Sale and Purchase Agreement in Malaysia: What is SPA in property?

From the preparation to the document signing, here’s everything you need to know about a Sale and Purchase Agreement (SPA) in Malaysia.

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If you are new to the property market and are scouring for your dream home, you will eventually have to learn about the nitty-gritty of actually sealing the deal, especially about documentation. Arguably, the most important document for a prospective buyer and seller, other than loan-related documents, is the SPA. 

As a beginner, you may be overwhelmed by all the documentation coming your way. To ease any concerns you may have, we have listed a few common questions and answers (Q&As) related to SPA for prospective home buyers. Hopefully, this will set you on the right path to secure your new home.

What is an SPA?

The SPA is a comprehensive legal document that contains details of the property transaction between the buyer and seller. Once you sign off on the SPA, you essentially get the ball rolling to seal the deal. There are a lot of SPA Malaysia samples available online if you’re keen to know how it looks like and what is included in the agreement. 

What is the importance of the Sales and Purchase Agreement

The SPA is one of the most important elements in your home buying journey. This agreement finalises legally binding terms and conditions in the home buying process and it safeguards home buyers’ and developers’ interests.

Who prepares the SPA?

Typically, the buyer and seller will engage a professional conveyance lawyer who specialises in property to prepare the SPA. Even if you are legally knowledgeable, this is advisable to avoid any unnecessary technical delays or errors by either party which, may prove costly. Normally, the lawyer is appointed by the seller, but it has to be mutually agreed upon by both parties. Try googling sale and purchase agreement sample Malaysia.

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What is in the SPA?

The Sale and Purchase Agreement key terms are comprehensive details of the contract between buyer and seller. These include:

• Purchase price
• Conditions and precedents 
• Payment terms
• Loan details
• Delivery of vacant possession
• Defect liability period and other relevant information on the property

It will also contain the course of action if either party fails to meet the requirements stated in the SPA, for example, the deadline for the buyer to receive keys to the property.

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What are the different types of SPAs

There are various sale and purchase agreements depending if the property is being purchased from the primary market or secondary market.

For residential property, the SPAs are split into two different types.

Primary property 

Primary property means direct purchase from developers. SPAs for the primary property are pretty much fixed and skewed towards the developer. A sale and purchase agreement sample Malaysia for Schedule G can be found here courtesy of the law firm Halim, Hong & Quek.

Secondary Property

Secondary property is a property purchased in the sub-sale market. SPAs for secondary property allow some room for negotiations between buyer and seller.

There are also different sale and purchase agreements depending if the property being acquired comes with an individual title or a strata title. The SPA templates for each are stated under the Housing Development (Control and Licensing) Regulations of 1989. Specifically, these are the two templates:

• Schedule G – Landed Individual Title

This SPA template is intended for landed individual properties, including terraced homes and semi-detached houses.

• Schedule H – Strata Title

This SPA template is meant for strata-titled residential properties, like flats and condo units. This type of SPA contains more details and provisions as it involves homes located in developments with common properties, such as corridors, lifts, parking spaces, and swimming pools, as well as other amenities and facilities.

Is an SPA legally binding?

Yes, the SPA is a legally binding contract and enforceable in a court of law. Once you have signed off on the SPA, no further negotiations are normally allowed. This will protect the interest of both buyer and seller. You have to be 100% certain before signing that document.

The procedure of Sale and Purchase Agreement in Malaysia

Buying a property in Malaysia is a straightforward process but you may want to appoint a real estate solicitor to ensure a smoother transaction and to avoid stumbling blocks during the purchasing process. 

There are a few steps in the SPA procedure:

Step 1: Choose that dream home you have always wanted to buy, then sign the Letter of Acceptance/ Offer Letter to pay a 3% deposit of the total property price. 

Step 2: The buyer will then sign the agreement and pay for a 7% deposit within 14 days after signing the Letter of Acceptance. Following this, the buyer now has three (3) months to complete the sale and to make full payment. 

Step 3: The SPA has to be stamped by Lembaga Hasil Dalam Negeri Malaysia (LHDN) or the Inland Revenue Board of Malaysia (IRB) for it to become a valid legal document.

The stamp duty payment, registration at the Land Office Registry, and the title deed will only be transferred to the buyer’s name once the property examination by the valuation department is complete. 

On the other hand, if you’re buying a new house and the seller/ developer does not yet have the property’s full title, this has to be stated in the SPA and it has to be transferred as soon as possible. 

Is it possible to cancel the SPA?

Yes, either party may cancel the SPA, if the terms and conditions stated in the document allow it. The SPA may contain certain clauses that may penalise either buyer or seller, depending on the situation. The SPA may consist of a specific performance clause, for example, delivery of vacant possession or payment during a specific duration. If these clauses are breached, it may lead to the possible cancellation of the SPA.

However, be mindful that flouting the agreement carries penalties for the party who broke the contract. For instance, there is typically a clause contained in every standard SPA, wherein the party who cancels the deal would be charged a penalty of 10% based on the property’s selling price. So, if the home has a price tag of RM700,000, the party who terminated the contract would need to pay RM70,000 to the other party.

The SPA also contains penalties if the seller or the developer rescinds the deal, but if they breach the contract, they can be sued in court.

Termination of a Sales and Purchase Agreement in Malaysia

The Housing Development (Control and Licensing) Act 1966 outlines and protects the rights of buyers and developers. Section 8 of the HDA (Control and Licensing) Act 1966 describes the cancellation of the SPA. Among the conditions under this act that allows SPA to be cancelled are:

• Termination of SPA is applied through the Ministry of Housing and it is approved by the ministry. 
• Cancellation of SPA is done within 6 months after signing it 
• At least 75% of homebuyers agree to the termination of the SPA

What is the difference between SPA and sale deed?

Here are a few differences between the SPA and sale deed

• SPA

The SPA is an agreement to buy/sell a property at a future date. Typically there is a waiting period for property transfer to a new owner. 

• Deed of sale 

A sale deed is a legally binding document proving that the seller has transferred absolute ownership of the property to the buyer. With the sale deed, the rights and interests in the property are acquired by the new owner. The property is immediately transferred, unlike the SPA. 

A sale deed usually includes details of:

• The buyer and seller
• Property description
• Selling price
• Mode of payment
• The time frame for transfer of property title
• Delivery of possession
• Indemnity clause.

Is the SPA valid after-sale deed?

A sale deed transfers the rights of a party with a property to another party. All the terms and conditions in the SPA are usually valid in the sale deed.

How much is the cost of SPA and stamp duty

The cost of SPA and stamp duty may vary according to the property’s price. It is as follows:

Stamp duty fees for SPA 

The stamp duty for the instrument of transfer is calculated based on the house price tier.

Property price	Percentage
First RM100,000	1%
RM100,001 – RM500,000	2%
RM500,001 – RM1,000,000	3%
Above RM1,000,001	4%

Legal fees

Just like the stamp duty, legal fees are charged based on the property’s buying price

Property price	Percentage
First RM500,000	1%
RM500,001 – RM1,000,000	0.8%
RM1,000,001 – RM3,000,000	0.7%
RM3,000,001 – RM5,000,000	0.6%

How much should I pay a lawyer to draft an SPA for me?

If you hired an attorney to create an SPA for you, which is often the case for homes being purchased on the secondary market, the amount you need to pay is based on the First Schedule of Solicitors’ Remuneration Order of 1991:

Aside from that, you should keep in mind Section 3 of the Solicitors’ Remuneration Order of 1991, which enumerates additional legal services or fees that needs to be paid for:

You can also check the latest stamp duty charges, RPGT and legal fees to consider before buying a house in 2023 to make a preliminary calculation before committing to the homeownership journey.

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Edited by G.Zizan