In this two-part series, we look at the nitty-gritty of buying a home
Last month we looked at the various Schedules involved in buying direct from the developer: Schedule G for landed housing accommodation, Schedule H for accommodation in a subdivided building, and Schedules I & J for “build-then-sell” properties – Schedule I for completed landed property (individual title properties) and Schedule J for completed houses in a subdivided building (strata title properties).
It must be noted that the Schedule(s) shall not apply if at the time of execution of the contract of sale, the certificate of fitness has been issued
AND its certified true copy has been forwarded to the purchaser(s). In such a case, parties are free to contract without following the Schedules.
When buying from a Developer, the following are instances where the prescribed Schedules do not apply:-
- For sale of commercial, agricultural and industrial lots not intended for residential purposes
- In sub-sales cases where CF has been issued.
- If the developer wants to amend any provisions in the Schedules, they must seek the permission from the Controller of Housing, the Secretary-General of the Ministry of Housing Development and Local Government.
It is important to note that the time frame to settle the balance purchase price of 90% is rather short in Schedules I and J. Purchasers are given only 21 days from receipt of the vendor’s written notice of delivery of vacant possession. In comparison, in the sub-sale market, although parties are free to contract, purchasers are usually given 3 + 1 months to settle the 90% balance purchase price. Therefore, the 21-day period for the settlement of the 90% balance purchase price seems rather tight bearing in mind the time it takes to process the loan applications.
I wish to thank Saiful Lizan Advocate & Solicitor for his contribution to this article on the amendments to the Housing Development (Control and Licensing) (Amendment) Regulations 2007.
Buying from the Secondary market
There are no hard and fast rules on the form of agreement for purchases of existing homes from the secondary or sub-sale market (Diagram 1).
Diagram 1 : Standard Process of Purchase of Home in the Secondary Market
Offer to purchase from Buyer + Earnest Deposit*
Acceptance of Offer by Seller
SPA to be executed + Buyer pays the first 10% of the purchase price (less Earnest Deposit) to the Seller
Buyer has three months to pay the 90% remainder of the purchase price** to the Seller with an extension of one month***
* It is common practice for the Earnest Deposit (usually two to three per cent of the offered price) to be held by the solicitors or estate agent’s clients account as
** The 3 + 1 month time-frame runs from the date of consent, where relevant
*** Interest of eight to 10% per annum (typically), calculated on a daily basis, is normally charged for the extension period
By law, you are deemed to have read and understood every document you sign. Be careful of promises made by the seller or anyone else about the transaction which may not be enforceable if the promises are not put in writing.
Payment of the balance of purchase price is usually made to the solicitors acting for the seller as stakeholders to ensure redemption of the house (if it is still charged to a bank or financial institution at the time of sale). On the Memorandum of Transfer, where title has not been issued, the transfer will be made through an assignment of the SPA between the developer and the seller (the Principal Sale and Purchase Agreement) to enable the buyer to benefit from the developer's undertaking to transfer the title contained in the Principal Sale and Purchase Agreement.
The most obvious expense is the legal fees. The vendor and the purchaser should each seek separate legal representation to ensure that their respective rights and interests are fully protected.
The vendor’s solicitor shall act for the vendor in the sale transaction, the discharge transaction (if any) and the application for consent (if required). The purchaser’s solicitor shall then act for his client in the transaction.
Stamp duty is also levied on the document of transfer (the memorandum of transfer if the title has been issued; or the deed of assignment of the Principal Sale and Purchase Agreement if the title has not been issued).
There are many things to consider when purchasing a home. We will look into the other Expenses, including maintenance and insurance, in future issues.
By Chan Ai Cheng
Chan Ai Cheng is the General Manager of S K Brothers Realty (M) Sdn Bhd. She is a Registered Estate Agent with the Board of Valuers, Appraisers & Estate Agents Malaysia (LPPEH); a Registered Financial Consultant (RFC), International Association of Registered Financial Consultant (IARFC); a member of the Institution of Surveyors Malaysia (ISM) and a member of the Malaysian Institute of Estate Agents (MIEA).