Property Ownership in Malaysia

 SAFEGUARDS TO PROPERTY OWNERSHIP IN MALAYSIA – THE LAWS:

1) THE NATIONAL LAND CODE

This is the main law that sets up a registry where ownership of land and property can be recorded (ie. the land office) and a title issued to the owner to reflect his interest in the property.

2) THE HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966 & REGULATIONS 1989

This is the law that guards purchasers of newly launched properties (pending construction). One of its main features are the regulation of developers by the Ministry of Housing, a Tribunal to hear claims against the developer and the standard format agreements a developer has to sign with buyers which contain terms such as:

• The specification of the property;
• A deadline for delivery of vacant possession of the Property of 24 months (landed properties)/36months (apartments and/or stratified landed properties) from the date of the sale and purchase agreement, failing which interest at the rate of 10% per annum on the purchase price shall be payable by the developer;
• The purchase price is to be paid progressive in stages and the completion of each stage is to be certified by the developer’s architect;
• The retention of a stakeholding sum of 5% of the purchase price for up to 24 months to ensure that any necessary rectification works are carried out by the developer.

3) STRATA TITLES ACT 1985

Whereas the National Land Code is a general law that regulates land or land and building, this Act facilitates the issuance of individual titles for units in a building called strata titles and their transfer to the purchasers. This Act also:

• Contains provisions for the regulation of the building and its common areas;
• Sets up the Strata Titles Board to hear and determine any disputes under this Act, for example any dispute that may arise between purchasers of adjoining units. 

4) THE BUILDING AND COMMON PROPERTY (MAINTENANCE AND MANAGEMENT) ACT 2007 (SOON TO BE REPEALED UPON STRATA MANAGEMENT ACT 2013 BEING IN FORCE)

Once the unit is delivered and owned by the purchaser, this is the law that ensures that the building and its common areas are taken care of. This Act, amongst other things:

• appoints an officer called the Commissioner of Buildings to implement the provisions of this Act (namely to ensure accountability of the developer and the Joint Management Body/Management Committee);
• requires that the developer deposits the maintenance funds it collected into the Building Maintenance Account;
• sets up the Joint Management Body (“JMB”) to oversee the management of the building. This body is made up of the developer and elected unit owners;
• the house rules & payment amount for maintenance of the common property and the building will be determined by the JMB;
• an annual general meeting and audited accounts are to be held and presented; 

Now that I have hopefully convinced you that your property investment in Malaysia will be safe, lets move on to the types of Property available to foreigners in Malaysia.

Sam Choong

1st December 2014

TYPES OF PROPERTY AVAILABLE TO FOREIGN BUYERS / THINGS TO LOOK OUT FOR

Purchase of property by foreigners is regulated by the respective State Authorities (Section 433B of the National Land Code). Each state also has their respective guidelines so it is best to check prior to buying. Generally, houses, apartments and land parcels developed specially for building your own house in the state of Penang can be purchased provided (effective from 1st July 2012) that they cost RM1,000,000/- minimum for any property except for landed properties on Penang Island, whereby the threshold is RM2,000,000/-

Other things to look out for when purchasing property are:

• whether the property is leasehold or freehold;
• whether the individual titles have been issued;
• whether there are any restrictions on the title (some titles, especially leasehold titles requires State Consent prior to sale)

 Now that you have chosen your property, let’s look at the sale and purchase agreement procedure. 

SALE AND PURCHASE AGREEMENT (“SPA”) PROCEDURE, TIMELINE, FEES & COSTS (*see table)

Property pending construction:

A standard format as prescribed by the Housing Development (Control & Licensing) Act is to be used by the Developer and the Purchaser. The timeline from the time of signing to vacant possession is 24 months for landed units & 36 months for apartments.

Ready built property

A sale and purchase agreement to be drawn up by a solicitor on terms to be agreed between the seller and purchaser. Typical terms & procedures are as follows:

• a land search is conducted on the property;
• negotiations on the property ie. does the purchase price include deposits with the developer (sinking fund etc), with fixtures & fittings, vacant possession or subject to tenancy? Can the purchaser come in to take measurements for renovation?
• 10% of the purchase price is paid on signing (if outside Malaysia, before a notary public or the Malaysian High Commission) a conditional (on State Authority approval**See table for fees and disbursements) sale and purchase agreement;
• a private caveat is lodged;
• an application is made to the State Authority (1-3 months for consent to be obtained);
• 3 months for payment of 90% of the purchase price starts to run from date of the State Authority consent;
• Once State Authority consent obtained, payment of stamp duty on the Transfer and Loan;
• On the expiry of the 3 month payment period, payment of the 90% purchase price and delivery of vacant possession. 

** State Authority Approval – cost based on purchase of residential units by individuals (for company purchasers the rates would be higher & all rates are subject to change from time to time):

STATE	TIMELINE	COST	RESTRICTIONS
PENANG	2 months	RM10,000/- on submission, 3% of purchase price upon approval	-Property must be more than RM1,000,000/- for all property excepted landed properties on Penang Island: RM2,000,000/- -No sales within 3 years
FEDERAL TERRITORY/KUALA LUMPUR	1 month	RM100/-	Property must be more than RM1,000,000/-
JOHOR	2 – 3 months	RM1,000/- on submission, 2% of purchase price upon approval	Property must be more than RM1,000,000/-

LOAN PROCEDURE, TIMELINE FEES & COSTS

Foreign buyers of Malaysian property can apply to Malaysian banks for loans of up to 75% of the market value of the property in exchange for a charge/mortgage on the property. Foreign owners of Malaysian property who are interested to take advantage of more competitive rates from alternative financiers, can re-finance their existing loans (do check to see whether there are penalties for early termination of the existing loan). Malaysian banks typically loan to borrowers below the age of 65 years and limit the period of their loans to this age limit.

Procedure:

• issuance of a letter of offer is approximately 2 weeks from the receipt of all necessary documents*;
• payment of loan fees & stamp duty (**See table for fees & disbursements);
• release of the loan is approximately 1 to 2 months from the signing of the letter of offer;
• loan documents can be ready within 1 week of the letter of instructions from thebank & signing of the loan documents is before a notary public or the Malaysian High Commission if outside Malaysia;
• *Documents required for a loan application:
• photocopy of passport;
• salary slip for the last 3 months if under employment or the bank statement for the last 6 months plus your certificate of incorporation if self employed;
• the latest income tax declaration;
• other forms of investment eg. Savings, bonds. 

SAM CHOONG

MESSRS KHAW CHEOW POH & ASSOCIATES

ADVOCATES & SOLICITORS

SUITE 7-2, 7TH FLOOR, MENARA PENANG GARDEN

NO. 42A, JALAN SULTAN AHMAD SHAH

10050 PENANG, MALAYSIA

TEL: 604-2270777 & 604-2273077

FAX: 604-2274077

E-MAIL: sam@ckylegal.com