Property Law FAQ Malaysia

What is a Sale and Purchase Agreement (SPA) and is it mandatory?

A Sale and Purchase Agreement is the principal legal document governing the transfer of property from seller to buyer. For residential property, the Housing Development (Control and Licensing) Act 1966 prescribes a standard form SPA (Schedule G for landed property, Schedule H for strata property) that developers must use. This statutory form protects buyers by including mandatory provisions on delivery dates, defect liability periods, and completion milestones. For sub-sale transactions (secondary market), the SPA is negotiated between the parties and typically prepared by the purchaser's solicitor. It is essential to have a lawyer review the SPA before signing, as it governs your rights and obligations throughout the transaction.

How is stamp duty calculated on property transactions?

Stamp duty on property transfers is levied under the Stamp Act 1949 on a progressive scale. For property valued up to RM100,000, the rate is 1%. For RM100,001 to RM500,000, the rate is 2%. For RM500,001 to RM1,000,000, the rate is 3%. For amounts exceeding RM1,000,000, the rate is 4%. First-time home buyers purchasing residential property priced at RM500,000 or below are eligible for full stamp duty exemption on the instrument of transfer, while properties priced between RM500,001 and RM1,000,000 receive a partial exemption. These exemptions are subject to periodic government policy changes and budget announcements.

What is a Memorandum of Transfer (MOT)?

The Memorandum of Transfer, also known as Form 14A under the National Land Code 1965, is the prescribed form used to transfer ownership of land from one party to another. It must be executed by both the transferor and the transferee and registered at the relevant Land Office or Registry to effect the transfer of the legal title. For strata properties, the transfer is registered at the Land Office after the strata title has been issued. Until the MOT is registered, the buyer holds equitable interest but not legal title. The registration process involves payment of stamp duty and registration fees.

What is a discharge of charge and who handles it?

When a property has been charged (mortgaged) to a bank or financial institution, a discharge of charge is required to release the property from the charge upon full repayment of the loan. The borrower's solicitor prepares the Form 16N (Memorandum of Discharge) and submits it together with the original land title to the chargee's solicitor for execution. The executed discharge is then registered at the Land Office. Until the discharge is registered, the charge remains on the title. In a sub-sale transaction, the seller's solicitor typically arranges the discharge concurrently with the transfer to ensure clean title passes to the purchaser.

What is a strata title and why is it important?

A strata title is issued under the Strata Titles Act 1985 for individual units in a high-rise or landed strata development. It confers separate legal ownership of a parcel (unit) together with a proportionate share in the common property. Until the strata title is issued, the developer holds the master title and individual buyers' interests are reflected through the SPA and charge documents. The strata title enables the owner to sell, charge or transfer the unit independently. The Strata Management Act 2013 governs the management and maintenance of strata developments, including the formation of the Management Corporation and the Joint Management Body.

What is the process for buying property from a developer?

Under the Housing Development Act, the buyer signs the statutory SPA and pays the purchase price in progressive stages as construction progresses, according to the Third Schedule. A housing developer's account (HDA) is maintained by a bank to hold buyers' payments, which the developer can only draw down against architect's certification of completion milestones. Upon completion and vacant possession, the developer must apply for the Certificate of Completion and Compliance (CCC). The buyer then takes possession and the developer is required to apply for strata titles within the prescribed timeframe. A defect liability period of 24 months from vacant possession protects the buyer against construction defects.

Can a foreigner buy property in Johor Bahru?

Yes, subject to restrictions. Under the Economic Planning Unit (EPU) guidelines and Johor state policies, foreigners may purchase certain types of property in Malaysia. The minimum purchase price for foreigners varies by state; in Johor, it is generally RM1,000,000 for landed property. Foreigners are not permitted to purchase Bumiputera-reserved lots, Malay reserve land, or properties valued below the state threshold without special approval. Strata properties (condominiums and apartments) above the threshold are generally more accessible to foreign buyers. Foreign buyers must obtain state authority consent, which adds time to the transaction. Our property lawyers regularly assist foreign purchasers, including Singaporean investors, in navigating these requirements.

What is the difference between freehold and leasehold property?

Freehold property is held in perpetuity with no time limit on ownership. Leasehold property is granted for a fixed term, typically 99 years or 60 years, as specified in the issue document of title. When the lease expires, the property reverts to the state authority unless a renewal is granted under Section 73 of the National Land Code 1965. Lease renewal is discretionary and requires payment of a premium. Leasehold properties tend to be valued lower than comparable freehold properties and may be more difficult to finance as the lease term shortens. The distinction affects long-term investment value and should be considered when purchasing property.

What are the lawyer's fees for property transactions?

Solicitors' fees for property transactions are governed by the Solicitors' Remuneration Order (SRO). For sale and purchase of property, fees are calculated on a sliding scale based on the purchase price, starting from 1% for the first RM500,000, reducing progressively for higher values. The SRO prescribes minimum fees and solicitors may not charge below the prescribed scale. Fees for drafting loan documentation, discharge of charge, and other ancillary work are calculated separately. Under the SRO, both the purchaser and vendor must be separately represented to avoid conflicts of interest. Always confirm legal fees upfront with your solicitor before engaging their services.

What happens if the developer abandons the project?

Abandoned housing projects are regulated under the Housing Development (Control and Licensing) Act 1966. The Controller of Housing may revoke the developer's licence and the accountancy firm managing the HDA account is required to report irregularities. The National Housing Department maintains a list of abandoned projects and facilitates rehabilitation through new developers or liquidators. Buyers may also seek recourse through the Home Buyers Tribunal for claims up to RM50,000, or through court proceedings. The government has established various rescue mechanisms, including the establishment of special purpose vehicles to revive abandoned projects. Buyers should verify a developer's licence and track record before committing to a purchase.