The Challenge of Transferring Property from Bumiputera to Non-Bumiputera

The Challenge of Transferring Property from Bumiputera to Non-Bumiputera

September 27, 2017   Property Basics 101, Property Talk   No comments Laura Lee

Disclaimer: The legal information shared below merely presents a general understanding of the topic from a layman point of view. For further clarification of such issues, we highly recommend you consult a legal professional.

Have you ever wondered about the differences between Bumiputera property and non-Bumiputera property? What issues would you encounter when a non-Bumiputera buyer wants to buy property from a Bumiputera seller? What are the laws or regulations related to transaction of Bumiputera lots, or Bumiputera-owned property?

UCSI College last month held a guest lecture by two real estate experts, Hartamas Real Estate associate director Christopher Chan, and Amir Toh Francis & Partners lawyer Ivan Chan, titled “Issues & Challenges Facing the Transfer of Real Estate From Bumiputera Vendors to Non Bumiputera Purchasers in Malaysia”. Here are some very useful takeaways we obtained from the session, which provides a sneak peek into one of the many topics students will be exposed to throughout the duration of the Executive Diploma in Real Estate (EDRE) programme at UCSI College.

General overview of Bumiputera lots/units

• Bumiputera lots rarely have labels on their titles. In certain states or documents, the label ‘Bumiputera lot’ can be found as a restriction-in-interest (RII) on the title of the property.
• There is no specific clause defining the word ‘Bumiputera’ in the Federal Constituion, unlike for the word ‘Malay’.
• The term ‘Bumiputera lot’ relates to the Bumiputera quota imposed by the authorities on the housing developer on each housing development. It requires Bumiputera ownership to be of a certain percentage at any one time without any mention of it at all in the SPA.
• In cases where the property is not labelled as a Bumiputera unit or any of the documents (either in SPA or title), a Bumiputera owner can apply for consent from the state authorities to transfer the property to a non-Bumiputera purchaser.
• [Strata property] If the property is without a title (i.e. still under a Master title), then a letter of confirmation must be obtained from the developer (assuming under HDA) to transfer the property; the developer would then have to consider whether the Bumiputera quota has been achieved.

Restriction-in-interests (RII)

Known as sekatan-sekatan kepentingan in BM, restriction-in-interests (RII) are commonly imposed to restrict property ownership and its transferability rights. They are mainly aimed at balancing socio-economic patterns of land ownership in Malaysia.

Note: Freehold titles sometimes have RII stated in the fine print of the title deed. As a responsible agent or negotiator, be careful not to overpromote or overpromise to clients when you are selling a property to a potential buyer, especially when you are unclear on what the RII entails.

Categories of RII on land titles

There are 3 categories of restriction-in-interest on land titles:

• Malay Reserve Land
• Bumiputera
• Transfer of ownership

Malay Reserve Land (MRL) restrictionA special category of land confined within the boundaries of a state, which can only be owned and dealt with by Malays or persons deemed native residents of the state. This is to provide for securing the Malays their interest in land. It is also to prevent interests in land from passing out of the hands of the Malays. Malay Reserve Land cannot be transferred or charged to any person other than a Malay, and is subject to the provisions of the Malay Reservation Enactment. For example, most lands in Kelantan are held under Malay Reserve Land title.

Bumiputera restrictionThis type of restriction varies by state, which have different conditions as stated in the title. For example, in Johor, a landed freehold property endorsed with “Bumiputera” title cannot be transferred to a non-Bumiputera without consent of the state authority. As another example, in Melaka, a leasehold landed property with “Bumi lot” title must obtain consent from the state authority in order to be transferred to a non-Bumiputera, whereas if it is a Bumi-to-Bumi transfer, consent to transfer is not required. Of course, there are many different iterations of these RII that vary from state to state, and described in the respective property titles.

Transfer of ownership restrictionSometimes, the transfer of ownership restriction does not mention Bumiputera or Malay at all, which makes it much more difficult to pinpoint the cause of a transfer application being rejected. In some cases, the only written restriction stated on the legal document is having to obtain consent from the Land Office in order to transfer property. However, sometimes the transfer may be rejected due to other reasons, in which case the vendor and seller may have to make multiple appeals.

No restrictionIn the case where there is no specific restriction stated, in the event that a Bumiputera owner sells property to a non-Bumiputera purchaser, the SPA can be expected to be freely transacted without rejection by the land office/registry, as there is no requirement to apply for consent to transfer from the state authority.

Multiple appeals are possible

If the property already has a title, then the transfer can be approved if a valid reason is given to the land office. One of the reasons given could be that the seller has tried – albeit unsuccessfully – to sell to a Bumiputera purchaser. In the event the application(s) to transfer is unsuccessful, don’t give up – multiple appeals can be made to the land office or state authorities as long as you are able to provide plausible reasons with valid proof.

In a nutshell…

• The seller and buyer should first establish the land title category and restriction-in-interest of the land title in order for each party to make the necessary decisions and preparations.
• If a Bumi seller disposes of a property (with no RII on the individual/strata title) to a non-Bumi buyer, the presumption is that the transfer will not be rejected by the land office/registry.
• If a Bumi seller disposes of a property (with RII on the individual/strata title) to a non-Bumi buyer, the presumption is that the transfer might be rejected by the land office/registry.
• If the application for consent to transfer is rejected by the land office/registry, the Bumi seller can submit an appeal (or multople appeals) based on compelling reasons.
• For transactions involving properties held under Master title (i.e. strata property), the buyer should obtain verification from the developer whether it is a Bumiputera lot/unit.
• If it is a Bumiputera lot/unit with no RII on the Master title, then it may be advisable for the non-Bumi buyer to proceed with the property purchase.
• If the developer confirms that the Master title has a RII and is a ‘Bumiputera status property’, then it is not advisable for the non-Bumi buyer to proceed with the property purchase.

Read from :
https://www.estate123.com/insight/2017/09/the-challenge-of-transferring-property-from-bumiputera-to-non-bumiputera/