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The process of buying or selling a property can already be a pretty complicated process for most first-timers.
Now, if you've managed to sign a good deal with someone eagerly wanting to buy your family home, you'd hope that everything will go smoothly.
But then, the other party keeps delaying the full payment to you, with a vague excuse about not having the proper permission to proceed.
You may be asking: Didn’t the Sales and Purchase Agreement (SPA) state that the homebuyer must pay the balance of the purchase price within 3 months?
Yes, it does state that. So, why is it taking more than the stated 3 months for the sale to be finalised and completed?
One of the reasons could be that the SPA is still subject to obtaining the State Authority’s Consent (also known as 'State Consent').
PropertyGuru Tip 'State Consent' is the prior approval that's required from the relevant state authority when it comes to any acquisition of a piece of property.
If this is the case, the 3 months’ period to pay the balance of the purchase price will only start to run AFTER obtaining the State Consent, which can usually take up to a few months.
What are some of the scenarios that cause this?
There are several situations where a State Consent could be required. The most common ones are:
- The title to the property is subject to a restriction in interest
- The purchaser is a foreigner
For the first situation, in order to find out whether that property you're selling/buying is subject to a restriction in interest, you can look at the title itself, at the description for “Sekatan Kepentingan”.
Check to see if the following sentence appears next to the description:
“Tanah ini tidak boleh diberi, dipindahmilik, dipajak atau digadai tanpa persetujuan pihak Berkuasa Negeri”.
That statement essentially means: "This land is not to be transferred, mortgaged or charged without the consent of the State Authority."
If you see that sentence, an application for State Consent must first be made and obtained BEFORE the property can be transferred to the purchaser under the SPA.
This particular application is normally made after the signing of the SPA, and submitted at the relevant land offices.
Who is responsible to apply for the State Consent?
Unless the SPA says otherwise, it's usually the owner or vendor’s responsibility to apply for the State Consent's to transfer.
After all, it's the owner or vendor who wants to sell off their property!
How long does it take to obtain a State Consent?
In different states and land offices, the duration for each can be different.
For example, in Wilayah Persekutuan Kuala Lumpur and Selangor, a State Consent can generally be obtained within 1-2 months.
What if the purchaser is buying the property with a home loan, and their bank requires the property to be charged as collateral?
PropertyGuru Tip A collateral is a form of security which a financial institution requires from someone wanting to take out a loan. So, in case the person were to suddenly stop his/her repayments, the financial institution can seize those assets.
Doesn't matter! A State Consent is still required and usually, the bank’s lawyer will also apply for a State Consent to charge the property.
Having said that, if a purchaser buys a property from public auction at the High Court or land office, a State Consent is not required even if the property has a restriction in interest.
Want to know if an auction property will be a good buy or terrible waste of money? Here's all you need to know about one before you seal the deal!
With regards to foreigners, our National Land Code stipulates that a foreigner can only acquire land/property after prior approval of the State Authority has been obtained (upon submitting an application in writing).
In simpler terms, foreigners are subjected to apply for State Consent if they intend to purchase a property here.
Besides that, there are also certain requirements imposed upon foreigners who're home shopping.
Some of these include a minimum threshold for purchase price, as well as types of property, which varies for different states.
Apart from those discussed above, there are also other (although less common) situations where consent from other authority is required in a SPA transaction.
For example, when buying a low-cost house in Selangor, consent from the Lembaga Perumahan dan Hartanah Selangor (LPHS) is required.
Relevant Guide
As the type of consent required in each case can be different, it's best for the purchaser to seek clarification from their lawyer handling the SPA transaction.
It's better to be safe than sorry, yes? 😉
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Allen Khor is an advocate & solicitor in Messrs Allen Khor & Partners. His areas of practice include conveyancing, civil litigation, divorce, probate and administration. The telephone number of the firm is 012-283 0656.
*This column is for your information only and does not constitute legal advice for your specific needs. It cannot disclose all of the risks and other factors necessary to evaluate a particular situation. You should seek and obtain independent legal or professional advice for your specific needs and situation.
