PROPERTY OWNERSHIP IN MALAYSIA

1) SAFEGUARDS TO PROPERTY OWNERSHIP IN MALAYSIA – THE LAWS

A. THE NATIONAL LAND CODE
This is the main law that sets up a registry where ownership of land and property can be recorded (i.e. the land office) and a title issued to the owner to reflect his interest in the property.

B. THE HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966 & REGULATIONS 1989 (AMENDED with effect from 1^st June 2015)
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.

C. STRATA TITLES ACT 1985 (AMENDED with effect from 1^st June 2015)
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.

D. STRATA MANAGEMENT ACT 2013 (with effect from 12^th June 2015)
This Act repealed the Building And Common Property (Maintenance And Management) Act 2007.This Act governs the management of the properties amongst other things: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);
sets up the Joint Management Body (“JMB”) and the Management Corporation (“MC”) 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, let us move on to the types of Property available to foreigners in Malaysia.

2) 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.

The revised threshold on June 11, 2020 will allow foreigners to buy apartments priced at RM800,000 and RM400,000 in the island and mainland respectively. For landed properties, the minimum price is now RM1.8 million (island) and RM750,000 (mainland). Note that this only applies to developer units and not secondary market properties.

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.

3) SALE AND PURCHASE AGREEMENT (“SPA”) PROCEDURE, TIMELINE, FEES & COSTS

I. 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 stratified units.

II. Ready built property:
A sale and purchase agreement is 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 i.e. 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 (1.5% of purchase price in the event property purchase price is between RM1,000,000/- and RM1,500,000/-	- Developer-direct condominiums/apartments must be more than RM800,000/- for all property excepted developer-direct landed properties on Penang Island where the minumum price is RM1,800,000/- - Secondary market properties threshold would be RM1,000,000/- for condominiums & apartments (stratified) and RM3,000,000/- for landed properties (including land, terrace, semi-detached, bungalow, heritage building, stratified gated&guarded landed properties) - MM2H applicants enjoy lower thresholds with restrictions (read)
FEDERAL TERRITORY / KUALA LUMPUR	2 months	RM50/-	Property must be more than RM1,000,000/- Individual foreigners are only allowed to purchase residential properties
SELANGOR	2 months	RM200/-	Residential property (landed with individual title is not available to foreign purchasers) must be more than RM2,000,000/- (for Zones 1 & 2) and RM1,000,000/- (for Zones 3) Commercial property must be more than RM3,000,000/-

4) 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;
release of loan approximately 1 to 2 months from signing of the letter of offer;
loan documents can be ready within 1 week of the letter of instructions from the bank & signing of the loan documents is before a notary public or the Malaysian High Commission if outside Malaysia;

DOCUMENTS REQUIRED FOR LOAN APPLICATION:

photocopy of passport;
salary slips for the last 3 months if under employment or bank statements for the last 6 months plus your certificate of incorporation if self employed;
the latest income tax declaration;
other forms of investment e.g. savings, bonds.

Source from:
MESSRS KHAW CHEOW POH & ASSOCIATES
ADVOCATES & SOLICITORS
SUITE 7-2, 7^TH FLOOR, MENARA PENANG GARDEN
NO. 42A, JALAN SULTAN AHMAD SHAH
10050 PENANG, MALAYSIA
TEL: 604-2270777 & 604-2273077
FAX: 604-2274077
E-MAIL: [email protected]

Sam Choong Khuat Yau is an Advocate & Solicitor based in Penang whose areas of practice include advice on the purchase of Malaysian property, setting up and/or purchase of companies, representative office and the application of related visas or passes such as the Malaysia My Second Home scheme and employment passes. Sam practices at Messrs Khaw Cheow Poh & Associates (www.ckylegal.com) and can be contacted at [email protected].