11 Legal Considerations Before Purchasing House

As a first time homebuyer, here are some legal tips to consider before deciding to purchase a property.

Registered Agent
If you are buying a property, it is advisable to pay the earnest deposit with a registered agency or through an enrolled agent with a REN tag. Under such circumstances, you can complain to the relevant authorities in the event any fraud or issues arise later on.

Loan Approval
You should always obtain the relevant loan approval “In Principle” before executing the Sale and Purchase Agreement (SPA). Most of the common SPA will spell out in the Default Clause that if you fail or refuse to pay the balance purchase price of the property within the specified period as stated in the SPA, the 10% purchase price which is deemed as the deposit of the property shall be forfeited.

Appointment of A Legal Firm
Kindly double check with your appointed legal firm and make sure that they are listed in the Malaysian Bar. This is to ensure that the lawyer who is handling your case has a valid practising certificate in Malaysia and has NOT been blacklisted by the Malaysian Bar.

Joint Name Purchasers
Most homebuyers nowadays purchase the property in the capacity of joint names and become the co-owners and co-borrowers. There is, however, a risk when the parties fall apart or one party faces financial difficulty.

The other party will have to bear the responsibility of paying the monthly instalments due on the loan even though the other party fails to pay his or her agreed share. The fact that one party cannot pay the obligation does not exclude the remaining party from the responsibility of paying the full monthly instalments due to the bank.

Freehold / Leasehold
From a legal perspective, there is little impact if the purchasers decide to buy a freehold or leasehold property. The only difference in purchasing a leasehold property is the period customarily required to obtain the vacant possession of the property as there will always be a Condition Precedent to be collected by the Vendor (for example the consent to transfer from the relevant State Authority which can take a few months to secure).

Generally, for a freehold property, the completion of the transaction shall take around three to four months. A leasehold property will usually take a longer time due to the need to secure the State’s prior approval.

Master title or Individual Title
If the property is under an individual title or strata title, there is no problem for the issuance of the title in the future. However, if the property is under a master title, there is a possible hitch here.

Please check the background of the developer to ascertain whether it is being wound up. If the answer is yes, the completion of the transaction can take years depending on the appointed liquidator as well.

This is the risk of buying and selling any property under a master title, especially if the developer is wound up. The seller or the purchaser, however, may terminate the deal when they are not patient enough to wait indefinitely.

Property With Fixtures and Fittings
If you are purchasing a property with fixtures and fittings, it would be wise to draw up an inventory, listing down all the fixtures and fittings included within the SPA. Don’t forget to take the necessary photos for your record. Such records will allow you to easily cross-check the list with the items available in the property during the delivery of vacant possession.

Joint Inspection
The seller and purchaser are encouraged to have a joint investigation before the full payment of the purchase price of the property are released to the seller or the stakeholder. This is to ensure that everything is proper and the property is in the same condition as it was when you initially viewed it. The joint inspection shall be spelt out as part of the terms in the SPA so that it can be carried out accordingly.

Stamp Duty Exemption
Based on the Stamp Duty (Remission) Order 2016, all first-time homebuyers are entitled to stamp duty exemption from Jan 1, 2017, till Dec 31, 2018, applicable to a particular residential property within specific criteria and limits.

This is only applicable to first time home buyers who purchase and execute the SPA within the above said period, provided that he or she has never owned any residential property, including a residential property which is obtained by way of inheritance or gift, and which is held individually or jointly. Please consult your lawyer and see whether you are qualified for such stamp duty exemption.

Termination of SPA
It is a common practice in a SPA transaction that 10% of the purchase price of the property shall be deemed as the Deposit. If you fail or refuse to settle the remaining 90% of the purchase price within the agreed timeframe as stated in the SPA, the Purchaser’s Deposit shall be forfeited. In the secondary market, the terms and conditions of the SPA can, however, be negotiated between parties.

Documents For Safekeeping
Please keep all the original and/or duplicate stamped copy of the SPA and the related stamped Loan Documentation correctly, as these documents are essential when you decide to sell your property in the future. If you lose these documents, you may need to lodge a police report, and it shall take a much longer time for you to dispose of your property.

Source: Star Property


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