REAL ESTATE & PROPERTY TRANSACTION COMMON LEGAL TERMS, DEFINITIONS AND MEANINGS
The purpose of this article is to give you more insights and also to make you familiarize yourself with the wordings of real estate’s legal terminologies.
This would help you to better decide in the property deals you are involve in whether you are an owner, purchaser, legal practitioner or even a real estate agent.
These terminologies are often used during the transaction in a real estate’s matter especially in buying and selling properties.
We shall go through one by one in an alphabetical order.
1. Accessory Parcel
An accessory parcel refers to any area of property that is solely owned by one particular individual. This is reflected from the house title/geran with regards to the ownership of the property. For example, one parking area owned by an individual who lives in a high-rise development (condominium, apartment)
2. Affordable Housing
Affordable housing literally means properties which are priced for sale that are affordable for people on average incomes in Malaysia. Examples of affordable housing would be PR1MA, Rumah Selangorku, My First Home, etc.
3. Acceptance
Acceptance means the act of you agreeing to the terms of an offer from the seller. Therefore, when the seller signs your purchase offer, you are already in contract for the sale of the said house. This will be explained more under the term “Letter of Offer”.
4. Adjudication
Adjudication is the essential procedure in order to ensure that any document duly stamped to protect the parties to the contract in respect of the admissibility of the instrument as evidence in court during a civil proceeding. An instrument which is not duly stamped is not admissible in court as evidence.
5. Bank Valuation
A Bank Valuation is a property valuation carried about by banks to determine the value of property. This valuation is an important consideration in home loan offers from Banks.
6. Bumi Lot
A Bumi lot is one of the four main types of land for sale in Malaysia. Houses built in these areas may be sold or leased only to ‘bumiputera’ citizens. There specific rules to this and each states in Malaysia has its own pecualiarities.
7. Common property
Common property area of property or facilities that is shared among others in a stratified property such as condo development. Some of the common properties which does not belong to any single specific owner are lifts, parks, gyms, gardens etc.
8. Conveyancing
Conveyancing is technically another branch of legal practice which deals with the legal process of transferring legal rights of the property between a buyer and a seller. Conveyancing lawyer on the other hand is a person who assists a party (the buyer or the seller) in a property transfer transaction and to ensure that the property is registered under the name of the buyer.
9. Consent
In usual circumstances, sometimes a buyer has to ask consent from the State Authority or the developer.
Consent from the State Authority means when there is an existing restriction towards the house that you intend to buy, the house cannot be sold unless you have obtained consent from the State Authority. Meanwhile, consent from developer simply means to undertake the registration of the property.
10. Certificate of Completion and Compliance (CCC)
This was formerly known as Certificate of Fitness which means this certificate is released by the local authority council to declare that the property is now safe to be occupied. This document is important as it is one of the process in buying a house.
11. Deed of Assignment (DOA)
This DOA is a document where it is used to transfer ownership of property between parties, and this is because there is no title yet. Therefore, this document can confirm that the owner is transferring his ownership to the new owner.
12. Defect Liability Period
If you are buying a property that is still newly developed, there will be a period in which it acts as a warranty for repairs and it is called as “Defect Liability Period”. Usually, this period lasts to 24 months or 36 months depends on type of properties which are individual title properties or strata title properties.
13. Down Payment
This is the basic rules of buying a property where you need to allocate sum of money in order to pay down payment of a property that you are buying. The minimum payment is 10% of the total purchase price. Nonetheless, you can still pay more than what it is required.
14. Discharge of Charge
This needs to be done in order to remove a debt by making a full payment. Hence, this will serve as a document in order to prove that debt have been fully paid and the property can be transferred.
15. Encumbrances
Encumbrances refer to a claim against a property by a party who is not the owner. Mortgages, easements, and liens are examples of some encumbrances that can apply to properties.
16. Earnest deposits
There may be a bit of confusion on the word deposit and down payment as discussed above. However, to differentiate between these two is whereby for earnest deposit, you may have to take out 1% - 2% from the total purchase price and this is to indicate your intention in buying the property. Also, you may have to attach with your letter of offer along with the payment.
17. First-time Homebuyer
If you have never bought any property just yet, and you are about to purchase you very first property, you are to be called as first-time homebuyer and you are entitled to obtain benefits such as financial support schemes or other government initiatives. So, be mindful and alert about this!
18. Fixtures and Fittings
Fixtures and fittings refer to objects that are movable and this will be defined under your Sale and Purchase Agreement and that may or may not be removed/included at the time of a property sale. For example, fridge, freezer, light fixtures or curtains.
19. Freehold
This is one of the main types of land in Malaysia. This has been discussed in our earlier post/article about tips on buying houses. In short, freehold means the ownership has no end date or simply means there is no expiry date as compared to leasehold. Leasehold means the ownership will only last up to 99 years.
20. Guarantor
A guarantor is a person who is named in the loan agreement and carries responsibility to make payment if there is an event of a default by the primary party.
21. Individual Title
An individual title means a title deed or a document that is being issued for property with a single owner of a whole piece of land, with no shared ownership responsibilities. This covers landed properties such as semi-detached houses, terraced houses, and bungalows.
22. Joint Ownership
We believe that this term is usually being seen by married couple in pursuing to have a joint ownership property. Therefore, this is also come hand in hand with the application of joint home loan.
23. Land title
Land title, or Geran is a document which indicates that you are the legal owner of that particular party. The document consists of all details of the property including your name and address. Land title in general covers all types which are individual title, strata title, etc. Please be noted that a copy of land title must be sent to the respective land office. Read more here
24. Landed Property
One thing to differentiate on all type of properties is the word “landed”. Landed properties refer properties such as bungalows, semi-detached, or terrace house. As compared to other properties such as condominium, apartments, whereby these are non-landed properties as the owners of these properties hold the Strata Title.
25. Legal Fees
As you have appointed yourself a lawyer to assist you, you have to bear the legal fees along with other fees that you have to pay throughout the whole process of purchasing a property. These legal fees are mandatory payments that is imposed to you to pay legal professionals for the assistance that they are giving. These fees are actually legislated by law under the Solicitor’s Remuneration Order 2005.
26. Letter of Offer
Letter of Offer is a letter to indicate your interest/intention in buying the said property. Also, as mentioned above, this will be sent along with your earnest deposit which you have allocated.
27. Loan Agreement
The loan agreement is an official document between a bank or any financial institution and the borrower.
28. Malay Reserved Land
This type of land is dedicated only for Malay people either to be sold or rented.
29. Master Title
If you are purchasing a stratified property, then you may come across with this term. Master title is a legal property title which is issued to the developer and this title gives the ownership of the entire parcel of land which are still under development. This title also confers the right to sell the individual parcels under a Strata or Individual Title.
30. Memorandum of Transfer (MOT)
Memorandum of Transfer is a form registering the title into the purchaser’s name at the Land Office. MOT is to ensure 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 seller to the buyer/purchaser.
31. Mortgage Reducing Term Assurance (MRTA)
MRTA is one of the type of life insurances that cover the value of a home loan as well as cover the death/permanent disability.
32. Redemption Sum
The outstanding amount owing to the Vendor’s Bank is known as Redemption Sum. There will be, additional provisions are required to be made for payment of the amount in excess by the Vendor whereby the Redemption Sum exceeds the Purchase Price or the Balance Sum.
33. Real Property Gains Tax (RPGT)
This is a tax imposed on the owners who wish to sell their properties with a higher price than the original price.
34. Sale and Purchase Agreement (SPA)
SPA is a written agreement between the buyer and the seller in a real estate transaction. This agreement covers all the terms and conditions which protect the rights of both seller and the buyer throughout the transaction.
35. Solicitor’s Remuneration Order
As lawyers are governed by the Malaysian Legal Profession Act 1976, the rate fees of the transaction will be same for all lawyers in Malaysia. Lawyer fees are based on the Solicitor Remuneration Order which are provided under the Act.
36. Stamp Duty
Stamp duty is a tax imposed on the document that will be stamped by the Inland Revenue Board (LHDN). Without stamping the document, your application to transfer the land title will not be processed at the Land Office, thus, cannot be transferred to you.
37. Strata Property
Strata property means property that has number of buildings, or simply means properties that are not such as landed properties.
38. Strata Title
Strata Title is a separate property deed for each unit in a sub-divided property which means a number of buildings on a piece of land which have common facilities such as condominiums, apartments, etc.
39. Sub-sale Property
Sub-sale property refers to property that is already being owned by the owners or renters, which also means existing properties. Hence, usually the owner will sell this to any interested purchaser.
40. Vacant Possession
In the contract or the sale and purchase agreement contain a clause which confirms that the property is sold with vacant possession. The vacant possession is an obligation on the Seller to make the property available on completion in a state in which the Buyer can physically and legally occupy it. Basically, it is the date which you obtain your key to your house.