REAL ESTATE AGENCY

PRACTICE

SALE AND PURCHASE LAND

IN MALAYSIA
 INTRODUCTION

Transactions involving sale and purchase of land in Malaysia may be

classified into three main stages:

i. The contract stage,

including the pre-contract stage;
ii. The post contract stage; and
iii. The registration stage
 THE CONTRACT STAGE, INCLUDING
THE PRE-CONTRACT STAGE

i. In pre-contract and contract stage, the general principles of the law of contract apply to
transaction relating to the sale and purchase of property.

ii. At present, most transaction for the sale and purchase of land are evidenced in a formal
Sale And Purchase Agreement.

iii. An Agreement of Sale And Purchase is a written contract between a seller and a buyer
for the purchase and sale of a particular property.
PRE-CONTRACT STAGE

After negotiations for the sale and purchase have been completed, the parties will
usually seek the service of solicitor (known as purchaser’s solicitor). Both party meet
and full details will be given to the solicitor ;

i. Name
ii. Identity card numbers
iii. Permanent address
iv. Whether the parties are acting on their own behalf or on behalf of other persons or bodies.
v. The description, locality and whether the land is subject to any conditions, restrictions or any existing
encumbrances will be investigate by solicitor.
vi. The purchase price, the deposit and the manner of payment of the purchase price, whether it is to
be paid by installments, lump sum or the purchaser is obtaining loan from a bank or any financial
institution.
vii. Vendor will be requested to produce the title to the property concerned and a copy of the original sale and
purchase agreement between the vendor and the original registered proprietor. The latter document is necessary
to ascertain the amount of real property gains tax which the vendor will have to pay in certain cases.

viii. If the is subject to any existing encumbrances, such a charge, a lien holders’ caveat or private caveat, the solicitor
will determine the manner in which the vendor proposes to discharge the existing encumbrance on the land.

ix. If the title to the land is subject certain restrictions as to its use, such as building, agriculture or industry, and if the
purchaser intends to use it for a purpose other than that endorse on the title deed, the responsibility of the
parties to obtain the relevant authority must be clearly agreed upon by the parties.

x. Agreement should also be reached as to the consequence in the event that such conversion or permission is not
obtained.
xi. The time for payment of the balance of the purchase price will also be discussed, whether
possession is to granted and, if the property is subject to an existing lease, which party is entitle
to rents and also the effect of failure of the obligations.

When all the terms of the sale and purchase agreement have been agreed upon, the solicitor
will undertake to prepare a draft Sale ad Purchase Agreement incorporating all the terms.

As there are no general Conditions of Sale, or their equivalent, sale agreement in Malaysia are
not uniform, each lawyer preparing his own agreement, each with its own variation.
 DEPOSIT
i. It is common practice in Malaysia for the purchaser to pay ten percent (10 %) of the purchase price
as a deposit.

ii. A deposit is normally requested by the vendor even before the formal Sale And Purchase Agreement
has been executed. However, it is paid to the purchaser’s or the vendor’s solicitor as a stakeholder.

iii. The solicitor will undertake to pay the deposit to the vendor only after an investigation of the title has
been conducted and it has found satisfactory. The solicitor should emphasize to the vendor that in the
event the title is found to be unsatisfactory and as a consequence no agreement is reached between
the parties, the vendor will not be entitled to the deposit.
 SALE AND PURCHASE AGREEMENT

i. The purchaser’s solicitor having conducted a search in the State Registry and having verified all the
particulars of the title will then prepare a Draft Sale And Purchase Agreement incorporating all the
agreed item. The Draft agreement is then sent to the vendor and his solicitor for approval.

ii. On approval, a final Sale And Purchase Agreement is prepared incorporating any necessary
modifications to the draft agreement, following which it is executed by the vendor and purchaser.

iii. The Agreement is then dully stamped

 SURVEY AND OTHER INQUIRIES

Besides a search in the State Registry, the purchaser’s solicitor will also
make necessary inquiries from the relevant government departments to
determine whether there are any proposed plans for the acquisition of
the land and whether there are any proposed plan for planning
permission will be granted for any proposed use of land by the
purchaser.

As a measure of prudence, it may be good practice to have the

property surveyed before a legally binding contract is entered into: this
is especially so when the vendor is only selling part of the land
Description of Property

The property which is being sold must be defined in clear terms, including locality, area and title
number, a plan should also be included. Where the property is not defines with certainty, the
agreement for sale and purchase may be held to be void under section 30 of the Contracts Act.

Requisition as to Title

As the title of the vendor is always verify by conducting a search in the State Registry, the practice
of making through requisition is not followed in Malaysia. However, as unregistered interests in the
land may not be disclosed in the search, the purchaser’s solicitor should ascertain from the vendor
the presence of any unregistered interests in the land.
POST CONTRACT TO REGISTRATION

Lodging a private caveat

On entering into a legally binding contract, the purchaser’s solicitor should lodge a private caveat
over the vendor’s land. The caveat will grant the purchaser certain safeguards pending
registration of the transfer. It will prevent the vendor from dealing with the land subsequently to
the prejudice of the purchaser priority over any other subsequent claimant to the land.

Solicitor acting for the purchasers should advise their clients as to the importance of lodging a
private caveat. In cases where purchaser refuses to take advice, solicitor to clear themselves from
a future suit for negligence, should obtain from the purchaser a waiver of this advice.
 COMPLETION

The next most important sequence in the sale and purchase transaction is the completion of the
contract. Under the Torren system of registration refers to the stage of the sale and purchase
transaction when the purchaser ultimately registered as the registered proprietor of the purchased
property. However, in practice, the time at which both the vendor and the purchaser fulfill their
outstanding obligations under sale and purchase agreement is deemed to be the time fixed for
completion. Therefore, on the date of completion, the purchaser must pay the balance of the
purchase price and the vendor should deliver to the purchaser a dully completed transfer in a
statutory form.

The vendor is also under a duty to deliver to the purchaser a title free from encumbrances, including
the discharge of any existing charge over the property
As both vendor and purchaser will have to perform their respective duties simultaneously, the solicitor
acts as a stakeholder of the purchase money until the transfer is registered in the Titles Registry.

Sometimes in practice to expedite the subsequent registration of the transfer, the vendor may be
asked to deliver a dully completed transfer in a statutory form even before the balance of purchase
price is paid by the purchaser.

This is done at the vendor delivers the transfer documents before the date of completion, he must
ensure that he does on an undertaking given by the purchaser’s solicitor that the transfer will not be
presented for registration until after the purchaser has paid the full purchase price.
 Search

 A search in the State Registry to investigate the vendor’s title, this is to determine whether
the vendor’s title free from encumbrances.

 Only when the purchaser’s solicitor is satisfied in respect of this, will he advice his client too
enter into an agreement and to pay a deposit.

 Similarly the purchaser’s solicitor has to make another search before the balance of the
purchase price is paid to the vendor. This is to ensure that no new encumbrance has been
created over the land since the last search was conducted, usually six months before.
Vendor’s duty to deliver a title free from encumbrances

 Failure on the part of the vendor to deliver such a title will amount a breach of
agreement

 Failure on the part of the solicitor to make necessary search may amount to
negligence on his part.

Valuation

 Before the transfer is submitted to the registry for registration, the sale and purchase
agreement and the transfer documents must be forwarded to the Valuation Office for
adjudications of the property for the purpose of payment of capital stamp duty in accordance
with the Stamp Duty Ordinance.
 MEMORANDUM OF TRANSFER

 All necessary documents must be in order with all the necessary information required by the
State registrar.

 The documents must be dully attested in accordance with the administrative requirements of
the Code; failure to comply may result in the transfer documents not being accepted by the
registrar.
 REGISTRATION
For registration of property, submission of the duly stamped Form 14A at the Land Office / Registry must be
accompanied with:

i. Original IDT (Issue Document of Title);

ii. Certified copies of the buyer’s and seller’s NRIC / passport; or
iii. Company Memorandum and Articles of Association, Companies Commission of Malaysia (CCM)
Company Search, Company Resolution, Return of Allotment of Shares – Form 24, List of Register of
Directors, Managers and Secretaries – Form 49;
iv. Fees as prescribed by the Land Office / Registry;
v. A copy of current Quit Rent and Assessment Receipt.
CHECKLIST FOR REGISTRATION OF TRANSFER OF PROPERTY AT KUALA LUMPUR LAND
REGISTRY : (FOR LANDED PROPERTY WITH INDIVIDUAL TITLE)

 The Land Administrator will endorse the name of the buyer in the Register Document of Title (RDT)
 The RDT is kept in the strong room at the Land Office / Registry itself.
 The Land Office / Registry will subsequently issue a new IDT to the buyer within 1 working day
from the date of submission.
 ASSIGNMENT OF PROPERTY
(FOR PROPERTY WITHOUT INDIVIDUAL TITLE)

i. No registration is required for properties without individual titles simply because the Land Office /
Registry does not have records of individual properties until the individual titles are issued.
ii. Properties without individual titles can be sold or change hands by means of a document called the
Deed of Assignment (“DOA”).
iii. A DOA is a legal instrument used as a means of conveyance of rights to property whereby the Seller
(“Assignor”) assigns his rights and title to the property to the Buyer (“Assignee”).
iv. By the DOA, the Seller’s rights, interest and title to the property as enshrined in the SPA, usually called
the Principal SPA (between the First Purchaser, the Developer and / or Proprietor) is assigned to the
Assignor.
v. Once the DOA is duly executed and stamped, the Assignee acquires legal rights and title to the
property assigned. The only difference is that it is not registered at the Land Office / Registry.
vi. The DOA has to be adjudicated in a similar manner as for property with title but instead of Form 14A,
the original copy of the DOA is submitted together with Form PDS 15.
ROLE OF SOLICITORS

i. The Solicitor as the Stakeholder

ii. The nature of the undertaking
iii. Solicitor acting for both parties
 THE DUTIES OF A BUYER’S SOLICITOR/CONVEYANCER

i. advise, prepare and /or vet documents such as SPA, deed of assignment, deed of reassignment, deed of mutual covenants, deed
of reassignment and loan document. However, the SPA for purchases of residential properties from a developer is a standard form
agreement fixed by law;
ii. conduct land, bankruptcy/insolvency and company searches to ensure that there are no surprises, such as a different registered
owner, encumbrances (charges, caveats), conditions or restrictions on the title (important for a buyer), or that a party is
bankrupt/insolvent;
iii. if there is an individual title, to enter a private caveat to freeze all dealings in the property until it is transferred to the buyer;
iv. send documents/instruments to the Stamp Office for adjudication and arrange for their stamping;
v. act as stakeholder, to hold all money paid, retain 5% of the purchase price for the purpose of Real Property Gains Tax; and/or to
hold the balance of the purchase price;
vi. prepare and witness the execution of statutory forms;
vii. for a sub-sale where the individual title has not been issued, get the consent of the developer to the sale of the property to the
new buyer and to undertake the registration of the property in the name of the new buyer. The lawyer should also get an
undertaking from the developer not to further encumber the property, and for a development project with a master title, a letter of
disclaimer from the chargee of the master title confirming no right or interest in the individual property;
viii. if the buyer takes a loan, get a letter of undertaking from the lender. The undertaking will include an undertaking that it will not
foreclose the property if the loan, interest, etc. has been repaid/paid; and
ix. present the transfer (Form 14A) and if applicable, the charge (Form 16A) for registration at the land office.
THE DUTIES OF A SELLER’S SOLICITOR/CONVEYANCER

i. preparing a vendor’s statement and special clauses to go into the contract;

ii. preparing a contract of sale;
iii. exchanging contracts with the buyer’s solicitor;
iv. checking the transfer, statement of adjustments and settlement statement;
v. preparing the statutory declaration about the value of chattels in the sale;
vi. arranging for discharge of the seller’s mortgages and for a clear title;
vii. attending settlement on the seller’s behalf; and
viii. notifying the council and the water authority of the sale.
CONDITIONAL CONTRACT FOR THE SALE OF LAND

It is not uncommon for parties to enter into agreement for the Sale & Purchase Agreement of land
subject to certain conditions being fulfilled. For example, “subject to contract “, subject to approval
by some authority’, subject to the purchaser obtaining a loan’ and etc.

The important question is whether the parties have entered into a legally binding contract, Thus it is
important to determine the intention of the parties;
a. Neither party is to be bound by the agreement until and unless the specified act or event has
been fulfilled
b. The agreement is binding on both the parties until the specified act or event cannot be fulfilled
c. The agreement is binding on both the parties and the acts or event relates to an obligation to
be fulfilled by one of the party
A conditional contract is one where the uncertain act or event affects the formation of a contract
of sale which creates the relationship of vendor and purchaser not which affects the performance
of one of the obligations or terms of an already binding contract.

The latter, the un-fulfillment of t he condition is a breach of a term of agreement which entitles
the other party to bring an action for damages.

Thus, the important to determine whether a contract is conditional or not for a number of reasons;
a. Whether either or both the parties may withdraw from the agreement whilst the said act or
event remains un-fulfilled.
b. Whether a party may recover the deposit in the event that the condition is not fulfilled.
c. Whether prior to the fulfillment of the condition, the purchaser has acquired an interest in the
property so as to entitle him to enter a caveat
d. Whether a decree of specific performance may be obtained even before the said act or event is
fulfilled.