Deed of Assignment and Grant of Probate: Why Are These Legal Documents Important?
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Homebuyers will encounter a number of legal documents throughout the property buying and selling process. An important one is the Deed of Assignment, which facilitates a property transfer. Meanwhile, the Grant of Probate is necessary for estate administration – which is the administering of a deceased person’s will (and the property left behind).
During the home buying process, you will encounter a mountain of documentation that you will need to sign. Depending on what stage the land title is in, you may be asked to sign a Deed of Assignment. Or during the land title search, your lawyers may have discovered that one of the landowners is deceased and the remaining landowners are selling the property. Your lawyer would then ask them if probate had been taken out for the deceased landowner.
What is a Deed of Assignment?
It is a legal document that enables the transfer of ownership of the property from one party to another, for many types of property. In the law, a property may be defined as ‘things’ and ‘rights’ that can be owned or have a monetary value. It may also signify a beneficial right to a thing. Some of the most common forms of property include real estate, rental proceeds, shares, and intellectual property; just to name a few.
What are the common types of a Deed of Assignment?
1. Deed of Assignment of Transfer and Loan
These are two separate deeds commonly used in real estate. The deed of assignment of transfer is used when the property is sold before the individual or strata title has been issued. The seller would then assign the rights to the property over to the buyer, thereby giving them the proof of ownership to the property.
Whereas, the deed of assignment of loan is used by the bank to have the owner of the property assign their rights and interests in the property over to the bank as a security for the loan. This would also apply to joint purchasers who are taking a bank loan where each of them would assign to the bank their individual share of the property. For example, if two people jointly buy a property and take up a joint loan, each person would assign to the bank their 50% rights and interest in the property to the bank.
2. Deed of Assignment of Tenancy
When a number of tenants sign a tenancy agreement with the landlord for a certain rental period, and in the event where one of the tenants is unable to continue for the duration of the rental period, the landlord may sign a deed of assignment of tenancy with the tenant and their replacement. This is to assign the previous tenant’s interests and obligations over to the replacement tenant.
This is a better alternative to preparing and having all the existing tenants sign a brand new tenancy agreement.
3. Deed of Assignment of Rental Proceeds
This deed is commonly used by banks when a property that is used as security for a loan is also being rented out. The deed of assignment of rental proceeds entitles the bank to any income (from leases, rents, etc.) derived from the property once the owner defaults on the loan. For example, Company A takes out a loan from Bank A.
As security, Company A uses their factory premises which are currently being rented out to Company B as well as signing a Deed of Assignment of Rental Proceeds to Bank A. A few months down the road, Company A is unable to make the monthly repayments and defaults on the loan. Bank A can use the Deed of Assignment of Rental Proceeds to utilise the rental from Company B to offset the loan repayment as well as taking action against Company A for the balance of the loan sum.
The Deed of Assignment of Rental Proceeds may also be used between two private individuals or companies where a loan is involved.
What is the Grant of Probate?
To put it simply, the Grant of Probate is an official document that is sealed by the High Courts of Malaya and confirms that the person named on it (the executor) is entitled to deal with the estate – collect all the assets, pay all liabilities and debts of the estate and distribute the net balance to the beneficiaries.
What is the difference between a will and probate?
A will is a legal document that details what should happen to your property after your death, together with any other wishes, while probate is the legal process that gives a person, or a group of people, the authority to deal with the deceased’s assets. This process of settling a will is known as estate administration.
There are three forms of probate which depends on whether there is a will or not.
a) Grant of Probate
This is where there is a valid will and an executor has been named and is willing to act. The executor would need to apply for the Grant of Probate of the will at the High Court, per S.3 of the Probate and Administration Act 1959 (“PAA 1959”)
b) Letters of Administration with will annexed
If there is a valid will but the executor is unwilling, unable to act, or no executor had been named in the will, then the person intending to be the administrator would need to apply for the grant of Letters of Administration with the will annexed at the High Court (S.16 of the PAA 1959).
c) Letters of Administration (if there is no will)
If there is no valid will (i.e. the deceased dies intestate), the person intending to be the administrator would need to apply for the grant of Letters of Administration (S.30 of the PAA 1959).
Disclaimer: This article is merely for educational purposes and cannot be regarded as advice, legal or otherwise. If in doubt, please seek the services of a lawyer for legal advice on how to obtain probate and administer the estate of the deceased.
How do you apply for probate for estate administration purposes?
1. Grant of Probate
To make an application for the grant in the High Courts, the following documents are required:
- Death certificate
- Executor’s identity card
- Identity cards of beneficiaries
- Original copy of will
- Land titles/evidence of property ownership
- Home loan statement (if applicable)
- Bank account details of the deceased
- Documentation of any other assets
- Documentation of any liabilities or debt
Generally, it takes between 3-6 months for the grant to be obtained from the High Court. Although in Kuala Lumpur, the courts have been known to issue the grant one month from the date of application.
2. Letters of Administration with will annexed
The application process is similar to obtaining a grant of probate in the High Court, the difference being that because the executor is unwilling, unable to act or no executor had been named in the will, pursuant to S.16 of the PAA 1959, the following persons in the following order are allowed to apply and be granted the letters of administration:
- A universal or residuary legatee;
- A personal representative of a deceased universal or residuary legatee;
- Such person or persons, being beneficiaries under the will, as would have been entitled to a grant of Letters of Administration if the deceased had died intestate;
- A legatee having a beneficial interest; and
- A creditor of the deceased.
3. Letters of Administration
Obtaining the letters of administration is far more costly and time consuming as compared to obtaining the grant of probate. It generally takes anywhere from 6 months to over a year to obtain the letters of administration.
Depending on the size of the deceased’s estate, there are different ways for the administrator to obtain the letters of administration.
Estates that consist of Wholly or Partly Immovable Property, where the value exceeds 2 million
For these estates (land, house, office lot, etc.), the administrator will have to obtain the Letters of Administration at the High Court (S.30 of the PAA 1959). Furthermore, if the value of the estate exceeds RM500,000, the administrator is required to provide two sureties (guarantors) who have assets within the jurisdiction equivalent to the amount of the deceased’s estate (the sureties must also be residents in Malaysia) as security for the due administration of the estate, unless the court makes an order for dispensation.
Estates that consist of Wholly or Partly Immovable Property, where the value is below 2 million
The administrator may make an application for distribution under the Small Estates (Distribution) Act 1955(“SEDA 1955”). The application may be made at either the Estate Distribution Unit of the Department of the Director-General of Lands and Mines (“JKPTG”) or the relevant Land Office (S.4, SEDA 1955). The Small Estates distribution generally costs less and is quicker than obtaining the letters of administration.
The estate administrator would be required to submit the following documents:
- Form A of Small Estate application
- Identity cards or birth certificates of beneficiaries
- Marriage certificate of decreased (if any)
- Death certificate
- Evidence of assets
- Certified true copy of land title or official title search from Land Office
- Quit rent and assessment receipt
Upon successful application, a hearing will be held in the High Court to determine the estate administration. The administrator and all beneficiaries must be present during the hearing. If the court is satisfied that the details of the application are accurate, the Distribution order will be issued.
Estates that consist of only Movable Property and is less than RM600,000
For these estates, if there is no person who is entitled to apply for the grant of probate or letters of administration – then the interested beneficiary may apply for summary administration through Amanah Raya Berhad (S.17 Public Trust Corporation Act 1995). The letters of administration issued would be in the form of a Declaration outlining the assets.
Generally, the process of administration of moveable assets through Amanah Rakyat Berhad would take around 4-6 months.
What happens after the Grant of Probate / Letters of Administration has been obtained?
Once the Court has granted the Probate or Letters of Administration, the executor or the administrator can then proceed to do the following:
a) Collect all the deceased’s assets;
- The executor/administrator may request for all financial assets or bank savings to be transferred to an ‘executorship account’ (except for EPF and insurance payouts, as both would go into the nominee’s account, if nominations have been made).
b) Pay off the deceased’s debts and liabilities (if any), and
- The executor/administrator must pay off any remaining debts or taxes before distributing the estate. This may include outstanding loans, bills, and taxes of the deceased.
c) Distribute the estate following the deceased’s will if there is one, otherwise to distribute the estate per the Distribution Act 1958.
- The executor/administrator should prepare an estate account accordingly and record all documents showing how properties and money were distributed. These documents should include:
1. Receipts showing debts and taxes paid;
2. Receipts for expenses made from dealing with the estate; and
3. Written confirmation from the beneficiaries stating that they have received their share of the estate.
In conclusion, it is smart to be aware of the various documents which you may encounter during the home buying process. If you are unsure about anything, always make sure to clarify any doubts with your lawyer and never sign off on anything that has not been thoroughly explained to you.
This article was first published as "Deed of Assignment and Grant of Probate: Why Are These Legal Documents Important?" on iProperty.com.my.