Property Transfer by Way of Love and Affection

28 Apr 2022

According to the Contracts Act 1950, in order to form a valid contract, the element of ‘consideration’ must be present. Consideration often includes the form of monetary, or both parties must have the obligation to give the other party something which is beneficial.

However, transferring a property to your loved ones without monetary consideration, which means there is no vendor and purchaser, only the recipient gains benefit from the donor, which is the said property as a subject matter, does this forms a valid contract?

Section 26(a) of the Contracts Act 1950 renders a contract made without consideration to be valid if it is expressed in writing and registered, and is made on account of natural love and affection between parties standing in a near relation to each other. The meaning of 'natural love and affection' is not defined in the Contracts Act 1950, so reference can be made to case laws that provide interpretations to the provision.

Reference is made to Section 26(a) of the Contracts Act 1950 which stipulates that:

“An agreement made without consideration is void, unless –

it is in writing and registered

(a) it is expressed in writing and registered under the law (if any) for the time being in force for the registration of such documents, and is made on account of natural love and affection between parties standing in a near relation to each other;”

In Chua Eng Wei & Anor v Liow Eng Keong & Anor [2015] 4 CLJ 1027 the court held that the words ‘near relatives’ refer to those who are closely related such as one’s parents, brothers or sisters.

In Tang Meng Hock v Tang Ming Seng [2010] 1 MLJ 33, the court held that the phrase ‘natural love and affection’ cannot be read in isolation. It must be linked to the requirement that the parties must be ‘standing in a near relation to each other’. In this case, both the parties are biological brothers and they are clearly ‘standing in a near relation to each other’.

Cases seem to suggest that immediate family members in the same bloodline fall under the category in Section 26(a).

In other words, transferring property by way of love and affection means that the property is not to be transferred by payment of a certain amount of money as consideration. It means the transfer is held between immediate family members which is recognised by law as a good consideration for natural love and affection.

Although the Sales and Purchase Agreement (SPA) is not necessary as there is no vendor and purchaser when the transfer of property is made through love and affection. However, a Memorandum of Transfer (MOT) or Deed of Assignment (DOA) is still required as evidence that a contract has been made and agreed upon by both parties. It still needs to be adjudicated and stamped. The consideration stated in the MOT or DOA will be ‘love and affection’. It is to be noted that in practice there are some donors and recipients, although not compulsory, sign Deed of Gift which is an instrument that sets out the transfer of the ownership of a property to another party with love and affection as the consideration.

Here comes the question, does the transfer of property by way of love and affection require the payment of stamp duty? The law does provide full or partial stamp duty exemptions for a transfer of property by way of love and affection. However, it only applies to parents, children, and spouses. Not everyone that transfers the property by way of love and affection can escape from paying stamp duty to the land office. Reference can be made to the table below: –

It is to be noted that the Stamp Duty (Remission) (No. 2) Order 2019 (P.U. (A) 369) provides that the stamp duty exemption for property transfer from parent to child is only valid if the recipient is a Malaysian citizen.

It also provides that ‘child’ means a legitimate child, a stepchild or a child adopted in accordance with any law. Therefore, the 50% exemption for the transfer of property between parent and child only applies to those that fall within the definition of ‘child’ stated above. If a child’s birth certificate does not include his or her parent's name or if the child is born out of wedlock, he would not fall under this definition. Hence, not entitled to the stamp duty exemption.

Can stamp duty be exempted for parties other than parents, children or spouses? Apart from the above, any forms of transfer between siblings, grandparents, uncles, aunties, nephews, nieces, friends, boyfriends, girlfriends and so on are not entitled to the stamp duty exemption. Therefore, the stamp duty will be charged in full amount.

Also, is the legal fee required to be paid? Of course, legal fees for professional legal services undertaken to transfer the property are still required.

This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author

Stella Lim Pooi Syuen

Pupil-in-Chambers

Halim Hong & Quek 

stella.lim@hhq.com.my