When you buy a property, there will seem to be a never-ending end of processes and documents to sign. Nevertheless, the most important document that will pass through your hands is the Sales and Purchase Agreement - otherwise also known as the SNP or SPA.
A SPA document is where all the prices, terms and conditions are hammered out between the buyer and the seller, or in most cases between the buyer and the developer. Everything will be stated there, from the payment manner, date of delivery for vacant possession and the details of the property.
Even the exact specifications of the property will be stated in the SPA, such as the fixtures, fittings, ceiling height, building material and parking lots (if it is a stratified high rise). This is applicable in both new and secondary homes.
It is therefore imperative for you to study your SPA carefully before signing it as you will thereafter be legally bound by it. Much as you would view a showroom before purchasing your property, a SPA document tells you all the particulars - even those that might be misrepresented in a show unit.
Focusing on the Salient Points
Unfortunately for most people there is no fixed SPA document, as things such as the price of the property and other bargains agreed on from both parties can be added in. But the good news is that, within Peninsular Malaysia anyway, there is a fixed set of terms that must be in the SPA - laid down by the Housing Development (Control and Licensing) Regulation 1989.
The only way that a developer can change this fixed set of terms is if they are offering something better than that such as a shorter delivery period, or a longer defect liability period. These fixed terms have cut down on the number of court cases that arise due to ambiguity of a SPA signed.
Although this set of SPA terms is applicable only to developer properties, it is nevertheless a great guideline for other SPAs as well, including property buyers looking to purchase subsale homes or commercial properties from developers.
Manner of Payment
One of the most important thing to focus on in your SPA is the manner of payment. As a purchaser, you will definitely need to know this as to not accidentally breach your contract by claiming that you ‘did not know’. If you are buying from a developer, the manner of payment will be stated clearly in Schedule 3 of the SPA, which will clearly stipulate the billing stages.
If you are buying a subsale property, the process will be much easier as the property is usually ready for delivery, and subsale properties usually have shorter transaction periods. The usual process is for the buyer to give the seller a 2% or 3% booking fee upon signing the Letter of Offer, while the remaining 10% deposit is paid during the signing of the SPA. The remaining 90% is then usually paid within 3 months of signing the SPA.
The 3-month period may occasionally be automatically extended for 1 month, which will incur late payment interest.
When’s the Vacant Possession?
This is the next most important question for you to ask. By law, vacant possession means that your new property is ready to live in. In other words, when is the developer going to hand you your keys and access card to your unit. The standard time for developers to hand over the keys for landed properties is 24 months, while for high rise stratified buildings is 36 months.
Subsale properties do however have a much shorter vacant possession period - normally within 3 to 5 days upon full payment of the full purchase price. This is however subject to change as agreed upon between the purchaser and seller. In effect, the purchaser will be the legal owner but do not have the keys to the unit. On the other hand, all the rental yields and what not will be delivered to the purchaser by way of assignment of tenancy.
Defect Liability Period
If you are buying your property from a developer, then this is one clause you need to look carefully at. This is the clause that gives you a warranty from the developer to fix anything that was defective upon vacant possession. There is usually a 6-month period or so, but this differs from developer to developer.
If you are buying a subsale property, you will however find this page missing in your SPA. This is because the previous owner is not obliged to give you a warranty for anything. Therefore careful inspection of the property is required before purchasing it, and you will need to check everything from the sewage and piping to fixtures and fittings, leakages and electrical appliances. Should the seller agree to fix anything for you, ensure that your lawyer puts it into the SPA.
Wrapping it Up
Buying a property is probably going to be the biggest purchase of your life. Therefore, be meticulous about it and do not be afraid to ask questions. Do not make assumptions, only to find them sorely wrong later.
If you are not sure of anything, ask your lawyer. If the sales agent agrees to give you anything extra such as an air-conditioner, make sure it is stated in your SPA document. Do not sign your SPA until you completely understand it and are very sure that everything you were promised is stated in it.