The Complete Guide In Buying Property in Malaysia for the year 2020

Purchasing property require huge investment; therefore, a lot of matters need to be considered, be it for a first-timers or even for second timers. 

When it comes to purchasing a property, it is essential for the Purchasers to have a strategic planning and to be well aware of the cost and the procedures involved in such matters. 

As such this article will explains and guides you to an easy understanding on the procedure and steps to purchase property but it is to note that this article shall be limited and restricted only to local citizen purchaser where no consent or encumbrances is involved on such Properties.

The Properties here including apartment or any units in a high-rise building, terrace or linked house, bungalows or any semi-detached houses, villas or any others can be brought by either sub sale purchasing from the previous property owners or directly from the Developer.

As a purchaser, the most important thing to determine is the budget to purchase the said Property. This is to estimate the monthly obligations that need to be paid and the upfront amount that will be needed to purchase the said property. Purchaser also need to consider other costs that will be incurred such as the legal fees, stamp duty, registration fees and other disbursement related to the sale & purchase transaction.

Upfront amount

Upon agreeing on the Property’s purchase price, Purchaser need to pay the downpayment of the Property at 10% from the Purchase Price to the Vendor upon signing of the Sale & Purchase Agreement (SPA). However, the down payment amount may vary as according to any arrangement that is mutually agreed by the Vendor and the Purchaser.

If the purchase involves a housing agent, usually the housing agent will provide the purchaser a booking form and would require the Purchaser to pay 2% from the Purchase Price upon signing the booking form and another 8% to be paid during the signing of the SPA of the said property.

For example :

Purchase Price : RM700,000

10%  Deposit from the Purchase Price: RM70,000

It is advisable that the downpayment be paid to the Solicitor in charge as the stakeholder of the money to avoid any upcoming dispute due to any failure by the Vendor to reimburse the Purchaser of their money in situations where the transactions had failed, and the property is unable to be transferred.

Execution of the Sale and Purchase Agreement (SPA)

The Sale and Purchase Agreement (SPA) outlines the terms and conditions of the said purchase and will be executed by the Vendor and Purchaser to seal the deal. The legal fees charged for the drafting and the preparation of the said SPA will be charged as according to the specific price tiers stated in the Solicitor’s Remuneration (Amendment) Order 2017. Reference could be made to the table below:

Purchase Price

Scale of Fees

First RM 500,000.00

1% to a minimum fee of RM500

Next RM 500,000.00

0.8%

Next RM 2,000,000.00

0.7%

Next RM 2,000,000.00

0.6%

Next RM 2,500,000.00

0.5%

Where the value in excess

0.5%

Usually 5 copies of SPA will be prepared for execution which the cost and disbursement in preparation of the copies will be incurred by the Purchaser. The cost and disbursement for the preparation of SPA which shall include travel expenses, photocopies, registration of instruments, Land Search, stamping of SPA, purchasing of instrument at the Land Office and others which usually will be ranging from RM1000 to RM1500.

These 5 copies of SPA will be stamped at a nominal value of RM10 each.

Having said so, in situations where the Purchaser bought the Property directly from the Developer, the amount of legal fees incurred by the Purchaser would vary and would much likely be lesser than the legal costs incurred in a sub sale transaction due to the discount rate provided under the Solicitor’s Remuneration (Amendment) Order 2017. Most of the time, in order to provide attractive offer and attract more buyers, Developer would usually bear the legal fees for the preparation of the SPA.

Caveat

Caveat is an application whereby upon entering such action on the said Property, the Property shall be in a “lock-down” manner whereby the Vendor cant simply sell the Property to other prominent Purchaser after the Deposit had being paid. Usually upon the stamping of SPA and upon payment of the Deposit by the Purchaser for the purchase of the said Property, the Solicitor in charge will enter caveat into the said Property at the cost of the Purchaser to secure the interest of the Purchaser on the said Property until the Property had been transferred to the Purchaser.

Memorandum of Transfer (MOT)

Another legal instrument that need to be executed is Form 14A or otherwise known as the Memorandum of Transfer (MOT). The propose of execution of this instrument is to transfer the ownership of the property to the new rightful owner which is the Purchaser which prior to the said execution by the Purchaser and the Vendor, the details of the MOT will be completed by the solicitor in charge.

Purchaser needs to prepare the stamp duty for the MOT which will be charged ad valorem based on the price tiers provided under item 32, First Schedule, Stamp Act 1949 which reference could be made to the table provided below:

Stamp Duty

First RM 100,000.00

1%

Next RM 100,001.00 – RM 500,000.00

2%

Next RM 500,001.00  and above

3%

Upon payment of such Stamp Duty, the solicitor in charge will proceed with the registration of the MOT at the Land Office.

Registration of MOT

The MOT will then be registered at the Land Office which the Registration Fees will be depending on the scale fees provided by the State Land Office. The pricing for registration shall vary from state to state.

Financing the Purchase Price

1. By Cash - If the Purchaser agreed to finance the Purchase Price by cash, the Purchaser must pay the Balance Purchase Price to the Vendor or solicitor in charge as the stakeholder before the stamping and execution of MOT.

2. By Loan - If the Purchaser decided to apply for loan from an end financier (Bank)to finance the Purchase Price, the stamped SPA will be given to the Purchaser to appoint another solicitor to handle the process of applying the loan. Having said so, most Purchasers would just commit to the same solicitor that was in charge with the SPA to apply for the Loan due to time and cost factor.

Loan Agreement

The Loan Agreement or also known as the Facility Agreement contains terms and conditions for the loan made in purchasing the said Property. Upon application for the loan, Purchaser need to prepare the Legal Fees and the Stamp Duty for the Loan Agreement which is to be paid upon the execution of the Loan Agreement which will be charged at a specific pricing tiers which will be as follows:

Scale of Fees

First RM 500,000.00

1% to a minimum fee of RM500

Next RM 500,000.00

0.8%

Next RM 2,000,000.00

0.7%

Next RM 2,000,000.00

0.6%

Next RM 2,500,000.00

0.5%

Where the value is in excess of RM7,500,000.00

Negotiable (shall not exceed 0.5%)

The cost and disbursement for the preparation of the Loan Agreement which shall include travel expenses, photocopies, and others which usually will be ranging from RM1000 to RM1500 shall also be charged to the Purchaser upon the execution of the Loan Agreement.

Stamp Duty for Loan (Ad Valorem)

0.5% from Loan Amount

After the registration of MOT had been successfully made at the Land Office, the solicitor will then make an advice letter to the Bank to release the Balance Purchase Price either directly to the Vendor or to the solicitor himself as the stakeholder depending on the terms of the Loan Agreement and the SPA.

Release of Title

Sub sale

The title shall be released to the Purchaser approximately 1 month from the date of registration. The period stated shall vary from state to state.

Developer

The title shall be released to the Purchaser in approximately 6 months from the date of the Registration which the period shall also vary from state to state.

Delivery of Vacant Possession

Once the Balance Purchase Price had been paid to either the Vendor or the Solicitor as the Stakeholder, the Vendor shall deliver the Vacant Possession of the Property together with the keys, within the number of days specified in the SPA.

It is important to note that upon handover, Purchaser must get the statements or receipts for all the utilities such as sewerage bills, phone bills, water bills) showing all the outstanding bills paid up to the handover date and ensure that all outstandings payment had been made by the Vendor.

Purchaser also need to register themselves as the new owner of the Property at their respective utilities provider.

To conclude, the procedure and the estimated costs and time stated above are only the basic guidelines of property purchasing which would vary depending on case to case basis (e.g. if the Property had a restriction of interest (RII) which would require more procedures to be taken for the Property to be transferred to the new owner, more cost shall be incurred by the Purchaser).