Many property owners would have known that upon settlement of their housing loans, the financiers or the banks will direct them to arrange with a legal firm to proceed with ‘redemption’ of their properties.
Redemption refer to a legal process which takes place when the legal owner under the terms of his loan agreement discharges his obligations imposed by the bank’s charge or assignment and thus becomes entitled to have his property redeemed in him free of the charge or assignment.
Until the debt has been paid and the money accepted, however, the charge or assignment remains in being.
Usually, under the facility agreement the bank will be obliged to reassign the property to the purchaser without default and upon payment of the facility sum. That is to say the right to redemption is an entrenched right.
Malayan Banking Bhd v Worthy Builders Sdn Bhd & Ors  3 MLJ 791.
Having said that, there legal cost to be borne by the borrowers, as contracted under the facility agreement normally. This legal cost is scaled cost as stated in the Solicitors’ Remuneration Order 2005.
Some banks will impose a documentation fee between RM50 to RM100 for purchase of such documents from the banks and the Malaysian Bar Council’s position is that such practice may be in breach of Section 37 (2) of the Legal Profession Act 1976 that prohibit unauthorised person to collect a fee for preparation of any documents or instruments relating to immovable properties.
Bank’s Legal Obligations
In the case of RHB Bank Bhd v Travelsight (M) Sdn Bhd  1 MLJ 691, the court resolved that there is an obligation in equity on the financier to reassign the security in the form of the Wisma Pantai following the full payment of the loan amount.
In Graham v Seal, the court said:-
“The obligation of a mortgagee is, as against payment of what is due to him, to reconvey and deliver up the deeds of the mortgaged premises. It is like the obligation of a vendor to convey and hand over the title deeds and the conveyance as against payment of the purchase-money. It contemplates that the handing over of the conveyance and payment of the purchase-money shall be a simultaneous transaction, so that neither party is at risk for any time without either the money or the estate; so in the paying off of a mortgage a mortgagee is not entitled to insist upon payment of the mortgage money with a view to his reconvening at some future time. Consequently, if a mortgagee has been fully satisfied and refuses to reconvey the security, he will have to pay the costs of any proceedings taken by the mortgagor to recover his property.”
It is also trite law that the assignor retains a residual right in respect of the property in the event he or she redeems the loan from the financier, in which case he or she is entitled for the rights, interest and title to be re-assigned to him or her.
RHB Bank Bhd v Singlefine (M) Sdn Bhd & Ors  11 MLJ 333
About the Author:
This article is written by Chia Swee Yik, Partner of this Firm (+6016 2148 218, firstname.lastname@example.org) (assisted by paralegal, Ooi Zhuang Hong) who has provided practical advice on property transaction.
Feel free to contact him if you have any queries.