Selling and buying a property can be daunting, especially for a first-time purchaser. The whole process involves many parties i.e.: vendor, purchaser, land office, Inland Revenue Board, lawyer, developers and valuer and it may take up to 6 months to complete the transaction before the buyer receives the keys to their property. This topic will be discussed in two articles for an easier understanding of the general guidelines that both vendor and purchaser must understand before deciding to sell or buy a property.
Let’s start!
Anyone is generally free to purchase any house in Malaysia. The term “house” refers to any accommodation used for residential purposes, including a terraced house, a semi-detached house, a bungalow, a flat, an apartment and a condominium.
However, some exceptions are imposed by the respective state authority, such as the followings:
Generally, each property is provided with a title or in the case of a flat or apartment; a strata title would be issued. To determine the particulars of a title, a purchaser can conduct a land title search with a certain fee imposed at the relevant land office or land registry based on where the land is located.
There are two categories of land title, namely:
On the expiry of the lease, ownership of the land will revert to the State. Commonly, a restriction is imposed on a leasehold title. For instance, such type of land cannot be transferred, leased, charged, or sold in any manner whatsoever except with the consent of the State Authority.
Property buying is a big financial decision; therefore, it involves a considerable sum of money from the payment of the deposit to the mortgage. In Malaysia, various banks offer DIFFERENT financing packages to assist buyers in buying houses. For a private employee, it is in their best interest to verify the financing details before committing to it.
Meanwhile, under the scheme known as “Lembaga Pembiayaan Perumahan Sektor Awam“, the government offers property financing for civil servants.
Employee Provident Fund (“EPF”) also has schemes for withdrawal by depositors below 55 of age, where depositors may apply for withdrawal capped at a certain amount to pay off their house deposit.
The Housing Development (Control and Licensing) Amendment Regulations 2015 prescribes four standard unit but distinct Sale and Purchase Agreements to be used when buying a house from a housing developer. These forms are Schedule G and Schedule H agreements (the “sell-and-then-build” concept of housing accommodation) and Schedule I and Schedule J agreements (the “build-and-then-sell” concept for housing accommodation).
In the case of a Schedule G or Schedule H SPA, the purchase price is paid progressively, based on the completion of work in stages. In the case of a Schedule I or Schedule J SPA, a buyer pays 10% on signing the SPA and the balance on completion of the house.
The format of the SPA in the secondary market, more commonly known as sub-sale, is not regulated. It is common practice that a sum equivalent to 10% of the purchase price will be paid to the seller upon signing the SPA.
The purchaser is usually given three months to pay the purchase price balance, with a given extension of a month. For property without the transfer restriction, the 3-month period begins from the SPA date. For property with restriction of transfer, it starts from the date the purchaser’s solicitor receives a copy of the consent of the relevant authority to transfer in favour of the purchaser. The purchaser typically must pay interest at the rate of 8% per annum, calculated daily, for the 1-month extension period.
If the house is charged or assigned by the vendor to a financier at the time of the sale, the purchaser (or their financier) will commonly pay the amount required to redeem the house from the vendor’s financier out of the balance of the purchase price. If the amount needed is more than the purchase price balance, the vendor must top up the amount.
To complete the sale, the remaining purchase price balance is typically paid to the vendor’s solicitor as a stakeholder. It is released to the vendor only after an agreed period to ensure that there is no hiccup in the process of registering the title or ownership of the house to the purchaser and after the possession of the house is delivered to the purchaser.
For property with restriction of transfers (often leasehold title), the vendor must apply to the state authority for consent to transfer. If the purchaser needs financing and there is a restriction on the title against a charge, they will also have to apply for consent to charge the house to the financier. Generally, both applications can be made simultaneously, and it takes about three months for the application to be approved.
If the consent to transfer cannot be obtained within the agreed period, the transaction would typically be terminated, and the deposit refunded to the purchaser. Usually, the vendor bears the cost of applications for consent to transfer, and the purchaser pays the cost of applications for consent to charge.
Apart from signing the SPA, if a house has an individual or strata title, an instrument of transfer known as Form 14A of the National Land Code 1965 must be completed to transfer the title of the house from the vendor to the purchaser.
In a sub-sale where a separate title has not been issued, the instrument that transfers ownership is commonly known as a deed of assignment or a deed of novation. In such a case, the purchaser must also ensure that all original documents relating to ownership of the property are kept safely, as collectively, these documents establish their ownership of the house.
After all the above steps are completed, the vendor’s solicitor will deliver the vacant possession of the house to the purchase. In the next article, we will discuss on the fees and duties involved in housing transaction that both vendor and purchaser must be aware of.
