A complete guide to the key property purchase documents in Malaysia - understand the 10 vital documents from SPA to loan agreement and what to look for when buying a house.
A Complete Guide to Property Purchase Documents in Malaysia
Purchasing your first home is an exciting milestone, but the amount of paperwork involved can seem daunting to novice homebuyers. Navigating the stack of documents and understanding the fine print is crucial to ensure your rights are protected.
This comprehensive guide will walk you through the 10 key documents you’ll encounter when buying residential property in Malaysia. We’ll explain what each document is, its purpose, what to look out for, and provide tips on how to review them.
Arm yourself with knowledge so you can handle property purchase documents with confidence!
1. Letter of Offer (Developer or Seller)
The first document you'll receive when buying a property is the Letter of Offer (LO) from the developer or seller. This letter signifies their willingness to sell you the property under certain terms and conditions.
The main aims of the LO are:
- Formalize the seller's intention to sell to you
- State the proposed property price
- Set out conditions like the deposit amount
- Specify any inclusions like fixtures and fittings
- Bind you to sign the Sale and Purchase Agreement (SPA) within a certain timeframe (usually 14 days)
By signing the LO, you agree to the broad terms laid out before proceeding with the full SPA.
What to Look For
Scrutinize these key details in the LO:
- Property address and lot number
- Price stated matches your agreed amount
- Deposit is typically 2% of purchase price
- Inclusions and exclusions are clearly specified
- Expiry date gives you enough time to review SPA
You should also receive a copy of the draft SPA, which you can review while the LO is in force.
- Clarify any vagueness in the LO before signing
- Mark your calendar for SPA signing deadline
- Use the LO period to thoroughly review the draft SPA
- Get your lawyer's advice on the LO and draft SPA terms
- Ensure all additional agreements (e.g. renovations) are appended
Don't rush through the LO - use this time to ensure you understand what you're signing up for.
2. Sale and Purchase Agreement (SPA)
The SPA is the main legal contract that governs the entire property purchase transaction between you and the seller.
As the legally binding agreement, the SPA sets out vital terms like:
- Details of the property
- Purchase price
- Payment schedule and method
- Completion date
- Other obligations of buyer and seller
It protects both parties' interests and provides recourse if either party defaults.
What to Look For
Some key areas to review in the SPA:
Title and ownership - Ensure it states the property lot number and that the seller has the legitimate right to transfer ownership to you.
The Property is known as Parcel No. A-12-15, Storey No. 15, Building Name Seri Anggun Condominium, Mukim Petaling, District of Kuala Lumpur, State of Wilayah Persekutuan KL.
The Property is under Hakmilik Strata title registered as Pajakan Negeri 12345 and identified as Lot 12345 Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur.
The Vendor is the registered owner of the Property and has the absolute rights to sell and transfer ownership of the Property to the Purchaser in accordance with the terms of this Agreement.
Encumbrances - There should be a clause stating the property is free from any encumbrances that can affect your ownership rights later on. Any legal claims against the property, like charges or liens. The seller must state these upfront.
The Vendor confirms that the Property will be transferred to the Purchaser free from any encumbrances, charges, liens, caveats, previous sale agreements, or other claims that may affect the Purchaser's ownership.
If there are any existing encumbrances on the Property, the Vendor shall remove them at the Vendor's own cost before the completion date under this Agreement.
If the Vendor fails to clear any encumbrances before the completion date, the Purchaser has the right to terminate this Agreement and receive compensation from the Vendor.
Vacant possession - Check the handed over property must have no occupants or debris inside on the completion date.
On the completion date as stated in this Agreement, the Vendor shall deliver vacant possession of the Property to the Purchaser.
The Property shall be delivered in a clean condition, free from any occupants, furniture or debris.
The Vendor confirms there are no tenants or other occupants currently residing in the Property. If any surface prior to the completion date, the Vendor shall ensure their immediate removal.
If vacant possession is not provided on the completion date, the Purchaser reserves the right to claim damages and compensation from the Vendor.
Defects liability period - Ideally 24 months from key collection date. Gives you time to identify and claim defects.
If the Purchaser discovers any defects in the Property within 24 months from receiving the property keys, the Purchaser must inform the Vendor in writing.
The Vendor shall repair or rectify any defects reported by the Purchaser within 30 days from the notification date. This includes defects to the structure, wiring, plumbing, fixtures, fittings or any part of the Property.
The maximum defects liability period shall be 24 months from the date the Purchaser receives the property keys from the Vendor.
The Vendor shall be responsible for rectifying defects at their own cost within this defects liability period. If the Vendor fails to do so, the Purchaser reserves the right to claim damages.
Payment schedule - Ensure installments match your financial plan and are timed appropriately.
The Purchase Price shall be paid by the Purchaser to the Vendor by progressive installments in the following manner:
- Booking fee of RM20,000 payable upon signing this Agreement
- 20% of Purchase Price payable within 30 days of signing Agreement
- 70% of Purchase Price payable within 120 days of signing Agreement
- Final 10% of Purchase Price payable on completion date before handover of keys
The Purchaser agrees to make payments accordingly or be liable for late payment interest of 8% per annum on any overdue installments.
Installment payments can only be varied if mutually agreed between both parties in writing
Completion deadline - Factor in enough time between final payment and handover of keys.
The date of completion for this sale shall be [INSERT DATE] whereby the Purchaser shall pay the final 10% of the Purchase Price and the Vendor shall hand over the keys and vacant possession of the Property to the Purchaser.
The completion date shall be no less than 14 days after the Purchaser's final installment payment. This is to allow sufficient time for completion of final payment procedures and documentation prior to key handover.
If for any reason the Vendor fails to hand over vacant possession of the Property by the completion date, the Purchaser shall have the right to claim late delivery compensation at the rate of [INSERT RATE e.g. RM100 per day] for every day of delay.
Default clauses - Check adequate protections are in place if either party breaches the contract.
Area - For new developments, the initial stated area is subject to final survey. Adjustments apply if significantly smaller.
For new projects, also review:
- House plans in First Schedule for layout
- Third Schedule for progressive payment schedule
- Read every page and clause thoroughly before signing
- Highlight ambiguous or concerning clauses to discuss with lawyer
- Ensure critical information like price and completion date are filled in
- Get lawyer to explain clauses you don't understand clearly
- Negotiate for more favorable terms if possible
- Don't rush - it's a legally binding contract
The SPA forms the foundation for the entire purchase. Give it the time and attention it deserves.
3. Memorandum of Transfer (MOT)
The MOT transfers ownership of the property from the seller to you, the buyer.
- Confirms the seller consents to transfer ownership to you
- Serves as proof you are the lawful owner
- Can be used to register the property under your name
For sub-sales, the MOT is typically signed with the SPA. For new developments, it may be signed later when the title is ready.
What to Look For
- Your full name and details are correct
- The property address and lot number match the SPA
- The seller's name is as per the SPA
- Signatures are present from seller and witnesses
- Ensure your name format is accurate and consistent
- Keep the MOT safe as it proves your ownership rights
- Register the MOT with the land office to update the property owner
- If loan financed, bank will handle MOT documentation
The MOT affirming the property transfer to you should be signed in front of a lawyer.
4. Bank's Letter of Offer (Housing Loan)
If you're getting a mortgage, the bank will issue their own Letter of Offer for the housing loan.
The bank's LO:
- Formally offers you financing up to a certain amount
- States the interest rate and repayment tenure
- Outlines conditions such as security required
Signing the bank's LO confirms you accept their financing terms.
What to Look For
Scrutinize key information like:
- Approved loan amount suits your needs
- Interest rate is competitive and fixed/variable
- Loan tenure matches your repayment capability
- Monthly installments are within your budget
- Any fees or charges imposed by bank
- Terms for early settlement if you want to repay faster
- Shop around to compare interest rates from different banks
- Calculate whether you can afford the monthly repayments
- Check if interest rate is fixed or variable
- Look for any lock-in clauses if you redeem early
- Ask bank to explain any unclear or dubious fees
The bank will prepare the LO based on your financing application. But you should still review it thoroughly before signing.
Read more here about How Do You Read a Bank's Letter of Offer?
5. Facility/Loan Agreement
The Facility or Loan Agreement lays out the detailed terms and conditions between you and the bank for the housing loan.
The loan agreement:
- Legally binds you to the financing terms
- Specifies loan amount, tenure, interest rate, etc.
- Details your repayment obligations
- Gives the bank rights over the property as security
It provides the bank recourse if you default on the financing terms.
What to Look For
Review these key sections:
- Your personal details and the property address
- Loan amount and interest rate must match LO
- Instalment amounts and due dates
- What constitutes defaulting on the loan
- Charges or action the bank can take if you default
- Any clauses allowing bank to vary conditions
- Read the agreement thoroughly and clarify doubts before signing
- Ensure critical loan details match your LO
- Be aware of conditions that qualify as default
- Check if interest rate and other terms can be varied
- Ask for fairer terms if certain clauses disadvantage you
The agreement becomes binding once you sign, so understand every clause.
6. Deed of Assignment (DOA)
The DOA assigns your rights and interests in the property to the bank as security for the housing loan.
Key functions of the DOA:
- Gives the bank security on the property for loan granted
- Transfers the property ownership to the bank until loan is fully repaid
- Allows bank to take possession if you default on the loan
It's the instrument where you provide the bank rights over the property.
What to Look For
- Your and bank's details are correct
- The property address matches
- The bank's rights over the property are clearly spelled out
- The loan amount secured matches your financing
- Signatures are present from you, bank, and witnesses
If two buyers but only one takes a loan, both must still sign the DOA and PA. This consents the property to be security for the loan.
- Ensure the DOA terms align to the loan agreement
- You must sign it for the bank to release funds
- Discuss any concerns about the DOA scope with your lawyer
- Consider negotiating for more balanced rights and liability
The DOA is critical for the bank, so you can't just opt out of signing it.
7. Power of Attorney (PA)
The PA allows the bank to act on your behalf in dealing with the financed property.
The main functions are:
- Appoints bank as your lawful attorney
- Grants the bank rights to sell the property if you default
- Enables bank to stake a claim on the property for security
It facilitates the bank securing your property for the housing loan.
What to Look For
Key details to check:
- The bank's powers over the property are reasonable
- The loan amount matches
- Your details and property address are accurate
- Signatures present from you, bank, and witnesses
As with the DOA, the PA must be signed by all buyers even if they are not borrowers themselves.
- Read the PA to ensure the scope is fair and relevant to securing the loan
- Get your lawyer's view on whether the bank's powers are too broad under the PA
- Clarify any doubts before signing away rights temporarily
- Keep the signed PA safely as you'll need it when redeeming the loan
The PA typically stays in force until the housing loan is settled.
8. Memorandum of Charge (MOC)
The MOC charges or creates a lien on the property for it to be security for your housing loan.
- Registers a charge on the property at the land office
- Serves as notice the property is security for a housing loan
- Allows the bank to claim rights over the property if in default
It is another instrument for providing the bank security on the financed property.
What to Look For
Check these key details:
- Property details and loan amount match
- Charge amount is accurate
- Bank has followed proper procedures to register charge
The MOC may be signed later than the initial documents if the property title has not been issued yet.
- Verify land search to confirm charge is registered
- Keep the MOC for discharging the charge when loan settled
- Ensure signing procedures adhere to registration requirements
- Check for any defects in the charge registration process
- Query the bank if you think the charge registration is flawed
Scrutinize the MOC thoroughly as the property becomes security for your loan obligations.
9. Statutory Declarations
Statutory declarations are legal declarations made in the presence of a Commissioner of Oaths.
Typical statutory declarations in a property purchase include:
- Declaring you are the rightful purchaser
- Stating the purpose for purchasing the property
- Affirming your repayment capability
These serve as formal statements that hold more legal weight than normal declarations.
What to Look For
- The content of the declaration is accurate
- No blanks or errors are left in the document
- Your personal details are correct
- The Commissioner of Oaths section is complete
- Ensure you agree fully with the declaration content
- Declare all required information truthfully
- Read the entire document before signing
- Keep a copy of the signed statutory declarations
Think carefully before signing statutory declarations as they are formal legal statements.
10. Stamp Duty
Stamp duty is a tax payable when you "stamp" or register your property transaction documents.
- Provides legal recognition of the documents
- Enables the documents to be admissible as evidence in court
- Serves as a form of tax revenue for the government
The amount payable depends on the type of document and value of the property.
What to Look For
- Check current stamp duty rates to estimate your liability
- The stamped documents have the official stamps indicating duty was paid
- Verify if any exemptions or relief apply to reduce your stamp duty
- Include projected stamp duty in your purchase budget
- Stamp duty must be paid within 30 days of signing SPA
- Engage a lawyer to handle the stamping process
- Keep stamped documents safely as proof of payment
- Ask for stamped copies of documents like SPA and MOT
Factor in stamp duty payable so there are no surprises later.
We've now covered the 10 major documents involved in purchasing residential property in Malaysia - from both the developer/seller side and housing loan side.
While the paperwork seems immense, the documents themselves serve quite straightforward and distinct purposes for safeguarding your rights as the buyer.
Now that you're equipped with knowledge on what these documents entail and what to watch out for, you can go into your property purchase transaction better prepared. Don't hesitate to seek legal advice on reviewing the documents too.
Owning a home is an aspiration for many Malaysians. We hope this guide gives you the confidence to realize that dream by navigating the paperwork.