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In Malaysia, all property acquisitions require a duly signed sale and purchase agreement (SPA) for the deal to be legally binding and take effect. A loan contract with a bank must also be completed to fund your home purchase.

However, these documents are complex and full of technical jargon that might confuse those without knowledge or prior experience. To help you understand this document, we have listed the most important seven points you need to scrutinise before signing the dotted line.

1. Land Tenure and Restrictions

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It’s extremely important to check the land tenure of the property you’re buying. If it is a freehold titled property, you will own the house in perpetuity along with the land. Although the government may still acquire the land for public use, they’re still required to provide a just compensation.

But if the tenure is leasehold, you only own the land for a fixed period. A typical term is 99 years. Although it’s nearly a lifetime, there’s no assurance that your descendants’ children will inherit your home. At the end of the lease, the occupants need to vacate the property and return the land to the government. You may also pay to extend the lease, but it’s still up to the government if they wish to allow it. Otherwise, you need to vacate the premises, and the government is not required to provide any compensation.

In addition, there are certain property restrictions you need to watch out for. Among these are Bumiputera lots/units and Malay Reserve Land. The former means only Bumis can purchase or lease the property, but the unit can still be sold in the open market with the state government’s approval. As for the latter, it’s nearly impossible to be acquired by non-Malays.

Here is a list of differences between leasehold and freehold tenured properties.

Also read: Freehold vs Leasehold: The Millennial Dilemma

2. Is it Residential or Commercial Title?

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It is vital to always check if the land title is residential or commercial. Houses typically have a residential title, but that’s not always the case in Malaysia. For instance, some condos built above shopping centres could come with a commercial title. There are also commercial properties like shophouses and SoHo units that can be used as living quarters, but come with a commercial title.

But these properties have two main disadvantages. One is that they’re costlier to maintain given their higher utility bills, maintenance fees and tax rates. Another drawback is that these properties are not safeguarded by the Housing Development Act (HDA), an act that prevents developers from imposing one-sided terms in the SPA.

Therefore, if you are looking for a long term home, a property with residential title is ideal if you want to lower your long-term costs and ensure that you’re protected by the HDA.

3. Different Property Types have Different Documents

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All property transactions whether it’s selling or buying, requires an SPA, a document that details the obligations of both parties, land title details, and the particulars of the property. But transactions involving different property types require other documents.

For example, deals involving subsales, resales or the sale of second-hand properties require a Deed of Assignment.

For sale of properties with an individual title or strata title, the seller or developer must fill-up Form 14A, the mandated form for transferring ownership of such properties, and then submit it to the Land Office. Please note that an individual title is used for landed homes in which you own both the house and the land its built on, while a strata title is used for properties with shared facilities constructed on land jointly owned by different unit owners.

Also read: The Different Types of Property Titles in Malaysia

4. Intent to Purchase

If you visited a showroom and spotted a house you like, what do you do to book the unit so that no one else can buy it? You submit an Intent to Purchase letter to the developer and pay a booking fee (2-5% of price), then pay the remainder when the SPA is inked.

If the developer accepts the booking fee, the firm is not allowed to sell the unit to somebody else during the period stated in the letter. But once the period lapses and you no longer proceed to buy and sign the SPA, the developer has the right to keep the booking fee. If the developer sells the unit to someone else while the Intent to Purchase is still in effect, then the firm is liable for damages.

If you are buying a subsale property, the term used is Offer to Purchase. If you hired an agent for the deal, the downpayment would be shared, with 7-8% percent going to the property seller, while the agent will get 2-3%. If there is no agent involved, you will save on the fees. However, you will need to take care of all the necessary paperwork for the transaction.

5. Lawyer’s Fees

In a bid to attract home buyers, many developers nowadays are waiving attorney fees for both the SPA and the housing loan contract. Enticed by the good offer, home buyers will then rely on the developer’s panel lawyers. But after the property title is issued, the buyer will still need to pay the fees to the developer’s attorneys.

For the purchase of a subsale home, please note that the buyer will still need to fork out lawyer fees for the SPA and the mortgage agreement.

Also, it’s more advisable to engage your own lawyer than the seller’s even though the latter option could cost less. This is because if a legal problem emerges, the attorney will be more likely to help the seller instead of you due to their connection.

Here is a list of latest real estate legal fees in 2019 you can refer to.

6. Legal Terms to Watch Out

Another perk of hiring a lawyer is that they can help you understand legal jargons in the SPA and housing loan contract. But if you want to learn them by yourself, below are some legal phrases and what they mean.

Date of vacant possession. This refers to when you’ll get the keys to the property.

Liquidated damages. This is the amount the buyer will receive from the developer if the company fails to give you the keys on time.

Defect liability period. This only applies to homes bought in the primary market. This is the time frame wherein any defects discovered during the period will be fixed by the developer at no cost to the buyer.

Completion period. In resale deals, the sale needs to be completed in 3 months. If the deal is not yet completed within the timeframe, the party causing the delay can be sued.

Late payment fees. In resale transactions that has been delayed due to late payment, the buyer will need to pay a daily penalty, typically at 8% of the property’s price.

Lock-in period. This pertains to your housing loan. This is the period during which you’re not allowed to fully pay the mortgage.

Encumbrance. This means the property has a legal liability, such as a lien, that prevents ownership from transferring to another person. For instance, if you’re still paying for your housing loan, the property will have a lien. Until you have paid in full, you will not really own the property.

Restriction in interest. This means that the property cannot be sold without the approval of relevant authorities, or you require the permission of the holder of the Master Title. A Master Title is the deed of ownership over a large land parcel that has not yet been divided.

7. A Crucial Advice

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Never ever sign a contract you do not understand! This is a common saying in the legal industry and property sector. Before signing the dotted line of the SPA and housing loan contract, read the terms thoroughly as there are serious financial consequences if you violate them.

For instance, keep in mind the lock-in period of your housing loan. During this timeframe, you’re not permitted to repay the mortgage in full even through refinancing or selling the property. Otherwise, you will face a hefty penalty and lose a significant amount of money.

Also, be ready to sign and initial lots of loan documents as banks will only accept originally-signed forms. To ensure that the debtor has read and understood all of the documents, he or she is obligated to initial every page.

But ultimately the most important part of the housing loan contract is your explicit commitment to pay on time a certain amount to the bank. Breach this and the lender will have the right to repossess your home and auction it off.

For more informative property articles like this, visit our discussion page.

(Written by G. Zizan, 17 October 2019)


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I think land tenure should be on the onset findings way before putting our marks at the dotted lines....

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It is always a prudent steps for anyone to take to confirm that the proprietor is who as said or stated in the Title, and SPA of the said property. It is also essential to confirm that no unfavorable caveat (other than bank caveat) is levied at that moment in time onto the property before one signs the sales and purchase agreement.