Sales and Purchase Agreement in Malaysia (New Property)

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Sales and Purchase Agreement for new residential properties

The sales & purchase agreement (also known as SPA and S&P agreement in Malaysia) of new uncompleted residential properties is a contract for the purchase of new uncompleted properties.

Terms and Conditions

The completion date of the purchasing procedure must be stated clearly in the SPA. Some common conditions include the purchase price deposit, the balance deposit, the delivery date, vacant possession and the deed of assignment. Should there be any demands from either seller or buyer, these are to be agreed on beforehand and inserted as special clauses in the SPA.

Because of the laws governing the agreement, the terms are standardized and do not allow any leeway negotiations. Any changes or amendments of terms in the agreements are rendered void and unenforceable unless the developer is looking to offer better terms such as a shorter vacant possession period or a longer defect liability period. These templates are mandatory for off the plan residential properties sold by all housing developers. The stated laws are enforced by the Malaysian Ministry of Housing and Local Authority. The aim of this is to reduce the flood of litigation in the event an agreement is found to be ambiguous. The stated templates are Schedule G and Schedule H.

Schedule G of the Housing Development (Control & Licensing) Regulations 1989 enforces the standard agreement for land, residential properties such as Bungalows and Terrace Houses.

Schedule H of the Housing Development (Control & Licensing) Regulations 1989 enforces the standard agreement for strata title houses such as condominiums, flats and townhouses.

However, if the properties are completed and then sold by the developers, the sale and purchase agreement can be written up from scratch or certain special circumstances may allow the developer to draft their own SPA if approved by the government.

In this case, there should be a Defect Liability Period clause in your SPA. During this warranty period, the developer is bound by the clause to repair any defects and damages that may have occurred due to construction flaws. Always consult a lawyer if you may require assistance in the SPA process.

Process

The time and medium of payment are important like any other contract. Unlike the relatively simple process of sub sale transactions which takes a much shorter period with readily available goods. New properties in contrast take a longer time and contains different billing stages.

To purchase a new property from a developer, a variable down payment sum is paid by the buyer in accordance with the loan agreement negotiated with the bank. The rest of the remaining payment will be settled in different completion stages of the construction period. For example, Lets say that you are required to put down a down payment of 10%, you will be required to make the next payment when the foundations are completed, and the next when the structural frame is built and so on. The completion stages start from the ground level consisting of piling and building foundation. The next stage will be the Structural Framework followed by the walls,roofing, wiring, cabling, and finally the sewerage , road work and plastering the walls.

Before receiving your property, there is still one last stage that needs to be fulfilled. This duration is formally known as the vacant possession, in which your property is in a suitable state of being occupied. However, before moving in the property must be certified safe for use when it receives its certificate of completion and compliance(CCC). After this, the developer may hand over the keys to you. The vacant possession period for land properties commonly span about 2 years while in high rise buildings range from 2-3 years depending on the state rules.

When buying an off plan/ under construction, property, all you may have as reference is the building model or a show house. This is just an illustrative idea of what you might be getting from the developer, hence actual results may differ. Make sure to emphasize the specifics such as fixtures and fittings, building materials and parking in the SPA if you feel they are important to you.

If you are purchasing a strata scheme property such as a condominium or flat, a deed of mutual covenant is required to be signed together with the sales and purchase agreement. This document binds all owners on the liabilities of co-owners, establishing common management rules and regulations for all co-owners to follow. This allows the management to take legal action on any owner who has violated any regulations or caused damage. The deed of mutual covenant will normally last a year from which a join management body will take over to manage the well being of the property.

Additional information

When buying a new property from a developer holding a master title, a home buyer must sign the deed of assignment (DOA). This legal document transfers the interest of the owner to the assignee when the property does not contain any title yet. The deed of assignment will show the new legal owner of the property once the transfer is completed. It is useful to add that the SPA agreement acts as a proof of ownership on strata titles pending the official issuance of the property title.

Conclusion

The process of buying new properties can defer from the typical sub sale agreements that are used in the secondary market. As stated above, the SPA used for uncompleted properties must contain certain specific clauses that must be followed by the developer when drafting it. This reduces the possibility for any legal conflicts and ensures the buyers needs are prioritized. Looking to buy a sub sale property instead? Here is the SPA guide for sub sale properties.



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