier/bank and the title of the property was kept by the bank as a security to the said loan.

Now, when the vendor intends to sell his property which is still charged to the bank, the transfer of title to the purchaser will involve settling the vendor’s loan beforehand so that the original title can be obtained from the bank. The vendor’s lawyer will have to prepare the discharge document for execution by the vendor’s bank when the vendor’s loan is settled.

6. The Vendor’s Financier Lawyer

The vendor’s financier lawyer acts to execute the discharge document once the vendor’s loan is settled. The document would be discharged by a Deed of Receipt and Reassignment (DRR).

The vendor has to either settle the outstanding loan on his own or it can be settled by the purchaser from the purchase price.

7. Government Agencies

Below are the relevant authorities involved to complete every process of transaction to transfer the land title to the purchaser or the buyer :-

a. Land Office and Pejabat Tanah Galian

For land search, registration of caveat, & MOT, collection of land title

b. Inland Revenue Board (LHDN)

For payment of RPGT & stamp duty

c. Insolvency Department

For bankruptcy search

d. Jabatan Penilaian & Perkhidmatan Harta Malaysia (JPPH)

Valuation of property for stamp duty

e. Local Authority

To obtain consent for transfer of title

A state consent is required if the title has a restriction in interest, ie the property cannot be sold without the consent of the state authority.

dIf this is the scenario, you will need to firstly prepare an application form for consent from the state authority to transfer the property to the purchaser. The application form can be obtained from the relevant land office.

Section 5 of the NLC 1965 provides that a restriction in interest is any limitation imposed by the State Authority on any of the powers conferred upon a registered proprietor to deal with his land by way of a transfer, lease, charge, easement, tenancy or statutory lien over his land, as well as his powers to subdivide, partition or amalgamate his land. The effect of a restriction in interest is that it limits the rights and powers of a proprietor to freely deal with his land.

Therefore, if a registered proprietor wishes to transfer a land title to another party, he must first obtain the consent of the State Authority. Failure to obtain consent to deal with the land will render any transaction entered by the proprietor void and unable to be registered. In real world scenario what this means is the Land Office won’t even start the land title transfer process.

What will a purchaser lawyer do in a Land Title transfer

If the property to be transferred has a land title, these relevant documents will be prepared by the purchaser’s lawyer:-

Prepare and assist the Vendor to execute the Sale and Purchase Agreement;

Assist Vendor to execute the Memorandum of Transfer (MOT);

Prepare the Real Property Gains Tax Form for the Vendor CKHT 2A (RPGT);

Assist the purchaser to apply consent from the State Authority to transfer the property (if it is needed);

Prepare and register a private caveat form (Form 19B) together with statutory declaration of the Vendor; and

Prepare and register a withdrawal of caveat (Form 19G).

What will a vendor lawyer do in a Land Title transfer?

These relevant documents will be prepared by the vendor’s lawyer:-

Assist Purchaser to execute the Sale and Purchase Agreement (that has been signed by the vendor);

Prepare the Memorandum of Transfer to register the Land Title under Purchase’s name;

Prepare the Real Property Gains Tax Form for the Purchaser CKHT 1A (RPGT);

Obtain relevant information from the Purchaser for the purpose of the land title transfer transaction.

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Need a lawyer or want to request for a quotation?

The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.

Deed of Assignment and Transfer of Rights [Parts and Template]

A Deed of Assignment and Transfer of Rights is a legal document used when a person or a company who originally was a party to a contract (also known as the assignor or transferor) transfers his or its rights under the contract to another party (the assignee or transferee).

Accordingly, when the Deed of Assignment and Transfer of Rights has been drafted on the basis that in the original contract there is no prohibition to or restriction on assignment, and hence signed by both parties, it can be consequently assigned without the other contracting party’s consent.

In this article, I’ll try to dissect a sample Deed of Assignment and Transfer of Rights of a St. Peter Life Plan and provide descriptions of its fundamental elements or parts. As drafting a deed requires abundant caution, presence of mind, and knowledge of property and other allied laws, I highly advise that you seek help from experts and experienced in legal transactions.

Parts of a Deed of Assignment and Transfer of Rights

[1] Title of Deed . As implied above, deeds come in different forms and types. Check if the document and the first section displays the title – Deed of Assignment and Transfer of Rights. Conventionally, the first paragraph runs:

  KNOW ALL MEN BY THESE PRESENTS:

This deed, made and entered made and entered into this 13 rd day of January 2018 at the City of Manila, by and between:

[2] Parties Involved . A Deed of Assignment and Transfer of Rights must contain accurate information about the identities of the assigning and assigned parties. Other information such as age legality, citizenship, and postal address must be included, just as seen below:

Juan De la Cruz, Filipino citizen, of legal age, married to Josefina De la Cruz, and with residence and postal address at 123 Kasiglahan Street, Karangalan Village, Dela Paz, Pasig City, Philippines, hereinafter referred to as the “ASSIGNOR/TRANSFEROR”

Sebastian Maliksi, Filipino citizen, of legal age, single, and with residence and postal address at 456 Kasimanwa Street, Karangalan Village, Dela Paz, Pasig City, Philippines, hereinafter referred to as the “ASSIGNEE/TRANSFEREE”

[3] Contract Details . A Deed of Assignment and Transfer of Rights must contain a detailed description of the contract, hence in the context here – St. Peter Traditional Life Plan (St. Anne) contract and the Life Plan Agreement (LPA) Number:

WHEREAS, the ASSIGNOR/TRANSFEROR is the owner of life / memorial plan contract which is identified as St. Peter Traditional Life Plan (St. Anne), with Life Plan Agreement No. 123456;

[4] Contract Assignment and Transfer Agreement . As one of the most important and critical parts, this specifies the terms and conditions of the agreement. See sample below:

WHEREAS, for and in consideration of the value of the plan and out of accommodation and assistance for the ASSIGNEE/TRANSFEREE, the ASSIGNOR/TRANSFEROR is assigning and transferring all his/her rights and interests over the Life Plan mentioned in the immediately preceding paragraph to the ASSIGNEE/TRANSFEREE;

NOW, therefore for and in consideration of forgoing premises, the parties hereto have agreed on the following terms and conditions, to wit;

THE ASSIGNOR/TRANSFEROR, hereby waives all his / her rights and interests in the subject life plan in favor of the ASSIGNEE/TRANSFEREE. It is understood that when the Life Plan is assigned / availed of, then all obligations of St. Peter Life Plan, Inc. are fulfilled and discharged.

As a consequence of this assignment / transfer of rights, the ASSIGNEE/TRANSFEREE hereby assumes all the obligations and accountabilities of the ASSIGNOR/TRANSFEROR to St. Peter Life Plan, Inc. in connection with the life plan contract which it issued to the latter.

The ASSIGNEE/TRANSFEREE obligates and / or undertakes to comply with and abide by the requirements which St. Peter Life Plan Inc. may impose in connection with the purchase, possession, and use of the said Life Plan particularly the requirement that it should be fully paid before the memorial service could be availed of pursuant to the Life Plan.

[5] Execution . Once the Deed of Assignment and Transfer of Rights is drafted, the parties involved shall execute it by affixing their signatures. Other than the assigning and assigned parties, witnesses should also sign all the pages of the document. In addition, the deed shall be acknowledged and notarized by a legal practitioner.

IN WITNESS WHEREOF the parties have hereunto set their hands on the date and place first above written.

[  Assignor/Transferor]                           [Assignee/Transferee]

SIGNED IN THE PRESENCE OF:

[Witness]                                                    [Witness]

Disclaimer: Although much effort has been exerted in the creation of this article, the author disclaims any legal expertise and does not guarantee the accuracy and legitimacy of any or all of the information. Hence, it is advised that you consult with professionals such as insurance brokers and lawyers before engaging in legal transactions.    

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How Does MOT (Memorandum Of Transfer) Works in Malaysia?

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See Also: What Is A Sales And Purchase Agreement (SPA)?

Table of Contents

• 1 Definition Of MOT
• 2.2 Considerations
• 3.1 1.Finding a suitable home loan and conveyancing lawyer
• 3.2 2.Letter of Offer (LO)
• 3.3 3.Sales and Purchase Agreement (SPA)
• 3.4 4.Facility Agreement
• 3.5 5.Memorandum of Transfer (MoT)
• 4 Strata Titles vs Master Titles
• 5 Why Retaining A Lawyer Is Necessary Through This Process?
• 6.1 1. Loan agreement
• 6.2 2. Letter of offer
• 6.3 3. Sales and Purchase Agreement (SPA)
• 6.4 4. Memorandum of Transfer
• 7 Transfer To Spouses And Loved Ones
• 8.1 Check the Title
• 8.2 House plans
• 8.3 Vacant possession
• 8.4 Area of your house
• 8.5 Free from encumbrances
• 8.6 Late payment charges/liquidated damages
• 8.7 Defect liability period
• 8.8 Payment schedule

Owning your own home is one of the most important milestones in almost everyone’s adult life. The process of owning a house or any property, in general, requires you as the owner to sign all necessary documents. The signing of the various legal documents through the purchasing process marks official checkpoints on the journey of owning your dream home or real estate property. This might be a challenge especially when you are trying to make sense of the significance of each and every legal document.

When buying real estate property in Malaysia it’s important to have an idea of all the important types of documents required including a Memorandum of Transfer (MoT).  This article is a handy guide providing all the crucial information you need to know about the Memorandum of Transfer as well as the ownership process and the legal documents required before acquiring one.

Definition Of MOT

A Memorandum of Transfer is a legal document indicating the ownership of a property. This document is important in the ownership process as it is used in the transfer of ownership of a house or real estate property from the developer to you as the new owner or from a seller to you in the case of secondary market purchases.

Components of a Memorandum of Transfer

The most recognizable component of a Memorandum of Transfer in Malaysia is the presence of the company letterhead. The company letterhead should belong to the initiating party of the transfer request. The memo also lists all the parties involved in the transfer of the property.

The rest of the document provides detailed information about the person who is requesting the transfer and a description of the items to be transferred. There is also a space provided to indicate information on the valuation of items that are being transferred in the items transfer memos. Valuation of the items being transferred is required for insurance purposes.

Both the government of Malaysia and homeowners/property owners use Memorandum of Transfer documents and materials to create a proof of transfer on paper. The document is also useful in the event that people are injured or items are lost.

Considerations

In Malaysia, a Memorandum of Transfer is a required legal document that is usually prepared following a particular format and piece of paper. This document must be accompanied by other documents collected prior to the transfer. These documents include Letter of Offer, Sales and Purchase Agreement and Facility Agreement. The transfer may be unsuccessful if the MoT isn’t acquired within the provided time frame.

Steps Required To Acquire A Memorandum Of Transfer

For something as valuable and important as property, the process of transferring ownership entails some vital legal steps. These legal steps require the procurement of some documents. So once you have identified an affordable and realistic piece of real estate with capital gains yield potential, it’s time to embark on the legal process. Here are the key steps required in the legal process of acquiring a Memorandum of the transfer.

1.Finding a suitable home loan and conveyancing lawyer

Finding and negotiating for an ideal home loan is the most common first step for owning residential homes unless you have all the required resources. Most loaning institutions and banks in Malaysia offers financing up to 90%. You are entitled to a loan financing for your first two residential real estate properties. Once you receive 90% financing, make preparations for the remaining 10% down payment that will cover the full purchase price of the property.

2.Letter of Offer (LO)

This is your first stage of the legal purchasing process especially when you are keen to attach your name to the real estate property you intend on purchasing. This document legally shows the seller’s willingness to sell and the buyer’s initial desire to purchase the property. The Letter of Offer contains information about the relevant furnishings to be performed or provided, the agreed selling price as well as the specific date when the Sales and Purchase Agreement should be signed.

3.Sales and Purchase Agreement (SPA)

This is the document that every buyer looks forward to receiving. Generally, the Sales and Purchase Agreement is a comprehensive legal document that highlights the terms and conditions of the purchase. Most importantly the document shows items included in the sale, conditions of purchase, the date of transfer and any other relevant terms to the sale.

4.Facility Agreement

This agreement is relevant to property buyers who have procured a home loan. The Facility Agreement is an official document that provides the confirmation that the bank providing your home loan has signed on the loan.

5.Memorandum of Transfer (MoT)

Finally, you get to sign Form 14A or your Memorandum of Transfer. The signing of the MoT document legally confirms the transfer of ownership. In some instances, the issuing of the MoT may not take place at the time of the purchase particularly if you are purchasing from a developer. Properties that are still under construction may not have had their titles issued yet. The developer will get in touch with you to sign the MoT at a later date after the title has been issued.

Strata Titles vs Master Titles

Transfer of ownership using an MoT may turn into a complicated process.  Ownership can only be transferred for those properties that have the relevant master title. Without the relevant strata, master or individual title then MoT cannot be used as the transfer method for the property.

This situation is common in the case of strata properties whereby the property developers have failed or delayed to properly register the individual properties. The transfer of ownership process, in this case, is done through a Deed of Assignment (DOA) form. In addition, a document is required to show a record of the Developers Consent.

A Deed of Mutual Covenants is sometimes issued alongside strata titles. It’s a legal document outlining the obligations and promise of behavior pertaining to ownership in shared developments. It provides a list of acceptable renovations, pet ownership and other conditions that ensure the shared developments or communities remain harmonious and uniform.

Why Retaining A Lawyer Is Necessary Through This Process?

Earlier on the article lightly explained the value of retaining the services of a lawyer through the process of acquiring an MoT. Essentially a lawyer will ensure that you will be getting a great deal in the purchase and the process is carried out in an honest and proper manner since legal professionals have experience in navigating the process and understanding the complicated legal jargon. A lawyer will be tasked with drafting and checking through the various complex legal documents to verify that the prescribed terms and conditions are balanced and fair.

A lawyer will ensure that:

• All the documents are stamped.
• All the legal requirements are fulfilled within the prescribed time frame.
• The process of getting the MoT runs smoothly.
• They check miscellaneous things including a search at the Land’s Office registration to clarify that the property you are interested in buying does indeed belong to the seller.

Truth is having someone in the know-how can greatly smoothen and expedite the entire process.

Costs Associated With Acquiring A Memorandum Of Transfer

• Transfer of ownership title fees – a couple of hundred ringgit
• Memorandum of Transfer stamp duty – 1% for the first RM100,000; 2% on the next RM400,000, and 3% on subsequent amount.
• Sale and Purchase Agreement (SPA) legal disbursement fee – a couple of hundred ringgit
• SPA legal fees – 1% for first RM500,000, 0.8% for the next RM500,000 and 0.5% to 0.7% for subsequent amount
• SPA stamping – less than RM100
• Tax imposed by the government on legal documents – 6% of the charged lawyer fees
• Loan facility agreement legal disbursement fee – a couple of hundred ringgit
• Loan agreement legal fees – 1% for first RM500,000, 0.8% for the next RM500,000 and 0.5% to 0.7% for subsequent amount of the loan
• Loan agreement stamp duty – 0.5% of the loan amount
• Loan processing fee – RM50-RM200

Other than the payments required in the purchase of the property there are additional transactions and financial obligations that are linked into the various legal steps of acquiring a Memorandum of Transfer. They include:

1. Loan agreement

In addition to getting a home loan to finance your purchase, you are required to pay stamp duty on the loan you take out.

2. Letter of offer

As indicated above, this is the first document presented to you in the process of purchasing a property. You need to sign this document regardless as to whether you will be purchasing the property from a sub-scale (previous homeowner) or a developer. In sub-scale sales, the property agent provides a simple form while the developer provides a letter of both documents that carry your signature signifying your acceptance to purchase and indicates the seller’s willingness to sell the property.

At this point, a non-refundable earnest deposit should be paid. This amount is equivalent to 2% of the total value of the property you are willing to purchase. This amount is also included in the overall 10% down payment placed on the property.

3. Sales and Purchase Agreement (SPA)

At this point in the process, you will be required to have paid the required 10% down payment in full. A stamp duty payment for the SPA is also required. The signing of the Sale and Purchase Agreement should be done in the presence of a lawyer. The lawyer will explain the primary terms of the contract.

In a sub-scale purchase, the lawyers will go through the terms of the agreement until all parties involved come to the final agreed contract. When purchasing a property from a developer, the Sale and Purchase Agreement should follow the format set out in the Housing Development (Control and Licensing) Act 1966 and the Housing Development (Control and Licensing) Amendment Regulations 2015.

4. Memorandum of Transfer

There is a stamp duty charge due on the Deed of Transfer document in Malaysia.

Transfer To Spouses And Loved Ones

Some situations may not necessarily involve a seller and a buyer as in the case of transfer to or between family members. This kind of ownership transfer is different especially those involving spouses or parents to children. This consideration is stated in the Memorandum of Transfer as a “love and affection” type of transfer.

It only applies when a transfer is from a spouse to spouse or parent to children and vice versa. In these instances, the MoT is adjudicated and stamped. Stamp duty is partially or fully waived for the MoT. 50% exception is waivered for parent to child transfers or vice versa and 100% is waivered for husband to wife transfers and vice versa.

Take note of the following clauses regardless of the kind of property agreement.

Check the Title

The title legally confirms the actual owner of the property and whether that property is charged, that is if it has been used as security for any loan. Ensure the agreement gives a detailed description of the information provided in the title. The agreement should also have a clause showing the seller promise to transfer ownership for the title to carry your name after the agreement completion.

House plans

These plans show the designs and the layout of your house. House plans should be included in the developer’s sales First Schedule.

Vacant possession

The manner in which you will find vacant possession of the property is an important consideration. The most common ideal vacant possession conditions include electricity and water connection as well as a certificate of completion and compliance showing that the house is completely safe to live in.

Area of your house

Note that the measurements provided in the agreement schedule should be the same as the final measurement. Should you get a substantial reduction in the measurements, then the developer should come up with an adjusted sum to be paid.

Free from encumbrances

If the property you are interested in is currently charged, then the seller should provide a written promise to clear that charge before the ownership of that property is transferred to you. A clause in the agreement should clarify that the property will be delivered free from encumbrances.

Late payment charges/liquidated damages

This stipulates interest accruing in case of a late payment on the property. Liquidated damages concern the damages owed by the seller or developer if they fail in delivering vacant possession in the stipulated time frame.

Defect liability period

A clause in the agreement should stipulate the basic warranty. It will specify the period through which you are entitled to ask the developer to carry out renovations or repairs to fix defects arising in the property. Sub-scale homes are however sold on an as-is basis.

Payment schedule

The payment schedule is usually included in the Third Schedule for developer sales. It shows when to pay and what amount should be paid at that time. If you have taken out a home loan the bank will provide an outline of the payment arrangements.

The journey to owning property in Malaysia may seem difficult in the face of the various legal documents like MoT that are required whether you are citizen or foreigner. Keep in mind these documents particularly the Memorandum of Transfer are there to protect you which implies an easier property ownership experience without any worry.

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https://www.propertyhunter.com.my/news/2021/01/7880/article/deed-of-assignment-and-grant-of-probate-why-are-these-legal-documents-important

Deed of Assignment and Grant of Probate: Why Are These Legal Documents Important?

Homebuyers will encounter a number of legal documents throughout the property buying and selling process. An important one is the Deed of Assignment, which facilitates a property transfer. Meanwhile, the Grant of Probate is necessary for estate administration – which is the administering of a deceased person’s will (and the property left behind).

During the home buying process, you will encounter a mountain of documentation that you will need to sign. Depending on what stage the land title is in, you may be asked to sign a Deed of Assignment. Or during the land title search, your lawyers may have discovered that one of the landowners is deceased and the remaining landowners are selling the property. Your lawyer would then ask them if probate had been taken out for the deceased landowner.

What is a Deed of Assignment?

It is a legal document that enables the transfer of ownership of the property from one party to another, for many types of property. In the law, a property may be defined as ‘things’ and ‘rights’ that can be owned or have a monetary value. It may also signify a beneficial right to a thing. Some of the most common forms of property include real estate, rental proceeds, shares, and intellectual property; just to name a few.

What are the common types of a Deed of Assignment?

 1. deed of assignment of transfer and loan.

These are two separate deeds commonly used in real estate. The deed of assignment of transfer is used when the property is sold before the  individual or strata title  has been issued. The seller would then assign the rights to the property over to the buyer, thereby giving them the proof of ownership to the property.

Whereas, the deed of assignment of loan is used by the bank to have the owner of the property assign their rights and interests in the property over to the bank as a security for the loan. This would also apply to joint purchasers who are taking a bank loan where each of them would assign to the bank their individual share of the property. For example, if two people jointly buy a property and take up a joint loan, each person would assign to the bank their 50% rights and interest in the property to the bank.

2. Deed of Assignment of Tenancy

When a number of tenants sign a tenancy agreement with the landlord for a certain rental period, and in the event where one of the tenants is unable to continue for the duration of the rental period, the landlord may sign a deed of assignment of tenancy with the tenant and their replacement. This is to assign the previous tenant’s interests and obligations over to the replacement tenant.

This is a better alternative to preparing and having all the existing tenants sign a brand new tenancy agreement.

3. Deed of Assignment of Rental Proceeds

This deed is commonly used by banks when a property that is used as security for a loan is also being rented out. The deed of assignment of rental proceeds entitles the bank to any income (from leases, rents, etc.) derived from the property once the owner defaults on the loan. For example, Company A takes out a loan from Bank A.

As security, Company A uses their factory premises which are currently being rented out to Company B as well as signing a Deed of Assignment of Rental Proceeds to Bank A. A few months down the road, Company A is unable to make the monthly repayments and defaults on the loan. Bank A can use the Deed of Assignment of Rental Proceeds to utilise the rental from Company B to offset the loan repayment as well as taking action against Company A for the balance of the loan sum.

The Deed of Assignment of Rental Proceeds may also be used between two private individuals or companies where a loan is involved.

What is the Grant of Probate?

To put it simply, the Grant of Probate is an official document that is sealed by the High Courts of Malaya and confirms that the person named on it (the executor) is entitled to deal with the estate – collect all the assets, pay all liabilities and debts of the estate and distribute the net balance to the beneficiaries.

What is the difference between a will and probate?

A will is a legal document that details what should happen to your property after your death, together with any other wishes, while probate is the legal process that gives a person, or a group of people, the authority to deal with the deceased’s assets. This process of settling a will is known as estate administration.

There are three forms of probate which depends on whether there is a  will or not .

a) Grant of Probate

This is where there is a valid will and an executor has been named and is willing to act. The executor would need to apply for the Grant of Probate of the will at the High Court, per S.3 of the Probate and Administration Act 1959 (“PAA 1959”)

b) Letters of Administration with will annexed

If there is a valid will but the executor is unwilling, unable to act, or no executor had been named in the will, then the person intending to be the administrator would need to apply for the grant of Letters of Administration with the will annexed at the High Court (S.16 of the PAA 1959).

c) Letters of Administration (if there is no will)

If there is no valid will (i.e. the deceased dies intestate), the person intending to be the administrator would need to apply for the grant of Letters of Administration (S.30 of the PAA 1959).

Disclaimer: This article is merely for educational purposes and cannot be regarded as advice, legal or otherwise. If in doubt, please seek the services of a lawyer for legal advice on how to obtain probate and administer the estate of the deceased.

How do you apply for probate for estate administration purposes? 

1. grant of probate.

To make an application for the grant in the High Courts, the following documents are required:

• Death certificate
• Executor’s identity card
• Identity cards of beneficiaries
• Original copy of will
• Land titles/evidence of property ownership
• Home loan statement (if applicable)
• Bank account details of the deceased
• Documentation of any other assets
• Documentation of any liabilities or debt

Generally, it takes between 3-6 months for the grant to be obtained from the High Court. Although in Kuala Lumpur, the courts have been known to issue the grant one month from the date of application.

 2. Letters of Administration with will annexed

The application process is similar to obtaining a grant of probate in the High Court, the difference being that because the executor is unwilling, unable to act or no executor had been named in the will, pursuant to S.16 of the PAA 1959, the following persons in the following order are allowed to apply and be granted the letters of administration:

• A universal or residuary legatee;
• A personal representative of a deceased universal or residuary legatee;
• Such person or persons, being beneficiaries under the will, as would have been entitled to a grant of Letters of Administration if the deceased had died intestate;
• A legatee having a beneficial interest; and
• A creditor of the deceased.

3. Letters of Administration

Obtaining the letters of administration is far more costly and time consuming as compared to obtaining the grant of probate. It generally takes anywhere from 6 months to over a year to obtain the letters of administration.

Depending on the size of the deceased’s estate, there are different ways for the administrator to obtain the letters of administration.

Estates that consist of Wholly or Partly Immovable Property, where the value exceeds 2 million

For these estates (land, house, office lot, etc.), the administrator will have to obtain the Letters of Administration at the High Court (S.30 of the PAA 1959). Furthermore, if the value of the estate exceeds RM500,000, the administrator is required to provide two sureties (guarantors) who have assets within the jurisdiction equivalent to the amount of the deceased’s estate (the sureties must also be residents in Malaysia) as security for the due administration of the estate, unless the court makes an order for dispensation.

Estates that consist of Wholly or Partly Immovable Property, where the value is below 2 million

The administrator may make an application for distribution under the Small Estates (Distribution) Act 1955(“SEDA 1955”). The application may be made at either the Estate Distribution Unit of the Department of the Director-General of Lands and Mines (“JKPTG”) or the relevant Land Office (S.4, SEDA 1955). The Small Estates distribution generally costs less and is quicker than obtaining the letters of administration.

The estate administrator would be required to submit the following documents:

• Form A of Small Estate application
• Identity cards or birth certificates of beneficiaries
• Marriage certificate of decreased (if any)
• Evidence of assets
• Certified true copy of land title or official title search from Land Office
• Quit rent  and assessment receipt

Upon successful application, a hearing will be held in the High Court to determine the estate administration. The administrator and all beneficiaries must be present during the hearing. If the court is satisfied that the details of the application are accurate, the Distribution order will be issued.

Estates that consist of only Movable Property and is less than RM600,000

For these estates, if there is no person who is entitled to apply for the grant of probate or letters of administration – then the interested beneficiary may apply for summary administration through Amanah Raya Berhad (S.17 Public Trust Corporation Act 1995). The letters of administration issued would be in the form of a Declaration outlining the assets.

Generally, the process of administration of moveable assets through Amanah Rakyat Berhad would take around 4-6 months.

What happens after the Grant of Probate / Letters of Administration has been obtained?

Once the Court has granted the Probate or Letters of Administration, the executor or the administrator can then proceed to do the following:

a) Collect all the deceased’s assets;

• The executor/administrator may request for all financial assets or bank savings to be transferred to an ‘executorship account’ (except for EPF and insurance payouts, as both would go into the nominee’s account, if nominations have been made).

b) Pay off the deceased’s debts and liabilities (if any), and

• The executor/administrator must pay off any remaining debts or taxes before distributing the estate. This may include outstanding loans, bills, and taxes of the deceased.

c) Distribute the estate following the deceased’s will if there is one, otherwise to distribute the estate per the Distribution Act 1958.

• The executor/administrator should prepare an estate account accordingly and record all documents showing how properties and money were distributed. These documents should include:

1. Receipts showing debts and taxes paid; 2. Receipts for expenses made from dealing with the estate; and 3. Written confirmation from the beneficiaries stating that they have received their share of the estate.

In conclusion, it is smart to be aware of the various documents which you may encounter during the home buying process. If you are unsure about anything, always make sure to clarify any doubts with your lawyer and never sign off on anything that has not been thoroughly explained to you.

This article was first published as " Deed of Assignment and Grant of Probate: Why Are These Legal Documents Important? " on iProperty.com.my .

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What you need to know about transferring property to family members

• Home Owners

We know that owning a property requires us to follow a set of procedures in order to avoid any unforeseen circumstances. It is the same thing when you want to transfer the ownership of your property to a family member. This article will shed some light and provide the necessary information to make the property ownership transfer smoother.  

Transferring ownership of your property to family members legally involves paperwork and several procedures. While most of the property transfers are done through purchases, transfers are also done in circumstances such as death, separation, divorce, inheritance, gifting and also when an owner is unable to pay the home loan.   

Most property buyers plan to pass on their precious assets to beloved family members, as it is deemed the right choice to make. In order to have a smooth transfer, you should know what needs to be done and most importantly, where to start; how to execute it; and what are the costs involved.   

This article will shed some light and provide the necessary information to make the property ownership transfer smoother.  

Transfer property to family members  

Other than selling your property to someone else, property owners often desire to transfer their properties to someone else, where in most cases it will be for the children, parents, spouses and siblings.   

If you want to transfer the ownership of your property to family, you would not need to undergo the conventional transaction as it will be under the “love and affection transfer” ( pemberian secara kasih sayang ) – which is a term used for property transfer among family members.  

Love and affection transfer are for property transfers between spouses, parents and children. Through this transfer, there will be a certain exemption on stamp duty, as long as there is no Sale and Purchase Agreement (SPA) involved.  

So, if a father owns a property and wants to transfer his property to one of his children, the transfer can be made without a monetary transaction between the two parties by using a normal Memorandum of Transfer (MOT) .   

According to Clara Wong, Managing Partner of Clara Wong & Co, there should not be an SPA for love and affection transfer in order to get the stamp duty waiver as according to Stamp Duty (Exemption) (No. 10) Order 2007 and Stamp Duty (Remission) (No. 2) Order 2019 .   

Wong said that the MOT is sufficient for the transaction, otherwise a full stamp duty will be charged although the relationship between the transferor and transferee is husband and wife or parents and children, or vice versa.  

“It will be like a normal subsale transaction if we use SPA. In order to be entitled to a full stamp duty waiver, love and affection transfer shall be by way of MOT without SPA,” she noted.   

However, she said, it also depends on whether banks have allowed refinancing, for properties that are still under encumbrances.   

“Sometimes certain banks don’t allow it, therefore will have to do by way of SPA and handle it like a normal sub-sale transaction.”  

What are the procedures for property transfer to family members?  

The process for the transfer will involve the adjudication of Form 14A or Memorandum of Transfer and Deed of Assignment .  

You will need to submit the Form 14A of the National Land Code (Act 828)  for the transfer of ownership of a property as specified in Section 215, 217 and 218 of the Act.   

• (1) The transfer under this Act of any alienated land shall be effected by an instrument in Form 14a.
• (1) The transfer under this Act of any undivided share in alienated land shall be effected by an instrument in Form 14a.
• (1) The transfer under this Act of any lease shall be effected by an instrument in Form 14a.

For the love and affection transfer to materialise, the Form 14A can be signed (attestation) in front of a Registrar/ Land Administrator for free before proceeding with the procedures.  

For properties that have not yet been issued an individual title deed, the transfer of ownership is usually done through a deed called the Deed of Assignment – a form of document that contains the details of the property, the “history” of the property and the agreement between both the assignee and the recipient of the rights, which is stated in writing and signed and testified.  

If it is prepared by a lawyer, it will be witnessed by the lawyer concerned.  

The cost involved to transfer property to family members

As for the stamp duty, Wong said that the love and affection transfers between parents and children; and husband and wife are entitled to a waiver of stamp duty.   

Budget 2023 stamp duty exemption

Beginning 1 April 2023, real estate transfers based on love and affection between parents and children as well as grandparents and grandchildren will enjoy full stamp duty exemption on the instruments of transfer –  limited to the first RM1 million  of the property’s value.

The remaining balance of the property’s value is subject to an  ad valorem  stamp duty rate (shown in table below). However, a 50% remission or discount will be given on the stamp duty imposed. These stamp duty exemption applies only to property recipients who are Malaysian citizens.

For example:   A father who owns a property with a market value of RM1,500,000 wants to transfer it to his son, will enjoy an exemption on the first RM1 million and will have to calculate the stamp duty for the remaining RM500,000.

Total stamp duty payable for the property is:   (First RM100,000 X 1%) + (Next RM400,000 X 2%) = RM1,000 + RM8,000 = RM9,000  

As for Real Property Gains Tax (RPGT), Wong added, it is deemed as “no gain no loss” situation for transfers between spouses; parents and children; and grandparents and grandchildren, as according to the Real Property Gains Tax Act 1976.  

“Other family members’ relationship are all subjected to full stamp duty and also RPGT unless if to be transferred after 5 years following recent change in RPGT ,” she said.   

The total costs for the transfer will be depending on the property market value.   

What happens when the property is still under a housing loan?  

The love and affection transfers through the procedures mentioned above only apply to debt-free properties and those which are not assigned to the bank as collateral to financing.  

Wong clarifies that if the property is still under a housing loan, the transferee must obtain a new loan to fully settle the existing loan before transfer can be done.  

“It can be done either via refinancing or a new loan application,” she said.   

Property that is still vested in the bank cannot be assigned to ownership unless the bank debt has been settled and the bank has reassigned the ownership of the property through a document called the Deed of Receipt and Re Assignment.  

How long does it take to transfer property to family members?  

The duration for the processing of property transfer through the love and affection transfers depends on the type of property, Joyce Lau Yu Chai, Advocate & Solicitor of Joyce Lau & Partners, noted.   

“If it is leasehold and encumbered; or if it is property under the master title and encumbered, it will take around six to seven months,” she said.   

While if the property is freehold and holds no restrictions in interest, Lau said it will take around three to four months for properties which are encumbered and three months for those not encumbered.   

Having properties and being able to pass them on to your loved ones definitely will be giving you so much joy. However, make sure you know the procedures on how it can be done.  Do consult a lawyer if necessary in order to have a smooth transfer and for you to have peace of mind.  

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Law On Transfer of Property Between Family Members In Malaysia

Property Transfer By Way Of Love and Affection

We believe many people out there are thinking about transfer of property between family members by way of love and affection, ie without any payment of money or monetary consideration.

So how do you transfer property between family members in Malaysia?

Some common scenarios are as follows:-

• the parents wish to give properties to their children; or
• husband needs to transfer half share of the matrimonial house to the wife.

Memorandum of Transfer/Deed of Assignment

There is no requirement to sign a Sale and Purchase Agreement in such situation but there is necessity to sign the Memorandum of Transfer (MOT) where the property in question has title or Deed of Assignment where the property in question has no title or is under master title.

The consideration stated in the MOT or Deed of Assignment would be “love and affection” or “ kasih sayang ” in Bahasa Melayu.

The MOT or Deed of Assignment still has to be stamped. However, such transfer of property between parent and children or married spouses is subjected to exemption.

The transfer of property between parent and children or married spouses attract no gains tax because the recipient/transferee is deemed to have acquired the property in question at the same price as acquired previously by the donor/transferor. So there is no gain. However, note that it is still necessary to file the relevant CKHT forms with the Inland Revenue.

The professional fee will be based on the monetary consideration or the market value of the property in question. Where the consideration is for love and affection, the professional fee chargeable will be based on the market value of the property in question.

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