Malaysian laws on change of ownership of demised premises – proof of ownership of property under new
LEGAL MATTERS PERTAINING TO MALAYSIAN LAWS ON CHANGE OF OWNERSHIP OF DEMISED PREMISES – PROOF OF OWNERSHIP OF PROPERTY UNDER NEW TENANCY AGREEMENT – POWER OF ATTORNEY TO ACT ON BEHALF OF OWNER OF PROPERTY
A) BRIEF INTRODUCTORY REMARKS ON CASE SCENARIO
The following matters are relevant for consideration / analysis:
- That the Demised Premises [CT Service Apartment – fictional name] had new ownership - from the previous owner(s), A,B,C & D to a new one, Y.
- That previously, there had been a Tenancy Agreement between an individual, E and a Company, Z Sdn. Bhd..
- That it had been informed that the estate / property agents had explained that the previous owner(s), A,B,C & D had appointed an individual, E (not the legal owner of the property) to act as authorized representative in all matters.
B) DOCUMENTS AVAILABLE FOR SIGHTING (UPON WHICH LEGAL OPINION IS BASED)
i) Copy of Tenancy Agreement between stated authorized representative, E and the Company, Z Sdn. Bhd. for the fixed tenancy period for example, of one (1) year commencing from 1 January 2012 and expiring on 31 December 2012;
ii) Copy of the Sale & Purchase Agreement dated for example, 10 July 2014 between the Parties [four legal owners (A,B,C & D) – collectively known as "the Vendor"] and [E – known as "the Purchaser"];
iii) Copy of the ‘Letter Of Confirmation (Rent)' issued by SUV Properties Sdn. Bhd. (fictional name) bearing reference: NO: DOV 123;
iv) Copy of the ‘Renewal Of Tenancy' dated for example, 27 December 2012 issued by ZTE Sdn. Bhd. to E and
v) Copy of the undated ‘Letter of Authorization' stated to be issued by A,B, C & D
C) TASKS UNDERTAKEN IN RELATION TO THE RESEARCH OF THE MATTER
i) Search of legal articles and related information on the internet in relation to the specific matter;
ii) Search of the relevant provisions of the National Land Code, Specific Relief Act 1950, Contracts Act 1950 and Powers Of Attorney Act 1949 and Stamp Act 1949;
iii) Highlighted all the important, relevant and pertinent information to be stated in this Legal Guide (being of the nature of personal views after having reviewed and analyzed all relevant information and furnished documents);
D) STYLE OF PRESENTATION
Legal analysis on the manner of application and interpretation of the relevant and concerned laws. To facilitate ease of understanding of the application and interpretation of Malaysian laws on this matter, the analysis shall be presented in a style of chronological flow of facts, law and explanation of the same in relation to the incumbent scenario.
E) ISSUES TO BE ADDRESSED
i) Confirmation of the ownership of the Demised Premises [CT SERVICE APARTMENT]
a) To be sure, it would be best to perform an independent land search at the Land Registry / Office to ascertain the owner of the title to the property.
Remark: Source of information: Article entitled ‘Sale & Purchase of Houses' sourced from the Malaysian Bar's website.
b) Another option would be to send a formal letter to the legal firm representing the Purchaser's solicitors [usually indicated on the front page of the copy of the ‘Sale & Purchase Agreement'] requesting for a copy of the ‘Title' to the property for verification purposes on account of desiring to execute a ‘Tenancy Agreement' with the Landlord of the Demised Premises. In this regard, Form 14A under the National Land Code is relevant with regards to the Transfer of Land.
Remarks: Common sense point of view / customary practice.
ii) If Tenancy Agreement entered into / executed by a person other than the legal owner of the Demised Premises on the basis of having been granted such legal authority to act on behalf of the owner(s)
In such a situation, from the context of legal validity / enforcement, a Power of Attorney (PA) would need to be executed. A PA is an instrument that provides for the appointment of the Donee (a recipient of a power) as attorney of the Donor (a giver of a power) to give certain powers to the Donee for a specific aim. The scope of powers given by the Donor to the Donee can be general or specific with either revocable or irrevocable depending on the needs and circumstances of the parties. The appointment of the Donee must be stated clearly in the Power of Attorney document.
Remark: Source of information: Website: Office of the Chief Registrar, Federal Court of Malaysia.
Remark: Hence, any other mode of authorization may be risky to trust and hence, should be declined as proof / verification. In view of the fact of the previous Tenancy Agreement having been entered into by the purported ‘authorized person', it would be advisable to request for the ‘Power of Attorney' for the authorization for that previous Term of the Tenancy. As a note of caution, these rights affect the proprietary / legal interests of the owner of the property and hence, the proper legal procedures must be adhered to in relation to proof prior to making monetary payments otherwise the rights of the owner may be prejudiced and hence fault may be imputed upon the Tenant for failing to adhere to the appropriate procedures for verification which it is able / compelled to comply with. This is in the interests of safeguarding against fraud / legal recourse by the rightful owner against the Tenant in the event of any fraud.
F) OTHER SIGNIFICANT / IMPORTANT MATTERS
i) Stamping of Tenancy Agreement
Having reviewed the previous Tenancy Agreement, it was noted that the stated Tenancy Agreement did not appear to have been stamped and further the rate and amount of rent due and payable also appear to have been omitted upon a sighting of Schedule 1of the stated Tenancy Agreement.
It should be noted that under the Stamp Act 1949, specifically Clause 4 stipulates instruments chargeable with duty as specified in the First Schedule where Agreement for a lease is included as a chargeable instrument. Lease under the stated Act means a lease of immovable property and includes any undertaking in writing to pay or deliver rent for immovable property. Clause 49 of the Act states that after execution, the instrument should be presented for stamping within thirty (30) days of its execution. Clause 47A stipulates the rate of penalty for late stamping. Clause 50 stipulates that all duties, penalties and other sums required to be paid shall be debts due to the Government and shall be recoverable by any of the ways and means in force for the time being for the recovery of debts due to the Government. Clause 52 states that instruments not duly stamped are inadmissible in evidence.
Hence, the Tenancy Agreement has to be stamped to have legal validity.
The following is the manner of calculation of the stamp duty payable to the Land Office with regards to the Tenancy:
Rental for every RM250.00 in excess of RM 2,400.00 rental:
Less than one (1) year: RM1.00
Between one (1) to three (3) years: RM2.00
More than three (3) years: RM3.00
Note: With regards to any rental amount below RM 2,400.00, no stamp duty shall be payable
Illustration of rent calculation:
Rental of property of RM 3,000.00 per month, the stamp duty payable is calculated as follows:
Stamp duty: [RM36,000 (annual rental) – RM2,400 / RM250) x 1 year = RM134.40
G) CONCLUDING REMARKS
Based upon the facts and analysis as detailed and explained above, it is clearly advisable to err on the side of caution and be prudent / careful when addressing these matters which concern ownership / proprietary rights. The strict legal procedures must be adhered to by the Company to safeguard against the risk of fraud. Exercising a liberal attitude / flexibility by requesting for alternative (not in conformity with proper legal procedures) documents is highly not advisable. One should be careful of legal consequences for the sake of convenience as the risk of potential litigation ensuing as a result of the rights of the owner of the property being prejudiced is a high one and may be a costly risk to bear which could / should have been averted by the exercise of caution.
H) PROPOSALS / SUGGESTIONS FOR HANDLING FUTURE MATTERS OF THIS NATURE
When in doubt, it is always wise / prudent to consult with competent legally qualified professionals for guidance, advice in order to safeguard against incurring the risk of a legal suit.
Prepared by,
Sumitra Woodhull
A) BRIEF INTRODUCTORY REMARKS ON CASE SCENARIO
The following matters are relevant for consideration / analysis:
- That the Demised Premises [CT Service Apartment – fictional name] had new ownership - from the previous owner(s), A,B,C & D to a new one, Y.
- That previously, there had been a Tenancy Agreement between an individual, E and a Company, Z Sdn. Bhd..
- That it had been informed that the estate / property agents had explained that the previous owner(s), A,B,C & D had appointed an individual, E (not the legal owner of the property) to act as authorized representative in all matters.
B) DOCUMENTS AVAILABLE FOR SIGHTING (UPON WHICH LEGAL OPINION IS BASED)
i) Copy of Tenancy Agreement between stated authorized representative, E and the Company, Z Sdn. Bhd. for the fixed tenancy period for example, of one (1) year commencing from 1 January 2012 and expiring on 31 December 2012;
ii) Copy of the Sale & Purchase Agreement dated for example, 10 July 2014 between the Parties [four legal owners (A,B,C & D) – collectively known as "the Vendor"] and [E – known as "the Purchaser"];
iii) Copy of the ‘Letter Of Confirmation (Rent)' issued by SUV Properties Sdn. Bhd. (fictional name) bearing reference: NO: DOV 123;
iv) Copy of the ‘Renewal Of Tenancy' dated for example, 27 December 2012 issued by ZTE Sdn. Bhd. to E and
v) Copy of the undated ‘Letter of Authorization' stated to be issued by A,B, C & D
C) TASKS UNDERTAKEN IN RELATION TO THE RESEARCH OF THE MATTER
i) Search of legal articles and related information on the internet in relation to the specific matter;
ii) Search of the relevant provisions of the National Land Code, Specific Relief Act 1950, Contracts Act 1950 and Powers Of Attorney Act 1949 and Stamp Act 1949;
iii) Highlighted all the important, relevant and pertinent information to be stated in this Legal Guide (being of the nature of personal views after having reviewed and analyzed all relevant information and furnished documents);
D) STYLE OF PRESENTATION
Legal analysis on the manner of application and interpretation of the relevant and concerned laws. To facilitate ease of understanding of the application and interpretation of Malaysian laws on this matter, the analysis shall be presented in a style of chronological flow of facts, law and explanation of the same in relation to the incumbent scenario.
E) ISSUES TO BE ADDRESSED
i) Confirmation of the ownership of the Demised Premises [CT SERVICE APARTMENT]
a) To be sure, it would be best to perform an independent land search at the Land Registry / Office to ascertain the owner of the title to the property.
Remark: Source of information: Article entitled ‘Sale & Purchase of Houses' sourced from the Malaysian Bar's website.
b) Another option would be to send a formal letter to the legal firm representing the Purchaser's solicitors [usually indicated on the front page of the copy of the ‘Sale & Purchase Agreement'] requesting for a copy of the ‘Title' to the property for verification purposes on account of desiring to execute a ‘Tenancy Agreement' with the Landlord of the Demised Premises. In this regard, Form 14A under the National Land Code is relevant with regards to the Transfer of Land.
Remarks: Common sense point of view / customary practice.
ii) If Tenancy Agreement entered into / executed by a person other than the legal owner of the Demised Premises on the basis of having been granted such legal authority to act on behalf of the owner(s)
In such a situation, from the context of legal validity / enforcement, a Power of Attorney (PA) would need to be executed. A PA is an instrument that provides for the appointment of the Donee (a recipient of a power) as attorney of the Donor (a giver of a power) to give certain powers to the Donee for a specific aim. The scope of powers given by the Donor to the Donee can be general or specific with either revocable or irrevocable depending on the needs and circumstances of the parties. The appointment of the Donee must be stated clearly in the Power of Attorney document.
Remark: Source of information: Website: Office of the Chief Registrar, Federal Court of Malaysia.
Remark: Hence, any other mode of authorization may be risky to trust and hence, should be declined as proof / verification. In view of the fact of the previous Tenancy Agreement having been entered into by the purported ‘authorized person', it would be advisable to request for the ‘Power of Attorney' for the authorization for that previous Term of the Tenancy. As a note of caution, these rights affect the proprietary / legal interests of the owner of the property and hence, the proper legal procedures must be adhered to in relation to proof prior to making monetary payments otherwise the rights of the owner may be prejudiced and hence fault may be imputed upon the Tenant for failing to adhere to the appropriate procedures for verification which it is able / compelled to comply with. This is in the interests of safeguarding against fraud / legal recourse by the rightful owner against the Tenant in the event of any fraud.
F) OTHER SIGNIFICANT / IMPORTANT MATTERS
i) Stamping of Tenancy Agreement
Having reviewed the previous Tenancy Agreement, it was noted that the stated Tenancy Agreement did not appear to have been stamped and further the rate and amount of rent due and payable also appear to have been omitted upon a sighting of Schedule 1of the stated Tenancy Agreement.
It should be noted that under the Stamp Act 1949, specifically Clause 4 stipulates instruments chargeable with duty as specified in the First Schedule where Agreement for a lease is included as a chargeable instrument. Lease under the stated Act means a lease of immovable property and includes any undertaking in writing to pay or deliver rent for immovable property. Clause 49 of the Act states that after execution, the instrument should be presented for stamping within thirty (30) days of its execution. Clause 47A stipulates the rate of penalty for late stamping. Clause 50 stipulates that all duties, penalties and other sums required to be paid shall be debts due to the Government and shall be recoverable by any of the ways and means in force for the time being for the recovery of debts due to the Government. Clause 52 states that instruments not duly stamped are inadmissible in evidence.
Hence, the Tenancy Agreement has to be stamped to have legal validity.
The following is the manner of calculation of the stamp duty payable to the Land Office with regards to the Tenancy:
Rental for every RM250.00 in excess of RM 2,400.00 rental:
Less than one (1) year: RM1.00
Between one (1) to three (3) years: RM2.00
More than three (3) years: RM3.00
Note: With regards to any rental amount below RM 2,400.00, no stamp duty shall be payable
Illustration of rent calculation:
Rental of property of RM 3,000.00 per month, the stamp duty payable is calculated as follows:
Stamp duty: [RM36,000 (annual rental) – RM2,400 / RM250) x 1 year = RM134.40
G) CONCLUDING REMARKS
Based upon the facts and analysis as detailed and explained above, it is clearly advisable to err on the side of caution and be prudent / careful when addressing these matters which concern ownership / proprietary rights. The strict legal procedures must be adhered to by the Company to safeguard against the risk of fraud. Exercising a liberal attitude / flexibility by requesting for alternative (not in conformity with proper legal procedures) documents is highly not advisable. One should be careful of legal consequences for the sake of convenience as the risk of potential litigation ensuing as a result of the rights of the owner of the property being prejudiced is a high one and may be a costly risk to bear which could / should have been averted by the exercise of caution.
H) PROPOSALS / SUGGESTIONS FOR HANDLING FUTURE MATTERS OF THIS NATURE
When in doubt, it is always wise / prudent to consult with competent legally qualified professionals for guidance, advice in order to safeguard against incurring the risk of a legal suit.
Prepared by,
Sumitra Woodhull
