PART II: PERFECTION OF CHARGE

PERFECTION OF CHARGE (“POC”)

Previously, we have explained about the Perfection of Transfer (“POT”) and for the purpose of this article, we will explain on the Perfection of Charge (“POC”); a complementary process of POT but only applicable to those who are purchasing any property by way of mortgage from any financial institution.

POC is the same dealing as defined under Section 241 of the National Land Code 1965 (“NLC”); created upon which a land and/or property being used as a collateral or security by the Registered Proprietor in return for a mortgage given by any financial institution.  Accordingly, the same is duly registered in the Original Individual/Strata Title (“Title”).  As a matter of fact, it is a process of registering your Financier/ Bank as the “Registered Chargee,” in the Title that confers the interest and benefits of the land /property but not your ownership status, to your Financier/Bank[1].  By doing so, your Title will be in the custody of your Financier/Bank until thefull settlement of your mortgage.  A question of fact: can you refuse to execute the POC? The answer is simply no.  This is because, prior to any release of payment from your Financier/Bank during your purchase of the land/property, you normally are compelled to execute another security documents i.e “Facility Agreement,” “Deed of Assignment” which expressedly assign all your rights and benefits to the Financier/Bank.  Also, such Financiers/Banks, would require you to always commit to registering and forwarding the title for their safekeeping. Hence, there is no escape route for you from executing the POC.  Basically, title here means the legal document that records every detail/information of the land/property, the ownership as well as any interest that binds to the land/property, hence the need for POC to be done.

 Example Charge Form (16A)

Procedure(s) for POC

POC procedure(s) basically is not very much difference from POT whereby there are 2 main stages involved i.e processing stage and the registration stage.

In the processing stage, the Purchaser is required to execute the Charge Form (Borang Gadaian) as per the National Land Code requirement (Form 16A)[2].  Next, the Form 16A as well as any other required documents will be forwarded to the Financier/ Bank for their execution.  Upon receipt of the duly executed Form 16A, the solicitor will then proceed with the adjudication process at the Lembaga Hasil Dalam Negeri (“LHDN”).  Whilst POT calculation is based on the “Ad Valorem Duty,” Form 16A will be stamped on a fixed fee of RM10/per copy as the “Ad Valorem Duty” charged on the previous Facility Agreement (the Principal Document).  Upon payment of the Stamp Duty, that Form 16A is ready for registration at the relevant Land Office.  During the registration process, the solicitor will usually register and present Form 16A as well as the completed Form 14A (Transfer) at the Land Office.  Lastly, after both forms are duly registered, the title will then be forwarded to the Financier/Bank the soonest possible. Only then, the POC procedure is said to be completed.

Document(s) for POC

One might wonder what are the documents required for the POC? In a nutshell, make sure you and/or your appointed solicitor have the following documents in order to prepare and proceed with the POC procedures,[3]:

  • A copy of the identity card of the Purchaser and/or Borrower;
  • A copy of Title;
  • A copy of the Facility Agreement (stamp duty paid);
  • The latest assessment receipt; and
  • The quit rent receipt.

 

Basically, POC is rather a straight forward procedure in which it is important in order to finalize the security of the Financier/Bank.  You might have no option not to do the POC as your Financier/ Bank may also demand you to perform your obligation as explained earlier.  Besides, should you choose to undertake POT, you have no other alternative except POC as well!  In case you need any help or further explanation on this topic, you may always contact us!

Prepared by,

Nur Hafizah Binti Abdullah

Legal Associate

[1] Tan, C (2016, March 06). Understanding Charge as Security Instrument. Retrieved from EdgeProp: https://www.edgeprop.my/content/understanding-charge-security-instrument

[2] Section 242 of the National Land Code 1965

[3] Perfection of Transfer and Perfection of Charge: Everything property buyers need to know, https://www.iproperty.com.my/guides/perfection-of-transfer-perfection-of-charge-malaysia-74571

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