Bumi Lot Dilemma

We have a problem at the office.

We have a customer who wish to refinance her loan from one bank to another. And we are acting for this other bank. During our preparation for the loan release, we realised that the customer who is a pure chinese has actually bought a property tagged as a bumi lot!

Now, if she has bought it from the Developer directly, the issue might not be so complicated, problem is she has bought the property under a subsale from a bumiputra! And the most curious thing is that her previous financier approved her loan!

How did the sale AND the loan went through is not for us to know as it was done by another firm and the lawyer in charge then apparently is no longer with that firm.

For one, the Developer endorsed their consent for the subsale of the bumi lot from a bumi to a non bumi! When enquired with them, they simply say, well they did “point out” to the solicitors handling the subsale that the property is a bumi lot… Is that all that is to the Developer? They will consent as long as the administration fees for the consent is paid? Developer will not be responsible if subsequently when the individual title to the property is issued it can’t be transferred to the sub-purchaser who is a non bumi?

As solicitors for a finance institution, our concern is that if subsidiary title is issued during the term of loan, land office would not allow the transfer of the subtitle with a bumi lot restriction endorsed thereon to the supurchaser (the customer) directly. If the customer can’t get her title to the property then our client, the bank’s charge cannot be lodged as well!

The other firm that handled the subsale brushed off the matter lightly saying in their letter that they have spoken to one land office officer who told them that bumi lot title only means that the property will be restricted from sale to non bumi for a period of 5 years, and that 5 years runs from the date of the Sale and Purchase Agreement (as in this case, when the customer bought the bumi lot, the bumiputra first owner has owned the property above 5 years).

BUT, even if the Developer had signed the Memorandum of Transfer to the sub-purchaser in escrow… technically, I would think, if the sub title is endorsed with a restriction to a bumi owner, it’s not possible to effect the registration of the direct transfer of the subsidiary title to the sub-purchaser who is not a bumiputra!

Because the title would specifically states that the issued title is a bumi lot and that “the owner” cannot transfer the title to a non bumiputra within five years! Ie, the title already “assumes” the first owner to be a bumiputra!

I vaguely remember seeing a bumi lot title not long ago but I can’t remember which file of mine… I will try to dig out that file and scan the relevant text here…

…. this article is to be continued …