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  • 22 May 2024

Boundless Horizons|Lee Sok Wah: The Procedures for Buying and Selling Property

One day, a client came to see Ms. Alice Lee, saying they had found a property they liked and wanted to buy it with cash. They asked if it was possible to transfer the title immediately after payment. Ms. Alice Lee responded that it wasn’t possible because purchasing property is not as simple as shopping at a mall, where you pay and take the goods immediately. Property transactions require compliance with the National Land Code and adherence to the specific land laws, procedures, and transfer fees of the state in which the property is located.

The Two Types of Property Purchases

In simple terms, property purchases can be divided into two types:

  1. Buying from a Developer: Since these properties are still under construction, payments are made according to the stage of completion. Once the property is built, the developer needs some time to apply for individual titles from the land office before distributing them to the buyers. Therefore, the timing of the title transfer depends on the developer’s efficiency.
  2. Buying from an Owner: This involves buying an already completed property. The buyer must first pay a small deposit to the seller to obtain the title deed information, allowing their lawyer to conduct a land search with the specific land office. After the lawyer confirms the landowner’s identity and ensures there are no unusual restrictions on the title deed, both parties’ lawyers will draft a contract for the buyer and seller to sign. At the signing of the sale and purchase agreement, the buyer needs to pay a 10% deposit to the seller, with the remaining 90% to be paid within three months of the contract becoming effective.
海阔天空|李素桦:房产买卖的手续

When Does the Contract Take Effect?

Generally, it takes about three months to complete a property transaction. Signing the sale and purchase agreement is just the beginning. Other procedures include:

  • State Government Approval: If the title deed stipulates that land transfer requires state government approval, the seller’s lawyer needs to apply for it. The three-month period only starts after written approval is obtained, marking the effective date of the contract.
  • Interest-Free Period: The three-month interest-free period allows both parties enough time to handle various tasks. If the transfer is completed within this period, the buyer does not have to pay interest on the remaining amount. If it takes three to four months, the buyer must pay 8% interest on the remaining amount. After four months, the seller has the right to forfeit the 10% deposit and cancel the sale.

Additional Procedures

From the contract’s effective date, if the seller still owes a bank loan, their lawyer needs time to redeem the property. If the buyer is financing the purchase with a bank loan, this also requires time. The buyer’s lawyer must apply for stamp duty valuation from the tax office, and the seller’s lawyer must report property gains tax, among other tasks. All these procedures take time, hence the necessity of the three-month interest-free period.

Special Conditions

The above describes typical property transactions. Some buyers and sellers may have special conditions, which can be clearly stated in the contract if both parties agree.

Respecting Lawyers’ Work

Handling property transactions involves a significant workload for lawyers. Unfortunately, the professional fees stipulated by the Bar Council are only 1.25% of the property’s value, much lower than the 2% to 3% charged by real estate agents. Some agents even encourage clients to further reduce lawyers’ fees, leading to exploitation. This unhealthy trend may deter young people from entering the legal profession. Consumers should respect lawyers’ expertise to ensure they can continue providing essential services in property transactions.

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