Transfer property between friends is quite common nowadays because it is a new norm to purchase a property with our friends, boyfriend, or partner.
Hence, the idea of co-own a property provides more comfort among people, and it also helps to lower the individual cost of buying a house.
Among others, applying for a home loan can be easier with a joint loan as the bank will access the capability to repay two individuals instead of one.
In this article, I will be writing about transferring property between friends. Thanks to a reader this morning for reminding me to write this article.
However, if you are looking for information about property transfer between family members, you should read this article.
Transfer of Property Between Family Members in Malaysia – Love and Affection Property Transfer
BUYING A PROPERTY WITH FRIENDS, PARTNERS, AND SIBLING
People can be in a relationship and not necessarily married, and they do have needs. Maybe one day they decided to buy a house together.
Or maybe you have a best friend for life. And the idea of buying a house with your best friend sounds like an amazing opportunity.
Or you decided to buy a house with your sibling. Just like I did – with my sister.
These partnerships or relationships often happen because we want to grab this hard to turn down investment opportunities.
However, buying a property together can be fun, exciting, and thrill. But, sometimes, it might not turn the way we plan.
Sometimes two people can argue, fight, and have a disagreement. And things can go south quickly if both parties can’t find a solution or middle ground. And this can cause both parties to end the investment.
If you decided to end it.
You have two ways to do it.
a. You can sell the property. And share the profit or loss.
OR
b. If one of the parties is interested in keeping the property, another party can transfer his/her shares of the property to the party that wants to keep it.
HOW TO TRANSFER PROPERTY BETWEEN FRIENDS, PARTNERS, OR SIBLING?
When you decided to keep the property, you can start by hiring an experienced lawyer to do so, or you can reach us at 012-6946746, and we will help you.
Let us know if you need any recommendations for a good lawyer. We have a few that exceptionally reliable.
By the end of this article, we will share the step by step ways of doing property transfer by engaging our services.
So, you have two ways to do the property transfer.
- By Memorandum Of Transfer (MOT)
- By Sale and Purchase Agreement (SPA)
BY MEMORANDUM OF TRANSFER (MOT)
Transfer by way of Memorandum of Transfer will create two entities – Transferor and Transferee.
The transferor is the party that agreed to transfer his or her share to another party (transferee). In contrast, a transferee is a party that receives the transfer shares from Transferor.
There is only one Memorandum of Transfer lawyer quotation when doing by way of Memorandum of Transfer.
BY SALE AND PURCHASE AGREEMENT (SPA)
By way of Sale and Purchase Agreement will create two entities – Seller and Purchaser.
Seller is the party that sells (transfer) the property to another party, which is Purchaser. In comparison, Purchaser is the party that RECEIVES the property from Seller.
When it comes to preparing of Sale and Purchase Agreement, there will be TWO lawyer quotations.
One is for Seller, called Seller SPA Lawyer quotation. And the second is for Purchaser, called Purchaser SPA Lawyer quotation.
Normally, these two quotations’ total cost will be more expensive than the Memorandum of Transfer lawyer quotation.
Need a quotation for MOT or SPA, click below.
REAL PROPERTY GAIN TAX (RPGT) IMPLICATION
Real Property Gain Tax is a property tax charged by the government. When an owner or the Seller sells a property and gains substantial profit from the transaction, they will be charged with Real Property Gain Tax.
By way of Sale and Purchase Agreement
When one decided to do a property transfer by way of the Sale and Purchase Agreement, there will be a direct implication on Real Property Gain Tax.
If the transaction shows a profitability side, there will be Real Property Gain Tax charged to the Seller.
However, if there is no exchange of money or gain from the transactions, a Seller can request a waiver on the Real Property Gain Tax.
Besides, everyone can request once in a lifetime Real Property Gain Tax waiver from the Inland Revenue Board Of Malaysia ( Lembaga Hasil Dalam Negeri Malaysia).
By way of Memorandum Of Transfer
If one decided to go by way of Memorandum Of Transfer, there is no Real Property Gain Tax.
If the new owner decided to sell the property, the share being transferred would be reduced to zero value when calculating Real Property Gain Tax in the future.
For example,
The property value is RM500,000.
A and B co-owned the property on a 50:50 basis. A owned 50%, B owned 50%. B decided to transfer his shares to A. A will owned B portion, another 50%. In the end, A will own 100% shares on the property.
3 years down the road, A decides to sell the property.
A sold the property for RM800,000. 50% of RM800,000 is RM400,000.
Earlier, A and B bought the property for RM500,000. 50% of RM500,000 is RM250,000
So, in the Real Property Gain Tax point of view.
For the first 50% (originally owned by A), the profit gain will be
RM400,000 – RM 250,000 = RM150,000
For the second 50% (transferred by B to A), the profit gain will be
RM400,000 – RM0 = RM400,000
The total profit gain is RM150,000 + RM400,000 = RM550,000
RM0 value because A has benefited from owning the property shares transferred by B without consideration or money exchange.
However, not to worry, everyone can request once in a lifetime Real Property Gain Tax waiver from the Inland Revenue Board Of Malaysia (Lembaga Hasil Dalam Negeri Malaysia).
To understand more about Real Property Gain Tax, you might interest in reading this article.
TRANSFER OF PROPERTY STAMP DUTY
There will be property stamp duty for any property transfer, either by way of Memorandum of Transfer or Sale of Purchase Agreement.
The transfer of property stamp duty is based on a scale fee. Please refer to the below table.
| PROPERTY VALUE | RATE CHARGED |
|---|---|
| For the first RM100,000 | 1% |
| From RM100,001 to RM500,000 | 2% |
| From RM500,001 to RM1mio | 3% |
| The subsequent Amount | 4% |
for example,
The property Value is RM500,000.
For the first RM100,000, 1% : RM100,000 x 1% = RM1000
From RM100,001 to RM500,000, 2% = RM400,000 x 2% = RM8,000
Total Stamp Duty Payable is RM9000
Note: There is NO property stamp duty exemption for transferring property between friend, partner, or sibling.
PROPERTY STAMP DUTY EXEMPTION FOR SPOUSES, PARENTS, AND CHILDREN
However, if the transfer is between Spouses, Parents, and Children. The Property Stamp Duty Exemption is below.
| TRANSFEROR | TRANSFEREE | EXEMPTION RATE |
|---|---|---|
| Husband | Wife | 100% |
| Wife | Husband | 100% |
| Mother/Father | Child | 50% |
| Child | Mother/Father | 50% |
For example,
If the Father owns the Property and he will transfer the property to the son.
How much is the Property Stamp Duty?
Let say the Property market value is RM400,000.
Formula,
For the first RM100,000, 1% = RM1000
Follow by RM300,000, 2% = RM6000
Total actual Property stamp duty is RM7000.
However, due to an exemption of 50% for a transfer between parents and children, he will be paying RM7000 – 50%= RM3500 only.
What a bargain!
COST FOR PROPERTY TRANSFER
When you want to do a property transfer, there will be some costs involved. There are two parts to the cost.
PART 1: MEMORANDUM OF TRANSFER OR SALE AND PURCHASE AGREEMENT
If chooses to do by way of Memorandum of Transfer, the lawyer will provide one Memorandum of Transfer quotation.
By doing this way, Transferor will transfer the property to the transferee by way of Memorandum of Transfer.
Or you can choose to do by way of Sale and Purchase Agreement. By doing this way, Seller will sell (transfer) the property to Purchaser.
Suppose you decided to do by way of the Sale and Purchase Agreement. The lawyer will issue two quotations – Seller SPA Quotation and Purchaser SPA Quotation.
All the quotations will be included Professional Legal Fees, Disbursement Fee, Service Tax, and Stamp Duty. However, the stamp duty will only be charged on MOT Quotation and Purchaser SPA Quotation. The Seller SPA Quotation will not have stamp duty.
PART 2: BANK’S LOAN COSTS OR ENTRY COST
When it comes to Property transfer, the existing property might still have a bank loan. If that is the case, the new owner (Transferee or Purchaser) will need to apply for a new bank loan. Unless, of course, the new owner can fully settle the bank loan in full. But that never the case.
If the new owner needs to get a new bank loan, there will be a Bank loan cost, or sometimes people will be calling Entry Cost.
Entry Cost is included Loan Agreement Legal fees, stamp duty, disbursement fees, service tax, and valuation fees.
Typically, the cost is about 2-3% of the original loan amount.
For example,
If the original loan amount is RM500,000.
You can expect the Entry Cost is about RM10,000 to RM15,000.
Formula,
RM500,000 x 2% = RM10,000
RM500,000 x 3% = RM15,000
However, if the new owner does not require any bank loan financing, this second part cost can be omitted.
I WANT TO PROCEED. WHAT SHOULD I DO?
If you are interested in proceeding with a property transfer, we advise you to follow the following steps.
a. For a starter, you can reach us at 012-6946746 or leave your number, and we will call you back.
b. We will hear your story and try to understand your situation. At the same time, we will check your profile and make sure you can do a property transfer. Yes, not everyone is suitable. Sometimes because of your profile or property background.
c. If you are suitable, we will match you with our experience bankers and lawyer. They will help you with the property transfer and bank loan. In case if you need a bank loan. The process must be done simultaneously – Property transfer and Apply for a Bank loan.
d. Once the bank granted you a loan, the lawyer will prepare the necessary documents to sign for both the Property transfer and Bank loan agreement.
e. Once all documents are signed, the lawyer will do the necessary works to complete the transaction.
f. The bank will disburse the loan. And you will start paying for installment.
g. The whole process might take about 3-4 months (Freehold property) or 6-7 months (leasehold property). The process for a property without a bank loan will be faster.
So, are you ready to proceed? Call us at +6012-6946746. Speak to Mr. David.
If you guys are interested in getting an accurate MOT, SPA, or Bank Loan Quotation, send your request by clicking HERE.
Or fill-up the form below, and we will send you the Quotation to your WhatsApp or Email.
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TRANSFER OF PROPERTY BY LOVE AND AFFECTION MALAYSIA
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