Sale & Purchase of Houses

7. Who can buy houses in llalaysia?

Any Malaysian can buy houss in this countryOnly Malaysian citizens may buy low-cost houses. A buyer must apply to the State Authority. Only those ftom the lower income group can buy low-cost houss. Only Malays can buy houses built on Malay Reservation Land.

Every housing developer must reserve 3OYo of its houses for'bumiputeras- [tlalays and other nativesl. Bumiputeras enjoy a certain percentage of discount.
A foreigner can buy any industrial land and fuctories.

A foreigner has to apply for consent from the State Authority to buy residential houss
shophouses or commercial lots in a complex.

and

A foreigner must also inform the Foreign Invstrnent Committee [FIC] - a planning unit in Ste Prime Ministefs 0ffice - if he wanB to buy landed property below tfte value of RM5 million. If the property is worth more than RM5 million, he has to obtain the approval from the FIC.

2. Euying a hou*

ftsn

developr

it has to use the standard agreements known as Schedule G and Schedule H in the Flousang Development (Control and Ucensing) Act 1966.
When a housing developer sells its residential houses in its housing development project, Schedule G is to be used for the sale of land with a building to be erected on it- Schedule H is to be used for Ere sale of uniB in a building intended for suMivision, where siEata tiUes are yet to be issued.

According to either of the standard agreements, housing developer as and when they are due.

a buyer has to pay progress instalmenB to the

The housing developer must produce its architect's certificate certifying the completion of eactt stage of construction, before it claims the progress instalment due. The final 596 of the purchase price must be kept by tfte sellefs solicitor as stakeholder for 18 months [after completion of the building] before it is released to the housing developer.

3. Buying a completed house If you are buying a completed house, there is no standard agreement. If a housing developer sells a completed house to a buyer, the standard agreement need not be used. A normal sale and purchase agreement will do. In a normal sale and purchase agreement, you have to pay 10% of the purchase price as deposit.
The balance of the purctrase price has to be paid to your solicitor. He will use part of the money to redeem the title from the seller's bank. 5olo of the purchase price has to be retained to cover the real property gains tax payable by the seller. The agreement usually provides for completion of the transaction within 3 months plus one further month with interest. Agred interest has to be paid for late payment of the purchase price in the 4th month, calculated from day to day. Both parties have to sign a transfer form- This is meant for transferring the house to the buyer in

time to come.

4. Buying a flat or apartment fwithout

*rata title]

If the housing developer has yet to obtain a strata tiUe for a flat or apartrnent it sells to you, it will sign a deed of assignment [instead of the transfer form] and it undertakes to deliver you the title when it is assuedYou may re-sell fassign] the flat or apartment to a sub-purchaser. The housing developer must give you tfie consent to re-sell, but has the right to collet O.5% of the purchase price as adminastrative fee [up to a maximum of Rll1500],

it

When the stJata Utle is issued, t}le housing developer will sign the transfer form in order to transfer the flat or aparfnent to you-

5. Documentsof Title
There are 2 types of documents of tide:

a. b.

freehold

leasehold

a perrnanent UUe - e-9. a term of 99 or 60 years-

[Upon expiry of the leasehold, it may be renewed. State Authority.l

If it is not renewed, the land reverB

back to the

Genemlly, every house has a tide. An apartrnefit or a flat has a strata tide- A seardr in the Land Registry or Land Office will show whettrer the land is encumbered [e.9. caveated or charged to a bankl.

5. Hutsing

lnns

You may obtain a loan from a bank or finance company. A bank may grant you a term loan [fixed

loanl or oyerdraft facilities. Under a term loan, you have

to pay

back by monthly instalments. The overdraft facilities are

EPF

normally given to those who engage in business activities. You may also apply for withdrawal from the Employees' Provident Fund [EPF] if you are an contributor- EPF will allow 3096 of your EPf savings to be usd for buying a house.
You may also

a. b.

withdraw 30Yo of your EPF savings to settle your housing loan obtained from a bank or
finance company; or
use your EPF savings to setde the balance of your bank loan, whicfiever is lower.

3}o/o of your EPF savings amounts to RM9,000, and the balance of your bank loan is you may only withdraw RM6,00O from his EPF savangs. This is because the balance of only Rll6,00O, your loan [RM6000] is lower than the 3$o/o of your EPF savings [RM9,000].

For example,

if

7. Stamp duty
Every transfer of property attracts stamp duty. The stamp duty is based on the value of the
property:
Valug qf

oropertu

Stamp Putv

a. bc.

First RM100,000 Next Rl'l4t)0,000

Above

lola
Tah 3q6

RM5O0,O00

8. Legal fees
There is a scale fee for every transfer of property" based on the value of the property:
Value af

property

Leoal Fees
to/o lzala

a. b. c.

First RM100,000 Next RM4,900,000

Above

Rl.ol5,0{l0,0CA

%ok

A solicitor can only act for one party only. He can only collect legal fees from one party only" For transfer of

propefi worth RM100,000

and below, and bought from a housing developer, you are

entitled to 25o/o discount. For every transfer of propety worth RM30.000 and below, and bought from a housing developer, you have to pay a flat rate of RM120 only.

9"

Rea.l

prcperty gains tax

Every seller must fill in the real property gains tax form [CKHT1]. Every buyer must also fill in a similar form [CKHT2]" It must be submitted to the Inland Revenue Board within 30 days frorn the date of the signing of the agreement.
The rates of real property gains tax payable by the seller are as follows:
Sale of

Properfu

Rate of Tax
3$olo 30olo 30o/o 15o/o
Sa/o Oo/o

a. b. c. d. e. f.

within l year within 2 years within 3 years within 4 years within 5 years after 5 years

But for a company, a minimum tax of

5olo

is payable even after 5 years.

The real property gains tax is based on the gain from the sale. 5olo of the purchase price must be retained normally by the seller's solicitor for payment of the real propefi gains tax.

Housing Development (Control & Licensing) Regulation 1989

SINCE April 12,2007, the Housing Development (Control and Licensing) Act, 1966 (Act 118) was not only

an Act to regulate the business of housing developers, but also an Act to protect the interest of purchasers. In line with this purpose, the recently amended Housing Development (Control and Licensing) Regulations 1989 (1989 Regulations), which came into operation on Dec L,2OO7, introduced some

significant changes to the statutory agreements required to be used in the sale of a housing
accommodation to a purchaser.

This article will examine some of the significant changes made to the statutory sale and purchase

agreement for a housing accommodation comprising land and building.

Agreement for land and building (Schedule G)

The contract of sale of a housing accommodation comprising land and building is known as Schedule G

agreement. A Schedule G agreement is required to be used where the building is erected on a plot of land

to be held under a separate issue document of title under the National Land Code.

Loan

If a purchaser has obtained a loan from a financier, the normal practice is that the develoDer will execute
the transfer in favour of the purchaser and deliver the title to the purchaser or his financier so that the propefty can be transferred to the purchaser and charged to the financier, even before the full purchase is
paid to the developer. The developer will only do this if he has received an undertaking from the financier

to pay the loan sum in accordance with the schedule of payment set out in the Schedule G agreement.

Many problems have arisen out of this practice, as it is common for the financier to stipulate various

conditions in its undertaking to the developer, some of which are not really reasonable, to say the least
Much time can be taken before the terms of the financier's uhdertaking are acceptable to the developer

and this battle of wordings to be used in an undeftaking usually results in a delay in the release of the loan by the financier. The purchaser ends up paying interest for late payment of the purchase price

claimed by the developer.

The recent amendment now requires the financier to furnish to the developer an unconditional

undertaking to pay the loan sum and, in return, the developer will undertake to refund the loan sum in the event the transfer cannot be registered in favour of the purchaser for any reason which is not attributable

to the purchaser. A notable point is that the developer is no longer required to furnish an undertaking to
refund the loan sum in the event the transfer in favour of the purchaser cannot be registered "for any
reasons whatsoever".

Purchaser's right to initiate and maintain action

In many instances, the separate title may not have been issued at the time of purchase or handing over of
vacant possession. In such a case, as security for the purchaser's loan, the purchaser will be required to
assign absolutely all his rights and interest in the propefty to his financier. By doing so, the purchaser may

be deprived of his right to initiate or maintain any action against the developer in respect of any matter

arising out of the contract of sale.

The new Schedule G agreement makes it very clear that, in such a case, a purchaser may now initiate and

maintain any action or suit in any court or tribunal provided that his financier is notified of the action or suit within 14 days after the action or suit has been filed.

fnterest on late payment

A housing developer is not entitled to charge interest on any late payment of any instalment of the
purchase price in the event the separate title has not been issued on the date of agreement and the purchaser has obtained a loan from a financier, if the developer delays or fails to execute and deliver the

instrument of transfer of the housing accommodation to the purchaser.

Infrastructu re and maintenance

A purchaser is required to contribute to the cost and expense of the maintenance of the infrastructure, including the roads, driveways, drains, culverts, water mains and sewerage plants until such time such

infrastructures are taken over and maintained by the appropriate authority.

The new Schedule G agreement requires the developer to provide the buyer a list and description of the

infrastructure and the expenditure incurred in the maintenance of these infrastructures before the
Durchaser becomes liable to make anv contribution.

Maintenance of services

In addition to contributing to the maintenance of infrastructures, the purchaser is also liable to contribute

to services provided by the developer for refuse collection, cleaning of public drains and grass cutting on the road reseryes, until such time as these services are taken over by the appropriate authority. For such
seryices, the purchaser is required to pay six months'advance when he takes vacant possession of his properuy.

The new Schedule G agreement now provides that when such services have been taken over by the

appropriate authority, the developer shall refund to the purchaser the balance of the amount of such contribution paid by the purchaser.

Delivery of vacant possession

It has been the case that even after taking delivery of vacant possession, the purchaser is not permitted
to occupy the house until the certificate of fitness for occupation (CFO) has been issued by the appropriate
authority.

Now, the developer shall let the purchaser occupy the house when the certificate of completion and compliance has been issued by the developer's architect or engineer, as the case may be. The purchaser

may immediately occupy the property as the CFO is no longer required.

Defect liability period

The defect liability period, which requires the developer to make good any defect shrinkage or other faults in the house, has been increased from 1B to 24 months.

Provisions allowing the purchaser to make a claim on the monies retained by the developer's solicitors for

this purpose have been enhanced and improved. A purchaser may make a claim before the expiry of eight
or 24 months after he takes over the vacant property. Once a notice of claim by a purchaser has been
made, the developer's solicitors may not release the monies held by him until the developer's architect has certified that the defect shrinkage or other faults have been repaired and made good by the developer.

Title not issued at time of vacant possession

If, at the time of taking vacant possession, the separate title to the plot of land has not been issued,

an

additional sum equivalent to 2.5olo of the purchase price will be held by the developer's solicitors and will not be paid to the developer until the separate title and the instrument of transfer in favour of the
purchaser has been delivered by the developer to the purchaser or his solicitor.