EDBFM4 Sale & Purchase of Houses

7/28/2019 EDBFM4 Sale & Purchase of Houses

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Sale & Purchase of Houses7. Who can buy houses in llalaysia?Any Malaysian can buy houss in this country-Only Malaysian citizens may buy low-cost houses. A buyer must apply to the State Authority. Onlythose 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 othernativesl. 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 andshophouses or commercial lots in a complex.A foreigner must also inform the Foreign Invstrnent Committee [FIC] - a planning unit in Ste PrimeMinistefs 0ffice - if he wanB to buy landed property below tfte value of RM5 million. If the propertyis worth more than RM5 million, he has to obtain the approval from the FIC.2. Euying a hou* ftsn a developrWhen a housing developer sells its residential houses in its housing development project, it has touse the standard agreements known as Schedule G and Schedule H in the Flousang Development(Control and Ucensing) Act 1966.Schedule G is to be used for the sale of land with a building to be erected on it- Schedule H is to beused for Ere sale of uniB in a building intended for suMivision, where siEata tiUes are yet to beissued.According to either of the standard agreements, a buyer has to pay progress instalmenB to thehousing developer as and when they are due.The housing developer must produce its architect's certificate certifying the completion of eacttstage 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 18months [after completion of the building] before it is released to the housing developer.

3. Buying a completed houseIf you are buying a completed house, there is no standard agreement. If a housing developer sells acompleted house to a buyer, the standard agreement need not be used. A normal sale and purchaseagreement 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 toredeem the title from the seller's bank. 5olo of the purchase price has to be retained to cover thereal property gains tax payable by the seller.The agreement usually provides for completion of the transaction within 3 months plus one furthermonth with interest. Agred interest has to be paid for late payment of the purchase price in the 4thmonth, calculated from day to day.Both parties have to sign a transfer form- This is meant for transferring the house to the buyer intime to come.


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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 willsign a deed of assignment [instead of the transfer form] and it undertakes to deliver you the titlewhen it is assued-You may re-sell fassign] the flat or apartment to a sub-purchaser. The housing developer must giveyou tfie consent to re-sell, but it has the right to collet O.5% of the purchase price asadminastrative fee [up to a maximum of Rll1500],When the stJata Utle is issued, t}le housing developer will sign the transfer form in order to transferthe flat or aparfnent to you-

5. Documentsof TitleThere are 2 types of documents of tide:

a. freehold - a perrnanent UUeb. leasehold - e-9. a term of 99 or 60 years-[Upon expiry of the leasehold, it may be renewed. If it is not renewed, the land reverB back to theState Authority.lGenemlly, every house has a tide. An apartrnefit or a flat has a strata tide- A seardr in the LandRegistry or Land Office will show whettrer the land is encumbered [e.9. caveated or charged to abankl.

5. Hutsing lnnsYou may obtain a loan from a bank or finance company. A bank may grant you a term loan [fixedloanl or oyerdraft facilities.Under a term loan, you have to pay back by monthly instalments. The overdraft facilities arenormally given to those who engage in business activities.You may also apply for withdrawal from the Employees' Provident Fund [EPF] if you are an EPFcontributor- EPF will allow 3096 of your EPf savings to be usd for buying a house.You may also -

a. withdraw 30Yo of your EPF savings to settle your housing loan obtained from a bank orfinance company; orb. use your EPF savings to setde the balance of your bank loan, whicfiever is lower.For example, if 3}o/o of your EPF savings amounts to RM9,000, and the balance of your bank loan isonly Rll6,00O, you may only withdraw RM6,00O from his EPF savangs. This is because the balance ofyour loan [RM6000] is lower than the 3$o/o of your EPF savings [RM9,000].7. Stamp dutyEvery transfer of property attracts stamp duty. The stamp duty is based on the value of theproperty:

Valug qf oropertu Stamp Putv


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a. First RM100,000 lolab- Next Rl'l4t)0,000 Tahc. Above RM5O0,O00 3q68. Legal feesThere is a scale fee for every transfer of property" based on the value of the property:

Value af property Leoal Feesa. First RM100,000 to/ob. Next RM4,900,000 lzalac. 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 areentitled 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 taxEvery seller must fill in the real property gains tax form [CKHT1]. Every buyer must also fill in asimilar form [CKHT2]" It must be submitted to the Inland Revenue Board within 30 days frorn thedate 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 Taxa. within l year 3$olob. within 2 years 30oloc. within 3 years 30o/od. within 4 years 15o/oe. within 5 years Sa/of. after 5 years Oo/o

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 beretained normally by the seller's solicitor for payment of the real propefi gains tax.Housing Development (Control & Licensing) Regulation 1989SINCE April 12,2007, the Housing Development (Control and Licensing) Act, 1966 (Act 118) was not onlyan Act to regulate the business of housing developers, but also an Act to protect the interest ofpurchasers. 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 somesignificant changes to the statutory agreements required to be used in the sale of a housingaccommodation to a purchaser.


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This article will examine some of the significant changes made to the statutory sale and purchaseagreement 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 Gagreement. A Schedule G agreement is required to be used where the building is erected on a plot of landto 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 executethe transfer in favour of the purchaser and deliver the title to the purchaser or his financier so that thepropefty can be transferred to the purchaser and charged to the financier, even before the full purchase ispaid to the developer. The developer will only do this if he has received an undertaking from the financierto 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 variousconditions in its undertaking to the developer, some of which are not really reasonable, to say the leastMuch time can be taken before the terms of the financier's uhdertaking are acceptable to the developerand this battle of wordings to be used in an undeftaking usually results in a delay in the release of theloan by the financier. The purchaser ends up paying interest for late payment of the purchase priceclaimed by the developer.

The recent amendment now requires the financier to furnish to the developer an unconditionalundertaking to pay the loan sum and, in return, the developer will undertake to refund the loan sum in theevent the transfer cannot be registered in favour of the purchaser for any reason which is not attributableto the purchaser. A notable point is that the developer is no longer required to furnish an undertaking torefund the loan sum in the event the transfer in favour of the purchaser cannot be registered "for anyreasons whatsoever".

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


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be deprived of his right to initiate or maintain any action against the developer in respect of any matterarising 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 andmaintain any action or suit in any court or tribunal provided that his financier is notified of the action orsuit 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 thepurchase price in the event the separate title has not been issued on the date of agreement and thepurchaser has obtained a loan from a financier, if the developer delays or fails to execute and deliver theinstrument 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 suchinfrastructures 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 theinfrastructure and the expenditure incurred in the maintenance of these infrastructures before theDurchaser becomes liable to make anv contribution.

Maintenance of services

In addition to contributing to the maintenance of infrastructures, the purchaser is also liable to contributeto services provided by the developer for refuse collection, cleaning of public drains and grass cutting onthe road reseryes, until such time as these services are taken over by the appropriate authority. For suchseryices, the purchaser is required to pay six months'advance when he takes vacant possession of hisproperuy.

The new Schedule G agreement now provides that when such services have been taken over by theappropriate authority, the developer shall refund to the purchaser the balance of the amount of suchcontribution paid by the purchaser.


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Delivery of vacant possession

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

Now, the developer shall let the purchaser occupy the house when the certificate of completion andcompliance has been issued by the developer's architect or engineer, as the case may be. The purchasermay 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 faultsin 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 forthis purpose have been enhanced and improved. A purchaser may make a claim before the expiry of eightor 24 months after he takes over the vacant property. Once a notice of claim by a purchaser has beenmade, the developer's solicitors may not release the monies held by him until the developer's architecthas certified that the defect shrinkage or other faults have been repaired and made good by thedeveloper.

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, anadditional sum equivalent to 2.5olo of the purchase price will be held by the developer's solicitors and willnot be paid to the developer until the separate title and the instrument of transfer in favour of thepurchaser has been delivered by the developer to the purchaser or his solicitor.

EDBFM4 Sale & Purchase of Houses

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