Why does it take so long for lawyers to complete a property transaction?

This question is not only asked by the purchaser of a property transaction but is also asked by the seller who sells the property to get money out of it. Most seller and purchaser expect a property transaction to be completed within a month or two. That is not the case as there are various factors to be taken into consideration and various parties involved other than the seller and the purchaser.

A lawyer is involved in a property transaction as a facilitator. A lawyer manages the various parties involved in the property transaction which include :

1)      the seller;

2)      the purchaser;

3)      the lawyer representing the seller (if the lawyer is acting for the purchaser) and vice versa;

4)      the housing developer (which an be the seller or involved in the transaction as the property is not issued with an individual title yet);

5)      the land office (where the property is registered as proof of ownership);

6)      the state authority (which is actually represented by the land office but is involved if the property is a property which requires a consent to transfer or consent to charge -  usually leasehold property);

7)      local authority (to pay for any assessment notice arrears);

8)      bank or banks (depending whether the purchaser purchase the property by taking a housing loan and if the seller still owes the bank any money which need to be paid first)

The duration of a property transaction from the time that the Sale & Purchase Agreement is signed to the time that the purchaser can say that he is the new owner of the property fluctuates according to the type of property being transacted. The easiest type of property to transfer will be a piece of land but this type of property also has pitfalls which can drag the transaction into many months. If the property is a house, the package that it comes in will be the key to the process. A house can be built on a piece of land and sell as a terrace house, a bungalow or a semi-D. A house can also be an apartment, a condominium and a penthouse. Agreements governing the sale of the house built on land and the one sold as a strata property are different.

When you buy from a property developer, the sale of a house on land will use the agreement provided for in Schedule G under the Housing Development (Control and Licensing) Act 1966 which is the sale of building and land. The time frame provided for the property to be completely built and delivered to the purchaser is two years. Within the two years, the housing developers at their own pace must built the structure of the house, get all the infrastructures within the housing development ready, deal with authorities and finally deliver the key to the house buyer. The sale of strata property will use the agreement provided for in Schedule H of the Housing Development (Control and Licensing) Act 1966 which is the sale of building or land which will be subdivided into parcel. As for strata property, the timeframe is increased to three years as there are a lot more complications in building a property with many units within it.

As housing developers has their own capability in building their housing project, you cannot actually say they are not delivering because you do not see any construction is taking place at the place where your new house is supposed to be. As much as housing developers are said to have a reputation as businessmen who don’t deliver what they have promised, they can set the schedule of building the houses according to their own time frame. If they are serious businessmen, they will want more purchasers to purchase their housing project and keep them in business.  Only when there are no progress in the housing development for more than one year should you worry about the fate of your house, if you buy the property from a housing developer.

However, if you are buying a property from another individual, the timeframe for the completion of the transaction can fluctuate between three months to more than a year (even more), depending on the type of property that you are buying and how you intend to finance your purchase. If the property that you are buying is not charged to any financial institution and the property does not require to be approved by the state authority to be transferred, whether the property has been issued a title or not, the time for it to be transferred can be a short time of two or three months. This is a very rare occurrence in this day and age as most property is purchased by the vendor in the first instance using a financial institution.

If the property is charged to a financial institution, the time for the transfer will be determined by the efficiency of bank which has put a charge on the property before it is sold. The bank will only release the property from its control once it has receives the full amount of payment due from the purchaser’s financier. Just imagine the intricacies that are involve as your lawyers have to communicate with your financier, with the vendor’s lawyer, with the vendor’s bank and in certain matters, the vendor himself, in trying to get the property unencumbered. Once payment are made, the lawyer who handles the finance side of your purchase will have to secure the interest of the financial institution that you have chosen to finance your property transaction. That will take another duration which will depend on the efficiency of your lawyer and to some extent, your financier.

One of the timeframe which usually delay the completion of a property transaction is when consent to transfer need to be acquired from the State Authority. ‘Application for Consent to Transfer’ as it is called usually takes between 3 months or more especially if the transfer is from a bumiputra seller to a non-bumiputra purchaser. Surprisingly, once consent to transfer is obtained, a consent to charge will only requires a maximum of 2 weeks to be obtained from the same department.

If the property is still not issued with an individual title, the housing developer which had built the property needs to be involved in the equation. Although Section 22D of the Housing Development (Control and Licensing) Act 1966 has specifically stated a housing developer should not withhold confirmation of any arrears and can only charge RM50-00 for issuing an undertaking to the lawyer(s) handling the transaction, things get complicated if there are arrears, if Joint Management Body decided to be tough and if the property is under receivership, to quote a few ‘complications’. Add between two weeks to three months for your lawyer to resolve this.

Another delay will usually happen when the property needs to be redeemed from the seller’s financier. As the seller’s financier is in the process of losing a customer, the department that handles the issuance of redemption statement and handling the redemption itself usually takes time to do as such. Another factor is the security documents are usually kept by a storage company and takes some reasonable time to be located. Add in another one or two month to the equation.

These are just some examples which can crop up when a property transaction is being conducted by your lawyer. A good advice for novice or even seasoned seller or purchaser of property to follow closely your lawyer who conducts your property transaction and help them facilitate the transaction wherever you could.

This article was first published in Property Insight magazine, April 2015 edition

40 Questions You Should Ask Your Lawyer Before Applying Housing Loan in Malaysia

This book of mine is already out in bookstores across Malaysia and can be bought online at my publisher's website since December 2014. My publisher's website can be access here : Book Planet.com.my

This book is the continuation of my other books : 40 Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia, published in 2010; and 40 Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia, published in 2013.

All the Ask the Lawyer series books

I also have the books in Bahasa Malaysia with 40 Soalan Yang Anda Patut Tanya Peguam Anda Sebelum Membeli Rumah di Malaysia being sold as a physical book since 2011 and 40 Lagi Soalan Yang Anda Patut Peguam Anda Sebelum Membeli Rumah di Malaysia sold as eBook. The link to my eBook is aptly named Lawyer Hartanah (Property Lawyer) and can be access here : Lawyerhartanah.com.

I am currently writing the Bahasa Malaysia equivalent for 40 Questions You Should Ask Your Lawyer Before Applying Housing Loan in Malaysia named 40 Soalan Yang Anda Patut Tanya Peguam Anda Sebelum Memohon Pinjaman Perumahan di Malaysia which will be released soon.

Here are some previews of the book :

Time to Dig In and Reassess Your Investment

The new year 2015 has brought a new landscape to the investment scenario, either to the property market or the investment market as a whole.

2014 can be called as the year where most investors had expected to make less money but surprisingly, most can claim it was not too bad of a year after all. Most investment funds such as Amanah Saham Bumiputera, real estate unit trust, unit trust and Employee Provident Fund have declared good returns more than what were expected from them. The stock market had climbed to new heights. Property market did return to a semblance of the good old days.

Alas, it didn’t last. By the end of the year, the stock market had turned southward, the oil prices started its sharp decline, the property market started to go soft and the fun is lacking in funds. If statistics are to be trusted, we are expecting 2015 to be a bad year. To add salt to the wound, we are expecting a period of ‘adjustment’ due to the introduction of the Goods and Sales Tax (GST) starting this 1st April 2015 in Malaysia. The words ‘uncertain’, ‘not going to be much impacted’ and the favourite ‘…going to pick up’ are keywords which are being used extensively when the experts are asked what lies ahead. No one will commit that we are heading for a bad time.

For those who had lived long enough, they recognised the next few months as the time to dig in and to reassess their investment. It’s not as if they have never seen it before. Right?

How about the young ones? The ones who had just start their work lives and are just starting to invest in places they thought were good enough for them to get good returns? Should they keep on investing? Should they cut their losses and wait until the market stabilised? Is property still a safe bet?

The answer is simple: It is time to dig in and reassess your investment. It is good to do this every once in a while. You need to understand the concept of holding power and the time to cut your losses.

There are a few rules all property investors or any other type of investors should always keep in mind:

1) ALWAYS RESEARCH WHAT YOU ARE INVESTING IN

Understand the concept of investment, know the product, and know how much you are spending and what your exit strategy is. Before jumping into the water, you should know whether it is cold, warm or hot.

2) ALWAYS KNOW THE SELLER AND MANAGER THOROUGHLY

One of the lessons I’ve learned about investing in property is how important it is to know the seller, be it the property development company, the bank auctioning the property or the seller of the property. Most people do not research properly the seller especially if they buy a property from a housing developer. Past success (or lack thereof) does not ensure future success.

3) RESEARCH THE PRODUCT YOU ARE BUYING

This advice is redundant of the advice No. 1 but this goes to the specifics. This is when you research the place and the type of property you are buying instead of knowing about how to invest in property. As an example, if you shunned areas such as Nilai or KLIA a few years ago, it might be of interest to you to know that the property investment landscape in those areas has changed. People are starting to buy in those areas. If you are looking for deals, this may be a good time but not for long.

4) UNDERSTAND THE COST (APPARENT OR HIDDEN)

People who buy properties should ask a lot of questions until the sale person who handles the queries starts to hate you. In all my years of being a lawyer, I find people are indifferent when it comes to the fees a lawyer can charge and why he/she is charging that much. They only look at the total amount and only care about how much discount they can get from the lawyer without asking why there’s a separate cost for disbursement and what each disbursement is for. I also find people are surprised at the idea of paying monthly charges, quarterly charges and annual charges for their strata properties to pay for monthly maintenance, sinking fund and assessment rate, respectively. When they sell their property, they are again ignorant of the fact of the Real Property Gain Tax that they will have to pay.

5) THERE IS NO SUCH THING AS A QUICK RETURN

Everyone wants to make a quick buck. As PT Barnum had allegedly said, “There’s a sucker born every minute.” These two rules have made a few enterprising spirits into crooks. The modus operandi maybe different but the rules have never change. There is no easy money. Period.

6) READ

Read the news, read about the change in law, read about the change in the interest rate regime, read about the debate on the implementation of Goods and Sales Tax, read about the debate on lowering of the prices of goods and, finally, read the fine print. Read every single thing. And understand it.

7) YOU CAN ALWAYS EXIT ANYTIME YOU WANT

If you have invested, surely you have read the fine prints and you have planned your exit strategy. Even if your debt is as simple as a credit card, as you aged, wouldn’t you want to close all those cards that are eating up your disposable cash and start to be smarter? If you had bought a property which you planned to rent but it is giving you negative cash flow, shouldn’t you check the market value and see if you can sell it for a good price? Why must you have debts that are not helping you to gain more money?

8) THERE’S ALWAYS OPPORTUNITY EVEN DURING THE BAD TIME

Yes, the oil prices dropped, the ringgit is at its lowest and the economy is going to be bad. Foreign investors are leaving in droves. People are not buying as much as they did a few years ago. If you have kept some money for such times, this is the time to buy properties. There are so many choices in the market. People rather rent than buy. If you had wanted to rent your property, you can start now. If you get good rental, don’t sell the property yet. Check your tenant properly, make sure you have an ironclad tenancy agreement and make sure you can sell the house when you get a good offer.

9) DO NOT STOP INVESTING. THIS TOO SHALL PASS.

As you reassess, exit your investment, recuperate, change tactics and reinvest your money somewhere safer, try to look for opportunities that are less risky. I’ve met so many people who insist in investing in properties but do not have any investment at all in safer portfolio such as ASB or unit trust. They rather take the high risk, high return route as if the winner-takes-all attitude is the only way for investors to live.

10) HAVE MULTIPLE SOURCES OF INCOME

Remember the time when even the government allows for its staff to have business? This happened a few years back. As much as you rely on your salary and allowance for your livelihood, why don’t you make money from what you do in your spare time? If you are a traveller or a cyclist, invite others to join you and you can charge them for organising the tour or event. Make sure you really know what you do and do it well so that the word of mouth will spread. It might just be your next career move.

This was first published as an article with Property Insight Magazine, March 2015 edition http://propertyinsight.com.my/time-to-dig-in-and-reassess-your-investment/

Media appearances past few months

It has been a few weeks of non-stop media appearances for me. Some are in articles in news portals, two radio guest appearance and author appearances at one book fair.

For posterity sake, here are those media appearances :

My two articles in The Malaysian Insider :

One is on the issue of Gated and Guarded Community in Malaysia published on 2nd April 2013 :

Whither neighbourliness?

Another is about Affordable Housing in Malaysia published on 19th May 2013 :

Affordable housing : Political Rhetoric or Serious Solution?

Then I answered a question in News Straits Times pullout Real Estate and Decor about discharge of a strata property :

Q & A on 5th April 2013

And my article was published by News Straits Times : Real Estate and Decor about Gated and Guarded Properties in Malaysia on 3rd May 2013 :

One day inside a gated and guarded development

In April and May, I had two radio interviews by BFM Radio both in The Property Show. Here are the podcasts from the show. Here is my interviewer, Azura Rahman, from the show :

First interview was about my new book :

40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

My second interview was about Malay Reserved lands in Malaysia :

Understanding Malay reserve land

Finally during the recent Kuala Lumpur International Book Fair at PWTC which happened between 26th April and 4th of May 2013, my new book was launched and I made two author appearances at my publisher's booth :

That was it. I just realised I had a busy April and May 2013. It was good to be busy.

You can still get my book here, at True Wealth Sdn Bhd's Book Planet website :

40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

Credit Reporting Agencies in Malaysia : What is CENTRAL CREDIT REFERENCE INFORMATION SYSTEM (CCRIS) and CREDIT TIP OFF SERVICE (CTOS)?

This is an excerpt from my next book. The book's working title is 40 Questions You Should Ask Your Lawyer Before Taking A Housing Loan in Malaysia, another book under Ask The Lawyer series. I am targeting for it to come out next year, 2014. Do get my new book 40 More Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia here. Any questions, comments and inquiries are welcomed.

CCRIS and CTOS are credit reporting agency, a newly-governed industry in Malaysia. People applying for housing loans in Malaysia will have their financial information checked by the financial institutions they are applying the housing loan to. Here is excerpts for one of the question in my book under the title above :

Central Credit Reference Information System (CCRIS) is an online credit checking system operated by Bank Negara Malaysia with all Malaysian’s resident’s credit information in the system. As long as that person has an identification card and credit history, he can check his credit history in CCRIS. CCRIS is managed by the Credit Bureau of the Bank Negara Malaysia since 1982 and formed under the Central Bank of Malaysia Act 1958. The Credit Bureau collects the credit information of any borrower from all financial institutions in Malaysia and then issue a credit report when it is requested by any of the financial institutions governed by Bank Negara Malaysia. Central Credit Reference Information System is a computerised database and there is nearly more than nine millions borrowers’ credit information currently being stored by Central Credit Reference Information System. All the information about the function of Credit Bureau and Central Credit Reference Information System, can be found in the Bank Negara website on Credit Bureau : http://creditbureau.bnm.gov.my.

The financial institutions are required to report the name, identification number, address and credit facility details such as type of credit facilities, credit limit, outstanding balance, conduct of account and any legal action status. A borrower can check your Central Credit Reference Information System report at Bank Negara or Bank Negara’s various branches in Malaysia. A borrower cannot ask a representative to check his own Central Credit Reference Information System report. Under the various banking laws including Banking and Financial Institutions Act 1989, Islamic Banking Act 1983 and Central Bank of Malaysia Act 1958, confidentiality is imperative in dealing with Central Credit Reference Information System report. It can only be released with a financial institution authorised by an applicant for a housing loan or any other loans to get the Central Credit Reference Information System report from the credit bureau. Upon getting the Central Credit Reference Information System report, the financial institution and its officer can only use it to process the loan and not use it for anything else such as marketing its products

Financial institutions giving housing loans or any other loans to borrowers in Malaysia need up-to-date information about the applicants of the loans. Central Credit Reference Information System is where these financial institutions go in order to get the credit history of the borrower. The Credit Bureau sourced the information from all licensed commercial banks, Islamic banks, investment banks and several other financial institutions. In order to ensure the borrower’s data is up-to-date, verifications are done against the data at the National Registration Department and Companies Commission of Malaysia. Here are the list of information listed in the Central Credit Reference Information System report :-

1.       Outstanding credit including housing loan, hire purchase, credit card, overdraft and personal loan;

2.       Special attention account under close supervision by any financial institution; and

3.       Application for credit

All these three types of information will be for anything under the applicant’s own name, joint name with another person, sole proprietorship, a partnership or a professional body.

Any account fully settled or application rejected, deleted or cancelled are not included in the report. Credit repayment behaviors are listed at the end of the report for outstanding credit report or special attention credit report with 1, 2 or 3 or more stated according to the month in a year for the last twelve months. These can affect certain loan application, including housing loan. Any financial institution processing an application from an applicant of a housing loan will give special attention to any account with late or missed monthly installment payments, high debt servicing ratio between the borrower’s take home income and the debt the borrower already have, high utilisation of approved credit such as credit card, too many loan applications and any loan under litigation or special attention account. Unless it can be disputed, it is good for a borrower to clear some of the debts before applying for a housing loan.

Any borrower can dispute your credit report in Central Credit Reference Information System by first going to the bank which has entered the wrong information and then at any of the Bank Negara branch. Any financial institution supplying the inaccurate report must rectify any inaccurate or incomplete information immediately by sending it to the Credit Bureau. The financial institution is obligated to reflect the latest credit position of the borrower. A data review by the Credit Bureau can be done if the borrower is not satisfied with financial institution. The borrower can get and filled the Request for Data Review form to do a data review. It can be downloaded from the Credit Bureau website and then submitted to any Bank Negara Malaysia’s branches.

Credit Tip Off Service (CTOS) is a different form of credit report used by some financial institutions in Malaysia. Credit Tip Off Service is not related to Bank Negara Malaysia or any government agency and it is not endorsed by any of them. Credit Tip Off Service is run by CTOS Data Systems Sdn Bhd, a private company, better known as CTOS Sdn Bhd. The website for CTOS Sdn Bhd is http://www.ctos.com.my/ with its office in Megan Avenue 1, Jalan Tun Razak, Kuala Lumpur. CTOS Sdn Bhd collects data made public in news, court filings of legal proceedings allowed to be made public by the court, Companies Commission of Malaysia, information provided by the borrower and any of the borrower’s creditors, people or companies the borrowers registered with such as clubs, memberships and even include utilities companies. CTOS Sdn Bhd also collects a person’s directorship in companies either listed or not and all his sole proprietorship or partnership holdings. CTOS Sdn Bhd is registered under Credit Reporting Agencies Act 2010 and governed by the Securities Commission of Malaysia. Any refusal by CTOS Sdn Bhd to update its record can now be reported.

A few people claimed Credit Tip Off Service is an illegal gathering of information by a private company and is a blacklist. There a few evidence of this as CTOS Sdn Bhd is a company gathering information made public relating to credits and liabilities. CTOS is a lead information system with clients that need to check a particular person or company’s background, especially financials, in their normal course of business such as bankers, legal firm, insurance company and credit card companies. CTOS Sdn Bhd does not update their database or delete a settlement on any of the borrower’s case automatically unless the borrower or the person being checked informs CTOS Sdn Bhd of such matter. CTOS Sdn Bhd also claims it is not a blacklist report. Having a credit report under CTOS Sdn Bhd does not mean an applicant of a housing loan will not get approved. Applicants may receive a rejection from the bank the borrower is applying for a housing loan with the word ‘CTOS issue’ and the best course it to get in touch with CTOS Sdn Bhd to know what is the issue if the bank is unwilling to divulge the information. Getting credit especially a housing loan from a financial institution is still about the borrower proving himself to be credit worthy. Any data from CTOS Sdn Bhd is a public record and a borrower can get this record at his disposal too. A settled court case or a bankruptcy already being settled will have proofs and the borrower can update the financial institution the borrower is applying the housing loan with the proof.

The difference between Central Credit Reference Information System report and Credit Tip Off Service report is the weight given to each report. Most financial institutions give more weight by rejecting a housing loan application when they found the applicant has a ‘CTOS issue’. Central Credit Reference Information System is run by Credit Bureau under Bank Negara Malaysia, with banking laws to back the collection of information. Credit Tip Off Service is not imposed on financial institution as it is not run by any government agency but is supervised by Securities Commision. Other than these two agencies, there are several other credit reporting agencies such as Financial Information Service Sdn Bhd (FIS) and SME Credit Bureau Sdn Bhd. The unscrupulous use of a borrower’s or an individual’s information, especially financial information by any agency under Credit Reporting Act 2010 shall be reported to Securities Commission. With the coming of the Personal Data Protection Act 2010, the usage of personal data on individuals by financial institutions are now under another layer of scrutiny including disallowing the financial institutions’ credit department to divulge an applicant’s or a borrower’s data to its marketing department unless expressly allowed by person.

Household debt clean-up : A personal journey

Personal financial stability is not something easy to resolved. If you were ever in an economy classroom, either during high school or as part of your college or university degree, no matter how much you understand the concept of 'want' and 'need', believe me, you will never get to feel the 'forcefield' pulling you to spend on the unnecessary thing in life, until you have 'disposable income'.

Whoever invented modern credit is evil. Financial institutions, be it banks or cooperative or finance companies, is always on the prowl for you to take whatever they can give you in the form of credit cards and personal loans before you have even step out into the real world and become part of the 'workforce'.

However, how else can you afford the basic thing in life if not for credit? It is a Catch-22 situation as most of the basic needs like food, a place to live and transportation cost money. Coupled that with the self-appointed financial guru who propagates the need to own your own place and transport (though this now seems to have been losing steam), you will feel left out if you don't own a house or a car by a certain age. Then to make matter worse, you live in a world where everywhere you turn, you are bombarded by advertisement promoting so many things like a brand handphone, a computer, a tablet, the need to travel to see new places and more expensive version of your need.

That was what happened to me.

In my years of living, I have bought more than one house, sell a few, kept a few; bought a few cars, sold a few, had two cars at one time, one car at another time, owned cheap cars, owned expensive cars; bought more than one personal computer for my house, left it dusty before buying a newer version; owned a tablet; a few smart phones. All this thanks to the supposedly disposable income I have which I increased to more than 10-fold thanks to the easy approval of credit cards and personal loans. Some are obtained through 100% loans which allow me to buy cars and houses (it doesn't exist for awhile in Malaysia but it is making a comeback through various affordable housing scheme)

When 2012 arrived, I am more than a few hundred thousand Ringgit Malaysia in debt. One thing I have always made sure is to never have any arrears in any of my installments. My business helped me to make sure of this but it is not a perfect personal financial stability that I aspire to have. So, I started to get my personal finance in order.

I listed out my debts which include a car, a house, an Amanah Saham Bumiputra (ASB) loan, a personal loan and a few credit cards which when tabulated comes up to more than RM100,000-00 disposable income but are mostly maxed out. Some of the credit cards are there as I have taken a balance-transfer credit card to lower down the interest charged on my other credit card debt. I was surprised that more than half of my drawing from my businesses goes to paying the credit card debt. And yes, the first thing to a cure from an addiction is to admit that you have a problem. Then, look for a solution.

Another myth in this modern age is to make sure you have savings for your old days. Yes, that is not bad advice. However, how about living your old age without debt and having a stream of cash supplementing you? That is equally important right? Without delay, I listed my assets and see whether I can match my liabilities.

My assets seem to be part of the problem too. A house still under a mortgage. An ASB certificate which is not mine. A few unit trusts. The car is never an asset as it is always a liability. After calculating all this, I find that it is easier for me to cancel a few loans such as the ASB loan and the few credit card, especially those which have high interest charged to it every month. Then I decided to sell my car which was already 6 years old this coming May and bought a cheaper car. I then did one of the most surprising decision ever, even to me. I put the current house I am living in on the market. At a very steep price. Canceling the loans allow me to be liquid as dividends are paid for the ASB for 2011, unit trusts are sold with cash as payment and the car was sold at a good price.

The journey is not over yet. I have only cleared 30% of the debt I have. I still have to see whether I can get the price I want for my house. What I do after will require another entry. As I cleared a few of the credit card debt, banks which always on the look-out for someone who has more than he can spend is already calling more offering me new loans. Then, my feet, knowing me, starts to itch to travel somewhere far. 

Let us see how much of the 'want' I can resist so I can totally clear up the debt.