Property buying in Malaysia can be exciting. You may spend weeks comparing locations, checking the view, visiting showrooms, negotiating the price and discussing your loan with the bank.
But buying a property is also a major legal and financial commitment. Many buyers focus on the property itself without fully understanding the legal risks involved in the transaction.
Before you pay a booking fee or sign a Sale and Purchase Agreement (SPA), there are important matters that should be checked, including the property’s title, ownership, restrictions, existing charges, outstanding sums, consent requirements and the terms of the transaction.
This guide focuses mainly on subsale property transactions in Malaysia. Some issues may differ for developer sales, auctions, commercial properties and other types of transactions.
1. Paying a Booking Fee and Signing a Booking Form Without Understanding
One of the first mistakes buyers make is paying a booking fee or earnest deposit and signing a booking form before properly understanding the document they are signing.
You may be asked to sign:
- a booking form;
- letter of offer;
- earnest deposit form;
- offer to purchase;
- reservation form; or
- other documents prepared by the estate agent.
The document may contain important terms concerning:
- the purchase price;
- deposit;
- completion period;
- financing;
- forfeiture;
- conditions of sale;
- withdrawal from the transaction; and
- what happens if the SPA is not subsequently signed.
A buyer should not assume that a document is “just a booking form” simply because an agent describes it that way.
Ask your lawyer before signing
If you are unsure about the legal effect of the document, have it reviewed before signing or paying a substantial amount.
A relatively small booking payment can potentially lead to a much larger dispute if the parties later disagree about whether the transaction was binding.
2. Assuming the Seller Is Definitely the Owner
An estate agent may introduce you to someone as the “owner”. That does not replace a legal title search.
The solicitor acting for the purchaser should verify who is actually registered as the proprietor of the property.
This is particularly important where:
- there are multiple owners;
- one owner has died;
- the property belongs to an estate;
- the seller is acting under a power of attorney;
- the seller is a company;
- there has been a recent transfer; or
- the property is being sold by an attorney, executor or administrator.
A property transaction should be based on the actual legal ownership, not simply what appears on an advertisement or what someone tells you.
3. Not Checking the Title Before Signing the SPA
The title is one of the most important documents in a property transaction.
A proper title search can reveal information that may not be obvious from the property listing.
Depending on the property, the search may reveal:
- registered proprietor;
- tenure;
- title details;
- restrictions in interest;
- registered charge;
- caveat;
- lease;
- other endorsements; and
- other matters affecting dealings with the property.
The Department of Director General of Lands and Mines explains that land subject to a restriction in interest or caveat may require consent before transfer, while a charge may require consent from the chargee.
Why this matters
Imagine that you have already agreed to buy a property, paid a substantial deposit and signed the SPA.
Only afterwards do you discover that the title contains a restriction requiring consent from the State Authority.
The transaction may still be possible, but the process may take longer and involve additional requirements.
A title search should be part of your due diligence, not an afterthought.
4. Assuming a Property With a Bank Loan Can Be Transferred Immediately
Many subsale properties are still charged to a bank.
This is normal.
However, it means the seller’s existing financing must be properly dealt with as part of the transaction.
For example:
Seller owes Bank A RM450,000.
Buyer agrees to purchase the property for RM700,000.
The seller cannot simply hand over the property to the buyer without dealing with Bank A’s charge.
The conveyancing solicitors will generally need to coordinate matters involving:
- redemption;
- redemption statement;
- settlement of the seller’s existing loan;
- discharge of charge;
- registration; and
- the buyer’s new financing, where applicable.
Where the title is charged, the chargee’s interest is legally relevant to the transaction.
This is one reason why a subsale transaction can involve several parties and documents behind the scenes.
5. Not Checking for Restrictions in Interest
Not every property can be freely transferred without additional approval.
The title may contain a restriction in interest.
For example, the title may require consent from the relevant State Authority before the property can be transferred.
Other restrictions may arise depending on the type of property and the applicable state rules.
The JKPTG guidance notes that State Authority consent is required for land with a restriction in interest, while other consent requirements may arise for matters such as caveats, charges, leases and foreign ownership.
This can become particularly important when:
- the buyer is a foreigner;
- the property is subject to a state restriction;
- the property is agricultural land;
- the property is subject to a caveat;
- the seller has an existing charge; or
- the property is subject to other statutory restrictions.
Never assume that because a seller is willing to sell, the transfer can automatically be registered.
6. Focusing Only on the Purchase Price
A buyer may negotiate aggressively over the purchase price while overlooking the other costs of acquiring the property.
The purchase price is only one part of the transaction.
A buyer may also need to budget for:
- legal fees;
- stamp duty;
- loan documentation costs;
- valuation fees;
- registration fees;
- land office fees;
- search fees;
- disbursements;
- consent-related costs; and
- other transaction expenses.
Stamp duty is imposed on instruments under the Stamp Act 1949, and the applicable duty depends on the relevant instrument and circumstances. LHDN also publishes current guidance on stamp duty matters.
A simple example
A buyer may think:
“The property is RM800,000. I have RM160,000 for the 20% deposit, so I am ready.”
But the buyer should also consider the transaction costs that arise in addition to the purchase price.
Your lawyer should be able to give you a clearer estimate of the expected legal fees, stamp duty and disbursements before you commit.
7. Not Checking Outstanding Maintenance Charges
This is particularly important when buying a condominium, apartment or other strata property.
A buyer should not simply assume that all maintenance charges have been paid because the seller says:
“Everything is settled.”
The solicitor should obtain the relevant information and, where appropriate, confirmation from the management body concerning outstanding sums.
Potential items may include:
- maintenance charges;
- sinking fund;
- utilities;
- late payment charges;
- administrative charges; and
- other sums payable to the management body.
A buyer should also understand what happens to outstanding sums as part of the completion arrangements.
Why this matters
A property may look perfect during a viewing.
But a legal and financial issue involving the management body can still affect the transaction.
8. Assuming Everything You See During the Viewing Is Included
A property viewing and an SPA are two different things.
You may view a house containing:
- built-in wardrobes;
- kitchen cabinets;
- air-conditioning units;
- water heaters;
- curtains;
- lighting;
- appliances;
- furniture; or
- other fixtures.
But what exactly remains with the property after completion?
This should be made clear.
If a particular item is important to you, do not rely solely on a verbal promise from the agent or seller.
Put important arrangements in writing
For example:
“The built-in kitchen cabinets, five air-conditioning units and all existing water heaters shall remain with the Property upon delivery of vacant possession.”
The exact wording should be properly incorporated into the contractual documentation where appropriate.
If it matters to you, document it.
9. Not Asking About Renovations and Alterations
A buyer may purchase a beautifully renovated property without asking how the renovation was carried out.
This can be risky.
For example, a seller may have:
- extended the kitchen;
- enclosed a balcony;
- constructed an additional room;
- altered internal walls;
- installed awnings;
- changed plumbing;
- carried out structural works; or
- made other alterations.
Depending on the nature of the works, approvals or consents may be relevant.
For strata properties, management rules and approvals may also need to be considered.
A buyer should therefore ask questions about significant renovations before committing to the purchase.
10. Signing the SPA Without Understanding the Completion Period
The SPA contains important deadlines.
For example, the agreement may provide for completion within a specified period from a particular date or event.
Buyers should understand:
- when the completion period begins;
- whether there is an extension period;
- what happens if completion is delayed;
- whether late payment interest applies;
- when vacant possession is due;
- what conditions must be fulfilled before completion; and
- what happens if one party defaults.
Do not simply sign the SPA because:
“The lawyer will explain it later.”
The SPA is the document that governs the transaction.
You should understand the important commercial consequences before signing it.
11. Not Understanding Late Payment Interest
Suppose your SPA provides that the balance purchase price must be paid by a particular completion date.
What happens if your loan is delayed?
What happens if your documents are not ready?
What happens if the bank’s documentation is delayed?
The SPA may contain provisions dealing with late payment and interest.
A relatively short delay can become expensive if interest is calculated on a substantial outstanding balance.
Example
If RM600,000 remains unpaid and the contractual interest rate is 8% per annum, the daily interest is approximately:
RM600,000 × 8% ÷ 365 = RM131.51 per day
That is why buyers should understand the completion mechanics before signing.
Do not wait until the completion deadline to discover how much a delay could cost.
12. Assuming Vacant Possession Means “I Get the Keys”
Vacant possession is more than simply receiving a set of keys.
The contractual requirements for vacant possession depend on the SPA and nature of the transaction.
For a subsale property, buyers should understand matters such as:
- whether the property must be vacant;
- whether tenants are still occupying the property;
- whether the seller has agreed to deliver vacant possession;
- whether items must be removed;
- whether the property should be in a particular condition; and
- what happens if vacant possession is not properly delivered.
If there is a tenant
This becomes particularly important.
A buyer should know whether the property is:
- sold with the tenancy continuing;
- sold subject to termination of the tenancy; or
- required to be delivered with vacant possession.
Do not assume that “purchase of the property” automatically means you can move in immediately.
The contractual terms matter.
13. Choosing a Property Lawyer Based Only on the Cheapest Quote
Legal fees matter. But property conveyancing is not simply a matter of finding the cheapest quotation.
You should also consider:
- whether the firm regularly handles conveyancing;
- who will actually handle your file (whether lawyer or a mere clerk);
- whether the firm is responsive;
- whether the lawyer explains the transaction clearly;
- whether the firm has experience dealing with banks and land offices;
- whether the firm identifies potential problems early; and
- whether you are comfortable entrusting a major financial transaction to the firm.
A difference in legal fees may be relatively small compared with the value of the property being purchased.
For a RM1 million property, the legal advice you receive before committing to the transaction can be far more important than saving a small amount on professional fees.
What Does a Property Lawyer Actually Check?
Many buyers ask:
“What exactly does my lawyer do?”
The answer is more than simply preparing the SPA.
Depending on the transaction, your conveyancing lawyer may assist with:
1. Title search
To verify ownership and identify registered matters affecting the property.
2. Contract review
To review and negotiate the SPA and related documents.
3. Encumbrances
To identify matters such as charges and caveats.
4. Consent requirements
To determine whether any consent is required before the transfer can proceed.
5. Bank coordination
Where the buyer and/or seller has financing.
6. Redemption
Where the seller’s existing property loan needs to be settled.
7. Stamp duty
To attend to the applicable stamping requirements.
8. Registration
To prepare and present the relevant instruments for registration.
9. Completion
To coordinate the legal requirements leading to completion and, where applicable, vacant possession.
10. Risk identification
Perhaps most importantly, your lawyer should identify legal issues that may affect the transaction before you become too deeply committed.
Questions You Should Ask Your Property Lawyer Before Signing
Before signing your SPA, consider asking:
“Who is the registered owner?”
“Does the title have any restriction in interest?”
“Is the property charged to a bank?”
“Are there any caveats or other encumbrances?”
“Does the transaction require State Authority consent?”
“Are there outstanding maintenance charges?”
“Is the seller required to give vacant possession?”
“Is there currently a tenant?”
“What exactly is included in the sale?”
“When must I pay the balance purchase price?”
“What happens if my bank loan is delayed?”
“What happens if the seller cannot complete?”
“What are the consequences of late completion?”
“How much should I budget for legal fees and stamp duty?”
If your lawyer cannot clearly explain the key risks and obligations to you, ask questions before signing.
What Should You Check Before Buying a Property?
Here is a practical checklist for buyers.
Before paying the booking fee
☐ Confirm the purchase price
☐ Understand the booking form
☐ Understand whether the payment is refundable
☐ Check the proposed completion arrangements
☐ Obtain legal advice where necessary
Before signing the SPA
☐ Verify the registered owner
☐ Conduct the necessary title search
☐ Check restrictions in interest
☐ Check charges and caveats
☐ Confirm whether consent is required
☐ Check the seller’s financing position
☐ Check maintenance/outstanding charges
☐ Confirm whether the property is tenanted
☐ Confirm what fixtures and fittings are included
☐ Understand the completion period
☐ Understand late payment consequences
☐ Understand vacant possession arrangements
Before completion
☐ Ensure financing documentation is ready
☐ Confirm redemption arrangements where applicable
☐ Confirm required consents have been obtained
☐ Ensure necessary documents are properly signed
☐ Confirm outstanding sums have been addressed
☐ Ensure the transaction is ready for completion
Frequently Asked Questions
Do I need a lawyer when buying a property in Malaysia?
For a property purchase, a conveyancing solicitor can handle and advise on the legal documentation, title, contractual obligations, completion and registration process. The exact scope of work depends on the transaction.
Should I hire a lawyer before paying the booking fee?
If the booking form contains important contractual terms, having it reviewed before signing can help you understand your obligations and potential risks.
What is a title search?
A title search allows the solicitor to examine the registered information relating to the property, including ownership and matters such as restrictions, charges and caveats where applicable.
Can I buy a property if there is still a bank loan on it?
Yes. Many subsale properties are sold while subject to an existing bank charge. The seller’s financing must be properly dealt with as part of the transaction.
What if the seller is a bankrupt?
If the seller is a bankrupt, the transaction becomes more complicated because the seller generally cannot deal with the property as if he were free to sell it himself. Upon bankruptcy, the bankrupt’s property generally vests in the Director General of Insolvency (DGI), who administers and realises the bankrupt’s assets for the benefit of creditors.
Therefore, if you are considering purchasing a property from a bankrupt seller, you should engage your own independent lawyer before signing any SPA or paying any deposit. The transaction may require the involvement, consent or approval of the DGI, and the usual conveyancing process may not apply. The Malaysian Department of Insolvency specifically handles the sale of bankrupts’ immovable properties and applications relating to the signing of SPAs.
It is important to conduct a bankruptcy search and confirm the seller’s status before proceeding with the purchase.
Can I cancel the purchase after signing the SPA?
This depends on the terms of the SPA and the circumstances. A buyer should not assume that signing an SPA creates a simple right to withdraw.
If the SPA does not provide the buyer with a right to terminate, and there is no lawful basis for termination without compensation— for example, where the seller has first breached or defaulted under the SPA — the buyer may be treated as being in breach if he simply decides not to proceed. In a typical subsale, the 10% deposit may then be forfeited by the seller in accordance with the terms of the SPA.
However, if the seller is the party who has first breached the SPA, the buyer may have contractual rights to terminate and/or claim the remedies provided under the SPA, depending on the nature of the breach and the applicable terms.
What happens if my bank loan is delayed?
If the SPA has been signed, dated and stamped, the completion period is generally 3 months, subject to the specific terms of the SPA. The purchaser should therefore ensure that the bank loan is released to the seller’s solicitors within the stipulated completion period.
If the balance purchase price is not paid within the 3-month completion period, the SPA will usually provide for an extension period, commonly one month, during which late payment interest at 8% per annum is payable on the outstanding balance, calculated on a daily basis.
However, if the delay is caused by the seller or circumstances for which the purchaser is not responsible, the position may be different depending on the terms of the SPA.
Do I have to pay stamp duty when buying a property?
Yes. Stamp duty is generally payable when purchasing a property, including on the relevant instrument of transfer and, where applicable, the loan or financing agreement.
However, certain stamp duty exemptions or remissions may apply, depending on the type of property, the purchaser’s eligibility and the applicable Government exemption orders. For example, eligible first-time homebuyers may qualify for stamp duty exemption subject to the prevailing conditions.
What happens if the seller refuses to give vacant possession?
If the full Balance Purchase Price (“BPP”) has been released to the seller and the SPA provides that the seller is required to deliver vacant possession, the seller must comply with that obligation.
If the seller fails to deliver vacant possession within the period stipulated under the SPA, the seller shall be liable to pay late payment interest at 8% per annum, calculated on a daily basis.
Your purchaser’s solicitor will calculate the interest payable based on the period of delay and formally seek payment of the same from the seller or the seller’s solicitor.
What if the seller run away or MIA during the SPA process?
If the seller becomes uncontactable or refuses to cooperate after signing the SPA, this does not automatically cancel the SPA. The SPA remains binding, and the purchaser’s solicitor should first take steps to formally notify the seller and demand that the seller comply with his obligations under the SPA.
If the seller is in breach, the purchaser may, depending on the terms of the SPA and the circumstances, seek the contractual remedies available, including damages and/or specific performance to compel the seller to complete the sale. Malaysian law recognises specific performance for contracts involving the transfer of immovable property.
What if, when I receive the keys, I realise that the house is substantially different from the one I inspected during the booking?
If the property is substantially different from the condition, fixtures, fittings or items that were represented to you at the time of booking, you should not accept the situation without first seeking legal advice.
The first step is to compare the condition of the property at handover against the SPA, booking form, inventory, photographs and any written representations or agreements made by the seller. It is particularly important that any agreed fixtures, fittings or furniture are properly recorded in the SPA or its inventory.
If the seller has removed items, altered the property, caused damage or otherwise failed to deliver the property in the condition required under the SPA, the purchaser may have contractual remedies against the seller.
Do not immediately sign a document confirming that everything is in order if there are substantial discrepancies. Take photographs and videos of the property, document the differences and notify your solicitor immediately so that the appropriate steps can be taken against the seller.
Should I use the seller’s lawyer?
In a typical sale and purchase transaction, the seller and purchaser have their own legal interests. Buyers should understand who their solicitor represents and obtain independent legal advice where appropriate.
Based on the above, our advice is that you should engage your own independent lawyer to review the transaction, advise you on the SPA, explain your rights and obligations, and protect your interests throughout the purchase.
Having your own lawyer can also help you understand potential issues such as completion deadlines, loan delays, vacant possession, late payment interest, forfeiture and the seller’s obligations before you commit to the transaction.
Final Thoughts: Do Your Legal Due Diligence Before You Buy
Buying property is one of the biggest financial commitments many people will make.
It is easy to become focused on:
“Is this the right house?”
But before asking whether the property has the perfect kitchen, view or location, you should also ask:
“Is this transaction legally safe for me?”
A property may look perfect during a viewing while the legal issues remain hidden in the title, SPA, bank documentation or other records.
That is why proper due diligence matters.
Before you pay a substantial deposit or sign the SPA, make sure you understand:
- who owns the property;
- whether there are restrictions or encumbrances;
- whether financing issues exist;
- what you are actually buying;
- when you must pay;
- what happens if there is a delay; and
- when and how you will receive vacant possession.
Do not wait until a problem appears before asking your lawyer to investigate it.
The best time to identify a legal problem is before you commit to the transaction.
Need Help With Your Property Purchase in Malaysia?
Buying a property is a major financial commitment, and the legal documentation should be properly reviewed before you sign.
At PropertyLawyer.my, we assist purchasers with property transactions in Malaysia, including subsale purchases, Sale and Purchase Agreements, title searches, financing-related matters, consent applications, transfer documentation and completion.
If you are planning to purchase a property and want to understand the legal process before committing yourself, contact us to discuss your transaction.
A few minutes of legal advice before signing can help you avoid much bigger problems later.
Disclaimer
This article is intended for general information only and does not constitute legal advice. Property transactions in Malaysia may be affected by the type and location of the property, title conditions, state requirements, financing arrangements and the applicable laws and regulations at the relevant time. You should obtain specific legal advice based on your circumstances before entering into a property transaction.
